If you want to buy a home, land or investment property you’ll have to sign a sale contract. The legal work involved in preparing the sale contract, mortgage and other related documents, is called conveyancing. It’s possible to do your own conveyancing, however, most people get a licensed conveyancer or solicitor to do the work for them.

Exchanging contracts and paying a deposit

Exchanging sale contracts is the legal part of buying a home. Before exchange, the agreement is usually just verbal and not binding. Up until you exchange contracts either you or the vendor have the right to change your minds.

After you have discussed the contract with your solicitor or licensed conveyancer and all the proper inquiries have been made, you will be ready to exchange contracts. There will be two copies of the sale contract: one for you and one for the vendor. You each sign one copy before they are swapped or ‘exchanged’. This can be done by hand or post and is usually arranged by your solicitor, conveyancer or the agent. If the agent is handling the exchange, you must expressly authorise them to do so.

At the time of the exchange you will be required to pay a deposit, usually 10% of the purchase price. Following exchange, you have a financial interest in the property so it’s wise to get it insured.

Note: A contract has not been made and is not legally binding before the exchange of contracts and the payment of a 10% deposit.

Cooling-off period

When you buy a property in NSW there is a five business-day cooling-off period after you exchange contracts. During this period you have the option to get out of the contract as long as you give written notice. The cooling-off period starts as soon as you exchange and ends at 5pm on the fifth business day.

A cooling-off period does not apply if you buy a property at auction or exchange contracts on the same day as the auction after it is passed in.

You can waive the cooling-off period by giving the seller a ‘66W certificate’. This is a certificate that complies with Section 66W of the Conveyancing Act 1919. The certificate needs to be signed by your solicitor or conveyancer.

If you use your cooling-off rights and withdraw from the contract during the five business-day period, you will have to pay the seller 0.25% of the purchase price. This works out to be $250 for every $100,000.

Sometimes, there are more buyers looking for homes than there are properties on the market. This is called a sellers’ market. In this case, you may want to organise a quick contract exchange. This way you can reduce the possibility of someone beating your offer and get your building and pest inspections done during the cooling-off period. You will still be able to back out if there is a problem. However, it is important to have the contract checked by your solicitor or conveyancer before you sign it.

It is possible to waive, reduce or extend the cooling-off period with the consent of the seller. If your solicitor or conveyancer has examined certificates from the appropriate authorities, a pest and building inspection has been done and your finance has been approved, then deciding to waive the cooling-off period could make your offer more attractive to the seller.

Settlement

Settlement usually takes place about six weeks after contracts are exchanged. This is when you become the legal owner of the property. The balance of the purchase price and other adjustments are paid on this date.


From NSW Office of Fair Trading website www.fairtrading.nsw.gov.au

Located in the Eastern suburbs, Double Bay is in the process of a resurgence, and is a suburb that Homesearch Solutions is tipping for relatively high capital growth prospects.

When Westfield opened in nearby Bondi Junction in late 2003, many of the shops subsequently went out of business in Double Bay and brought about a slump for the commercial profitability of the suburb, previously known by it’s nickname “Double Bay – Double Pay”. The closing of the Village Cinema and loss of public car parking areas further contributed to it’s general decline.    

However over the past couple of years Double Bay has re-invented itself, particularly with it’s new unit residential developments such as the Stamford Cosmopolitan Centre in Knox Street, previously the Sir Stamford Hotel, which is due for completion in late 2009. In Cross St, the Ashington Group is proposing to re-develop the Stamford Plaza site with a new luxury residential & retail building.              

On the other side of New South Head Rd, discussions continue between Woollahra Council and Woolworths about a low-rise development on the Kiaora Lands site.

Apart from the new developments, Double Bay is full of quality restaurants, hotels, cafes, shopping & other amenities, with a sophisticated village atmosphere. It sits directly between the two most expensive suburbs of Sydney, being Point Piper & Darling Point. It is linked to the city by ferry from the pier in Bay St,  is on the major bus routes, and also the Eastern suburbs train line at nearby Edgecliff Station.

There are a variety of unit styles, ranging from simple 1970’s and art deco units starting at around $500,000 for a basic 1 or 2 bedroom places, through to over $10M for modern deluxe units with harbour views. Houses start at around $1.5M for a basic cottage or terrace through to very high premium waterfront houses worth tens of millions. Many of the houses are character Victorian & Federation, mixed in with more modern styles, particularly Tuscan.

What is a release of deposit clause?

Upon exchanging contracts on a property, the buyer is required to pay a deposit.  This is usually 10% of the agreed sale price.  The deposit is held in a trust account by the real estate agent until settlement takes place, usually 42 days later.  This deposit acts as a form of guarantee that the purchaser will complete the sale and the vendor is entitled to keep this deposit if the purchaser pulls out.  At settlement, the purchaser pays the balance remaining in return for the title for the property.

A release of deposit clause (or Section 27) can be inserted into the sale contract for a property, to enable the deposit paid to be released to the vendor after exchange of contracts (ie before settlement).  This is usually requested by a vendor to enable them to then purchase and place a deposit on their new property but can sometimes be sought for alternative uses.

In the past most purchasers’ solicitors advised against this and sought to delete this clause.  If a purchaser objects to early release of the deposit (and they need to state a reason for the objection), the vendor won’t be able to access the deposit until settlement.

Now days though the release of deposit clause is far more commonly accepted and with the rising property prices it in Sydney is often a necessity.  It is in most cases a perfectly acceptable practice, as long as some safeguards are put in place to reduce risk.  We recommend that you seek guidance from your solicitor or property conveyancer.

 

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