Generally each transaction will have 3 stages which are:
This involves the property being put on the market for sale, negotiations between the Vendor and the Purchaser over the price and other conditions and the Purchaser’s preliminary inspections relating to the property. All this leads to the parties being ready to “exchange contracts”.
This includes the contract exchange and then events leading up to the settlement. The exchange of contracts is when each parties’ signed and dated contracts are exchanged between the representatives of each party, and the Purchaser pays the deposit. Normally the deposit is 10% of the purchase price, although this can be reduced by agreement. The deposit is paid by cash, cheque or deposit bond.
The contract then becomes binding, subject to a 5-day cooling-off period (unless purchased at auction or the cooling off period waived by an s.66W certificate) during which the Purchaser can change their mind and cancel the contract. If the Purchaser decides not to proceed they forfeit 0.25% of the purchase price to the Vendor. For example, on a $1,500,000 purchase, the forfeit fee would be $3,750.
Usually, if the Purchaser has an opportunity to have the contract explained to them by their lawyer, and carry out the usual pre-contract investigations on the property, the Purchaser will be asked to waive the cooling-off period.
A standard contract provides for settlement within 6 weeks from the exchange. This period will usually be agreed before exchange and set out in the contract.
Unless the Purchaser is eligible for a First Home scheme benefit or is a home “off the plan”, then stamp duty is normally paid during this period. Although a Purchaser has 3 months from the exchange of contracts to pay stamp duty any lender providing finance to assist with the purchase will require the duty to be paid on or before settlement.
This is the completion of the transaction after which the Purchaser will become the registered proprietor (owner) of the property and normally be able to move into the property. The parties are represented at settlement by their lawyer or conveyancer and do not need to attend personally. Many settlements now take place electronically.
It is important that the Purchaser conducts an inspection of the property in the days leading up to the settlement to ensure it is in the same condition as when contracts were exchanged and the Vendor is in the process of moving out.
- The Purchaser pays the balance of the sale price.
- Any mortgage on the property is discharged.
- The Vendor’s property agent is directed to release the deposit to the Vendor.
- The Purchaser normally collects the keys from the property agent.
- The Purchaser receives the title deeds to the property and can them register the transfer of the property into their names.
- If the Purchaser is borrowing, the lender will take the deed, register the transfer, and then hold the deed until any mortgage loan is paid out.
- Warning – This is a general overview of the process and not intended to be legal advice. For information about a specific transaction please contact us.