Selling a Property
You have decided to put your property on the market with the hope of selling quickly and for a great price. When you have decided on a real estate agent to market the property, you will need to have a contract prepared before your nominated agent can commence the marketing campaign.
The Contract
The contract for sale of residential property usually used in New South Wales is a contract devised by and adopted by the Law Society of New South Wales and the Real Estate Institute of New South Wales. This contract is updated every so often to reflect changes to the conveyancing legislation and the most up to date version is the 2016 contract. However, the main terms and condition of this contract has not changed since 2005. Whilst the majority of law firms across NSW use this contract, we do make some minor amendments to the contract where appropriate by including what is known as “special conditions” to ensure that the terms and conditions suitably reflect your property and the intended conditions of your sale.
The preparation of a solid contract is essential to the sale process going smoothly and ensuring your rights as vendor are protected and all obligations are met. There are a number of obligations placed on vendors under NSW conveyancing legislation and failure to comply with these can have dire consequences on the validity of the contract and, ultimately, your sale. Because of this, it of the utmost importance that you have chosen a professional, diligent and experienced representative such as one of our solicitors to carry out the work on your behalf.
Exchange of Contracts
When you receive that offer you cannot refuse from a prospective purchaser it is time for you to sign your counterpart of the contract and have your counterpart and the purchaser’s signed counterpart exchanged and dated. This date becomes known as the contract date.
Exchange can occur between the respective solicitors or it can be effected by the real estate agent. On most contracts exchanged, there is a “cooling off period” of at least five (5) business days, which is for the benefit of the purchaser. However, this can be waived by the purchaser but only after receiving advice from their solicitor and providing you with a section 66W certificate.
During the cooling off period, you cannot sell the property to anyone else, however, the purchaser is not yet locked in to the contract. If the purchaser pulls out of the contract before the expiry of the cooling off period, you will be able to retain an amount equivalent to 0.25% of the purchase price, which the purchaser would have paid you on the exchange of contracts.
There is no cooling off period when your property is sold at auction.
Unconditional Contract
The contract becomes unconditional:
- at 5pm on the last day of the cooling off period if the purchaser has not already rescinded; or
- on the exchange of contracts under “auction conditions”; or
- on the exchange of contracts when a s 66W certificate is signed by the purchaser’s solicitor.
When the contract becomes unconditional, subject to any other specific terms and conditions of the contract, the purchaser is locked in to purchasing the property and can no longer rescind. It is at this time that they must pay the deposit on the contract, which is generally an amount equivalent to 10% of the purchase price. The deposit is usually paid into the real estate agent’s trust account until settlement occurs.
The Contract Period
The most common length of a contract period is 42 days. This is the timeframe between the contract date and settlement. However, when we prepare the contract for you, we can nominate any timeframe to be the contract period. This timeframe can also be negotiated on between the parties and amended by mutual agreement prior to the contract becoming unconditional.
During the contract period, we will act on your behalf to:
- assist you with completing the steps necessary to discharge the mortgage on the property and liaise with your bank to arrange for their attendance at settlement;
- answer any requisition’s raised by the purchaser;
- arrange for your execution of all the necessary paperwork in preparation for settlement; and
- confirm draft settlement figures and provide cheque directions to the purchaser.
Settlement
In the days before settlement, we will review the draft settlement figures received from the purchaser which is a statement showing the outstanding council rates, water rates and other charges and calculates who is responsible for what proportion of those charges.
Once reviewed and approved, we will obtain a final payout figure from your discharging bank and provide directions to the purchaser of how to pay the balance of the purchase price. This is known as “cheque directions”.
At settlement, you receive the balance of the purchase price from the purchaser, and the title deed and transfer document is handed over to the purchaser. Usually, because banks will be involved, the title deed and transfer will be given directly by your discharging bank, once they receive their cheque paying out the existing mortgage, to the bank who is paying the purchase price on behalf of the purchaser. We will attend settlement on your behalf and ensure that the settlement documents are in order and the purchase price is paid in full by the purchaser exactly in accordance with the cheque directions. Once settlement is effected, we will then contact you to advise you that settlement has been completed successfully, and your cheques will be made available for your collection usually the next day.
Even the seemingly simplest conveyancing transaction can develop unforeseen problems so it is important that you have a skilled and experienced team on your side from the beginning. The above is just an overview of the steps involved in the process of buying and selling a property and is not meant to be an exhaustive list of everything involved in a conveyancing transaction. If you would like further information, or if you have any questions relating to your specific situation, please contact our office to talk to someone from our property team.
