PURCHASER'S GUIDE
The Contract for the Sale of Land
Not all things that affect the sale will be written into the contract, it is important to have your conveyancer review the contract prior to you signing it and paying the deposit. Generally a contract will have a settlement period of 42 day, however this can be negotiated if for example you are buying and selling simultaneously. There are consequences if you do not settle by the due date. These will be explained to you by the conveyancer. The contract will also contain a list of all the items that are included with the property. These items should be confirmed or negotiated through your conveyancer before the contract is signed. It is usually best to confirm with the vendor what items including fixtures the vendor intends to remove to avoid disappointment and arguments later.
Finance
It is essential that you have written unconditional finance approval to hand before the contract is binding.
Exchange of Contracts
Once the vendor and buyer have agreed on the price and any other special terms of the sale, the Contract for Sale is finalised in duplicate so that one copy can be signed by the vendor and the other copy can be signed by the buyer. The two copies are then compared to ensure that they are identical, and if so, they are dated and swapped or “exchanged” so that each party holds the copy signed by the other party. Normally at this point, the full deposit must be paid to the stakeholder nominated in the contract the contract specifically provides an alternative arrangement for payment.
The Cooling Off Period
All contracts for the sale of residential property have a cooling off period of five business days ending at 5:00pm on the fifth business day. This means that from the date of exchange, the purchaser has five business days in which to make enquiries, carry out inspections and obtain unconditional finance approval before the contract becomes binding. If the purchaser decides not to proceed, the purchaser can rescind the contract within the cooling off period. If the purchaser does choose to rescind, the purchaser must forfeit to the vendor 0.25% of the sale price. The seller is locked into the contract from exchange and cannot withdraw from the sale. Generally, purchasers only have a cooling off period when the real estate agent completes the exchange.
Payment of the Deposit
The agent holds the deposit in trust for both the seller and purchaser and cannot release it or deal with it without consent from both parties. It is normal practice for the purchaser’s consent to release to be handed to the vendor’s representative at completion so that the agent can account to the seller immediately after settlement. The agent will deduct its commission from the deposit before accounting to the vendor for the balance.
Insurance
The risk of damage to the property stays with the vendor up until the earlier of completion or the purchaser taking possession of the property. The vendor is required to take care of the property up until completion, and the property should be handed over at completion in the same condition, subject to fair wear and tear, as it was at the date of exchange.
Stamp Duty
Stamp duty is calculated on the sale price: the higher the price, the higher the duty. It is the purchaser’s responsibility to pay the stamp duty. The Office of State Revenue allows up to 3 months for the duty to be paid before the fines become payable however the duty must be paid on or before completion in order for the associated Transfer document to be registerable at the Department of Lands.
Rates & Levies
Council Rates
Council rates are levied on a financial year basis. The standard terms of the contract provide that the rates be adjusted between the vendor and purchaser as at the settlement date so that each party pays the rates for the period that they own the property. The adjustment tis calculated on the basis that the rates are paid in full regardless of whether they are in fact paid or not. Any outstanding rates are paid from the sale proceeds (being the vendor’s money).
Water Rates
A separate water authority supplies the water and sewer service and an adjustment of these rates must also be made at settlement.
Unlike council rates, there may be an additional water usage charge to be paid by the vendor for the water used by the vendor from the time of the last meter reading up to the day of settlement. This is usually estimated on the basis of the vendor’s average daily usage at the time of the last meter reading multiplied by the number days to settlement. This amount is then deducted from the amount due by the purchaser on completion. The purchaser is then wholly liable for the next water usage bill when it issues.
Strata Levies – Unit, Townhouse, Villa
If you are purchasing a lot in a strata scheme, the quarterly strata levy will be included in the settlement adjustments. The levy is usually issued quarterly and therefore adjusted in the same manner as water rates. However, unlike water rates, the quarters for the strata levies are not necessarily the usual quarters of the calendar year.
Pre-settlement Inspection
As a purchaser, you are entitled to and should take advantage of, a pre-settlement or final inspection of the property before you make the final payment and take occupation of the property. Once settlement takes place, it is too late to be finding that some of the inclusions are missing or that something has been damaged. It is extremely difficult to be able to have repairs done, or inclusions returned after the seller has left and settlement completed.
What to do before Settlement
Any final moneys that need to be paid by you will need to be drawn and given to your conveyancer the day before settlement. You should be advised by your conveyancer who to make this payment in favour of a couple of days before it is due. However, you should be aware that because of the procedures followed by some financial institutions, the final cheque details may not be known until the day before the settlement. You should be prepared to receive the details and be able to provide your conveyancer with the final cheques on short notice. While this is not very convenient, it is in the most cases unavoidable.
Settlement
Your conveyancer or your conveyancer’s agent will attend the settlement on your behalf. Settlement is completed on an electronic settlement platform called PEXA. PEXA allows the Vendor's and Purchaser's representatives to have a transparent workspace to enable to a smooth settlement for all parties. The settlement time is generally determined by the person or institution that holds the deeds to the property, normally a discharging mortgagee. It is your lender who attends to registration of your ownership of the property and the Land Titles Office, and they should do this shortly after the settlement date. If you do not have a Lender, it will be your conveyancer's responsibility.
Moving In
It is normal practice that occupation of the property is not granted until after the settlement has been completed, unless some other arrangement is made. You should not assume that the seller will allow you to move in before settlement even if the property is vacant. Because you may not have a firm time and date for settlement when you want to book the removalist, it is difficult to organise the time for the removalist to arrive and load and then to arrive at your new property coinciding with the settlement time. Unfortunately, this is a fact you just have to deal with, and it may be best to arrange for the removalist to do an afternoon move in preference for paying the removalist to sit and wait for confirmation to unload. It is a good idea to change the locks immediately before or after moving in.
After Settlement
Immediately following settlement, the estate agent will be advised so that they have authority to release any keys being held so that the buyer can have access to the premises. It is normal practice for the buyer’s conveyancer to give to the seller’s conveyancer at settlement, a written direction to the agent authorising release of deposit and keys. This direction or “order on agent” is usually faxed to the agent, so they have written authority to release the keys to the buyer. When confirmation of the settlement is given to you by your conveyancer, you can then collect the keys from the agent and move in. When settlement has been completed, a “Notice of Sale” will be lodged. It is this document that is used by the Land Titles Office to notify Council, Water authority and Valuer General of the change in ownership so that all future rate notices issue in your name. If the settlement occurs just before the Council or Water authority issue their rate notices, they may issue in the wrong name. Be aware of this so that if you move into the property and receive correspondence from Council or Water authority in the previous owner’s name, the enclosed assessment is probably for your payment and not the previous owner.