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Home Buying Guide
FinanceOnce you begin looking for a property to purchase, an important thing to understand is that the finalisation of a transaction necessarily takes some time. Following the successful negotiation of a purchase price, there may still be some matters to be attended to prior to the exchange of contracts, at which time the property is legally considered to be sold. In the intervening period, the vendor may choose to accept a higher offer from another prospective purchaser, thereby leaving you both disappointed and, perhaps, out-of-pocket. In order to avoid this happening to you, it is in your interest that you be ready and able to proceed as soon as possible once a sale has been negotiated. By placing yourself in such a position, you will be less likely to experience the trauma known as gazumping. One matter that should be attended to as soon as a decision has been made to look for a property is to contact your lending institution for finance approval. Whilst final approval may not be given until such time as a property is chosen, many lending institutions have the facility to issue preliminary approval up to a certain figure, based on you capacity for repayment. You would be well advised to obtain such preliminary approval as your first step in buying a property. GazumpingGazumping" occurs when the owner of a property verbally agrees with a buyer to sell and then subsequently accepts a higher offer from a second purchaser prior to the agreement with the first buyer being formalized. Often the first buyer has incurred costs for finance approval,building reports and legal fees and then loses the property. Until the contracts are exchanged however, the agent is legally bound to submit all offers to the owner even though a price may already have been agreed upon. ContractsSince 1988, the Conveyancing Act has made it an offence for an agent or a private vendor, to advertise a property for sale until such time as they are in possession of the proposed Contract for Sale. This contract will set out the terms and conditions on which the property is being offered for sale with the sections dealing with the purchaser and the purchase price left blank. The contract will also include a copy of the Title documents, a drainage diagram and the Zoning Certificate issued by the Local Council. When you have located a property which you intend to purchase, you should then ask to see a copy of the Contract. If you wish, the agent should agree to making a copy of the Contract available for perusal by your solicitor. DepositsOn exchanging contracts the purchaser is required to pay a deposit, normally 10% of the purchase price, which will usually be held by the agent as stakeholder in a Trust Account, pending settlement. In some circumstances, such as where the deposit is sizable and the settlement period lengthy, it may be desirable that the deposit be invested with the interest normally being shared equally between the seller and the buyer. As the agent is under specific statutory obligations in relation to the handling of trust monies, they may not invest the deposit unless they have received explicit written instructions in this regard from both parties to the contract. Any investment of the deposit should be discussed with the agent prior to exchange of contracts in order that appropriate arrangements may be made. The agent will need to supply the tax file number of both buyer and seller to the financial organisation with which the deposit is to be invested. In some situations the agent may ask you to pay a preliminary deposit once the price has been agreed upon and prior to exchange taking place. Purchasers should be aware that the payment of such deposit does not IIhold" or IIsecure" the property for you and that the owner of the property has no obligation to sell to you or you to buy. In the event that a contract is not entered into, such preliminary deposit is refundable, in full, to you. The agent is, however, obliged to inform you of any subsequent offers that may be received from any other person. SaleWhen you have negotiated a purchase with the vendor, the agent will complete the contracts in their possession with your details and the purchase price. If necessary, they may amend the agreed inclusions which are to be purchased with the property. The agent may then present you with two documents to sign. The first will be a copy of the contract completed with your details, the second will be a "Sale Note" confirming that you have signed the contract, been informed as to your cooling-off rights and have authorised the agent to proceed with the exchange on your behalf. By signing these two document, you are committing yourself to the purchase of the property, subject to your cooling-off rights. The agent will also, at this stage, request that you pay to them the agreed deposit. ExchangeWhen you have signed the copy Contract, the agent will deliver this to the vendor and will deliver to you the original Contract signed by the vendor. This process known as exchange - results in each party holding a contract signed by the other party. At this stage, both parties become legally obliged to proceed with the purchase of the property, subject to your cooling-off rights. You would be well advised to contact your solicitor immediately after exchange has taken place. Cooling off RightsUnder legislation, most Purchasers of residential property are granted a cooling-off period. This period commences on the day of exchange and expires at 5:00pm on the fifth business day following. Within this period, you are able to withdraw from the contract without penalty other than forfeiting an amount of money equivalent to 0.25% of the purchase price. Should you exercise your cooling-off rights within the five day period, the agent will refund to you the deposit paid, less the 0.25% of the purchase price forfeited to the vendor. The cooling-off rights do not apply in certain cases, such as a sale by public auction, or a sale negotiated on the same day as the property was offered for sale by public auction but passed in. In addition, you will lose your cooling-off rights if you produce a S.66W certificate, signed by a solicitor stating that you have received independent legal advice in relation to the transaction. Other matters that need to be attended to by you at this stage may include the ordering of a building inspection or a pest report. If these are to be undertaken, it is essential that you act quickly in order not to lose the benefit of the five-day cooling-off period. Whilst the vendor may agree to an extension of the cooling-off period, it is safer to presume that they may not. You should therefore aim to be in a position where you can make your final decision well prior to 5:00pm on the fifth business day. SettlementOnce an exchange of contracts has taken place and the cooling-off period expired, your solicitor will conduct a number of searches and enquiries to verify that all is in order with the legal title of the property. At the same time, you should finalise you finance with your lending body. This process will usually take four to six weeks. When such matters have been attended to, the solicitors for both parties will make arrangements for settlement to take place. At settlement, you will be required to pay the balance of the purchase prices, certain adjustments will be made, any outstanding mortgage will be attended to and you will then become the legal owner of the property. |