After your offer is accepted

There is a verbal agreement between you and the vendor or agent to purchase the home. However don’t start celebrating the deal just yet.

Neither you nor the vendor is legally bound to proceed with the purchase until the contracts have been exchanged.

This is a worrying time for both parties. Essentially all you’ve done is offer to purchase the vendor’s property Until contracts are exchanged you’re in the danger period which means either party can pull out or you could be gazumped. .

What is gazumping?

Gazumping occurs when you reach a verbal arrangement with the vendor to purchase the vendor’s property but the property is sold to someone else. This usually occurs because the vendor accepts a higher bid. Being gazumped is not only heartbreaking but can also be expensive if you’ve already spent money on building and pest inspections, searches or solicitor’s fees.

Unfortunately, there is nothing you can do to prevent being gazumped. Even if you’ve paid a holding deposit it does not protect you from being gazumped.

To avoid becoming a victim, be prepared to move quickly to exchange by doing such things as having your loan finance pre-approved, seeking a copy of the contract for sale as soon as possible and having the contract reviewed by either your solicitor or conveyance.

Legalise it!

A property sale isn’t formalised until the exchange of contracts. A Contract of Sale  is a legal document that sets out the terms and conditions of the sale including the price and settlement date. It should contain a copy of the property title, any local planning certificates, a sewerage diagram, the general terms and conditions, any special conditions and inclusions (such as curtains, dishwasher or floor coverings).

You can do this legal work yourself (there are DIY kits available) but this is not recommended for most buyers, particularly first home buyers. It’s a far better idea to employ the services of a solicitor or conveyancer to do the work for you.

Ask for a quote first, and compare prices of legal representatives. Most solicitors charge a fee calculated on the price of the property, the type of title and the mortgage or complexity of the deal. Others may charge you on a ‘time spent basis’ in accordance with an hourly charge out rate. Solicitors  are sometimes  more expensive than conveyancers but can provide you with a wider range of legal advice.
Conveyancers are licensed to provide conveyancing services but can only give legal advice relating to property. They generally charge either a flat fee or a price based on the value of the property.

Both a solicitor or conveyancer will look at the contract, discuss the terms and conditions with you and ensure the relevant searches and inspections are carried out. During this period, you (or your solicitor or conveynacer)can negotiate any changes to the contract and ensure the contract is amended to reflect any agreed changes.

CHECK IT OUT!
Inspections can be provided by the Housing Industry Association - HIA: www.buildingonline.com.au and Archicentre: www.archicentre.com.au

Solicitor/conveyancer checks

It is your legal representative’s job to ensure there are no hidden surprises before you take ownership of the property. That involves checking that all rates and taxes are paid up and that the vendor is legally entitled to sell. They should also check heritage orders and any other peculiarities of the property

Generally speaking, the vendor will not provide any guarantees as to the structural soundness of the property so it’s essential you get an independent body to do this for you. Building and pest inspections are strongly recommended and your solicitor/conveyancer may ask you to organise one.

Beware of inheriting illegal renovations. If, for example, the new house you’re interested in is the only property with two storeys in the street, have your representative obtain a Building Certificate from the council to ensure it complies with council’s requirements.  They should also check council planning regulations for the area. Some councils are nightmares when it comes to getting renovation or building approvals , which means your plans to make additions or add an extra storey to your new home could be severely restricted or not allowed at all.
 

Exchanging contracts

Once you are happy with the form of the contract, the necessary  checks have been made and you have organised finance, you should  be ready to exchange contracts. There will be two copies of the sale contract: one for you and one for the vendor. You will each sign one copy of the contract(you usually do this at your solicitor’s office) and your paperwork is swapped or ‘exchanged’ with the vendor’s. This can be done by hand or post and is usually arranged by your solicitor or the vendor’s, in consultation with the agent.

It is at this time that you are required to pay a deposit of at least 10 per cent of the purchase price. The contract will include a settlement date, which is the date that the property becomes yours. If the property was bought at auction, the exchange of contracts will occur on the day, where the auction is conducted.

Cooling-off period

Depending on the State or Territory in which the property is located and the terms of the Contract for Sale, most buyers of residential property receive a cooling-off period (with some exceptions, such as  if you buy at auction or you agree to waive your cooling off rights). This period normally starts on the day of exchange and ends around five business days later. Within this time you, the purchaser, can withdraw from the sale. However, you will usually forfeit around 0.25 per cent of the purchase price.

Depending on the terms of the contract, the cooling off period is usually the last chance to organise a building inspection or a pest report. As a side note, you should organise written confirmation that you have loan approval before the end of your cooling off period

House settlement date

The date of settlement is the date you take legal ownership of the property. The balance of the purchase price has to be paid on this day.

Settlement usually takes about six weeks or 30 days in Queensland from the time contracts are exchanged. However it is not unusual for the settlement period to be changed so long as the vendor and purchaser agree and it is reflected in the contract for sale.

On or prior to the settlement date, you’ll need to ensure that you have organised (among other things) relevant insurances, signing the mortgage documents, obtain funds for and pay stamp duty and the balance of the purchase price.

A note on insurance: Don’t try to insure the house for less than full replacement value (which can be different from the purchase price). If you do, you risk receiving only a percentage of the actual value of the house in the event of a disaster.

Your solicitor or conveyancer will get you to sign a Transfer of Land just prior to settlement. The Transfer will be handed to your lender at settlement. It will then be registered at the relevant State or Territory Titles office on your behalf to officially document the change of ownership of the property. When your solicitor or conveyancer is satisfied everything is in order, a settlement time will be booked. They will contact your lender and the vendor’s solicitor to arrange the date and place of settlement.

Final inspection

On the morning of the settlement, it is recommended you take a final look at the property with the agent. This is to make sure the owners or their tenants are really moving out and that they are not removing light fittings or door handles, or that they haven’t left a rub bish tip in the backyard!

Payment of balance of purchase price

A bank cheque for the balance of the property will be handed over to the vendor’s solicitor in return for the title of ownership.

Obtain keys

You will receive a copy of the property title and a set of house keys! A good tip is to change your locks because you don’t know if a tradesperson or cleaner had access to the property.

Now, the property is really yours. It’s time to open that champagne.

Congratulations! You own your first home.