VENDOR'S GUIDE
What do I do first?
When you have decided to sell any residential property, the first thing you should do is consult your conveyancer. You may have been contacted by a Real Estate Agent or you may have one in mind to use, but they cannot proceed until after you see your conveyancer.
The Law provides that before anyone, estate agent or owner, can place a property on the market, they must have a proposed contract prepared so that a prospective buyer can inspect the contract. There are hefty fines imposed on anyone caught promoting the sale of a property in anyway whatsoever before a contract is prepared.
Your conveyancer will prepare the contract for you so that you can instruct your estate agent to proceed with the sale of the property.
The Contract for the Sale of Land
The Contract details the ownership, title details and the conditions of the sale together with what is included in the sale. It is prepared with all details leaving blank the buyer’s details and the sale price.
There are certain documents that must be attached to the contract and are specified in law.
These documents are called “Prescribed Documents”, without these documents attached, a buyer has 14 days from the date of exchange of contracts wherein they can pull out of the contract with no penalty.
Real Estate Agents and Agency Agreements
An Estate Agent must have an agency agreement signed before they can list your property for sale.
Agency agreements are usually for a fixed period of time and cannot be ended prior to the end of that period unless both seller and agent agree. The period of the agreements is negotiated with the agent; it is usually 90 days but can be for any period agree to. Make sure you only have one agreement at a time and do not commit yourself to payment of a commission to more than one agent. Make sure any agreement is properly ended before entering into another agreement with another agent.
Exchange of Contracts
Contracts are signed by all parties involved in the transaction and when the seller and buyer have both agreed on a price and the conditions of the sale the contracts are exchanged and dated and the deposit paid by the buyer.
Contracts are drawn up in duplicate and one copy is signed by the seller and one copy is signed by the buyer. The exchange of contracts is the exchanging of copies so that each party ends up holding the copy signed by the other party.
The contract can be exchanged in one of two ways:
By the Estate Agent
In this case the contracts are signed and exchanged shortly after the sale price has been agreed to. The agent will send the appropriate copy of the contract to the party’s conveyancer and the buyer will have a 5 working day cooling off period in which to get any reports, finance approval and have the contract explained by their conveyancer. The seller does not have the benefit of the cooling off period.
By the Conveyancer
In this case, it would be normal for the buyer to have all reports done, financial approval and the contract explained by their conveyancer before the contracts are exchanged. It is usual practice for the buyer to waive their cooling off rights so that the contract is binding on both parties as and from the date of the exchange taking place.
Until such time as the contracts are exchanged, either party can withdraw from the transaction, it is only once contracts are exchanged that the parties are bound to proceed, and in the case of the buyer having a cooling off period the buyer is not bound until the cooling off period expires.
The Cooling Off Period
Every contract for the sale of residential property (less than 2.5 hectares) has a cooling off period of five working days (the cooling off period ends at 5:00pm on the fifth working day). This means that after entering into the contract the purchaser has five working days in which to “cool off”. The seller is locked into the contract and cannot withdraw from the sale. If the purchaser finds that for any reason he or she does not want to proceed with the purchase, they can rescind the contract within the five day period. If they do rescind the contract they forfeit to the vendor 0.25% of the sale price. The contract is then at the end and neither party has any further claim against the other.
The purchaser can waive the cooling off period by having the contract explained by a conveyancer or solicitor and a certificate signed by that conveyancer or solicitor and the certificate handed to the seller’s conveyancer. The certificate is drawn under Section 66W of the Conveyancing Act and is commonly called a “Section 66W certificate”.
Discharge of any Mortgage
If you owe money to a lender who has a mortgage registered, then you will need to have the mortgage discharged at settlement. Your conveyancer will communicate with your mortgagee requesting they have a discharge of mortgage prepared in readiness for settlement, however most lenders will not do anything until they have your written authority to prepare the discharge, this authority also authorises the lender to communicate with your conveyancer, in particular regarding the amount required to payout your loan.
The fixed payout figure will be given to your conveyancer and the loan will be paid out from the proceeds of your sale.
Building Insurance
All buildings on the property are at the seller’s risk until settlement. It is therefore essential that all building insurances be maintained and not allowed to lapse before settlement.
If the buildings are damaged by fire or flood or some other catastrophe, the buyer is not bound by the contract to proceed with the purchase. Depending on the amount of damage a buyer may proceed with the purchase after negotiating the price down to cover the cost of repairs, but it is in the seller’s best interest to keep the buildings insured.
If your policy is due before settlement you are advised to renew the policy and then claim a rebate where possible, after settlement. It is better to be sure than sorry.
Sold with Vacant Possession but Tenant in Possession
A tenant is not bound to move out of the property until the term of the lease has expired and a notice to vacate has been served. If selling a property that is tenanted, you should be sure that the term of the lease has or will expire before the settlement is due. You must also give 30 days’ notice to vacate to the tenant, and as the settlement date is normally 42 days after exchange of contracts you must arrange with your conveyancer and your managing agent to give the notice immediately contracts are exchanged. It is either you as the landlord or your managing estate agent who must give notice to the tenant. Your conveyancer cannot give the notice but should check to see the notice has been served.
Council, Water Rates & Strata Levies
Council Rates
The Contract provides that council rates be adjusted between the vendor and purchaser as at the settlement date.
Council rates are levied for the financial year. They will be adjusted so that the vendor pays the rates up until the day of settlement and the purchaser will be liable from then until the end of the rating period, in this case, the 30 June. They are adjusted as if 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
In some country areas, the water rates are paid to council and may be incorporated within the council rates. In other areas where a separate water authority supplies the water and or sewer service an adjustment of these rates must also be made at settlement. Water rates are usually quarterly rates and the adjustment made will only be for the current quarter. The same principles apply to water rates as they do for council rates. A water usage charge may have to be paid by the vendor. To assess whether a charge is payable or not can be done in one of two ways.
Strata Levies – Unit, Townhouse, Villa
If you are purchasing a lot in a strata scheme, the quarterly strata levy will need to be adjusted. The levy is adjusted in the same manner as council rates except that they are adjusted on the quarterly not annual rate. The quarter for strata levies may begin at any time, they are not necessarily the quarters of the calendar year. Because the levies commenced on a date determined at the first annual general meeting held by the Owners Corporation, the quarterly levies can commence at any date but for convenience, it is usually but not necessarily from the beginning of a month.There may also be special levies to take into consideration. A special levy is struck when and if there are not enough funds held by the owners corporation to cover either the normal running expenses or a special job has to be carried out, and there are not enough funds held to cover the cost of the job.Normally a special levy struck before the date of the contract has to be paid in full by the seller. Sometimes the special levy may be paid by installments, if this is the case, all installments must be paid by the seller. If however, a special levy is struck after the date of the contract, then that levy is adjusted between the seller and buyer.
Settlement
If the property is sold with vacant possession, then you need to make arrangements to vacate the premises prior to or by the time of settlement. The property should be left in a clean and tidy condition, and all possessions moved from the property. It is not always easy to arrange for removalists etc. to have you moved out before the settlement time but you should be advised that the buyer does not have to settle if you have not left the property vacant by the settlement time. If need be, and you are able, you might consider moving out the day before settlement but remember that you are still liable for insurance and the safety of the premises until such time as settlement takes place. If you are selling and buying simultaneously, you may have to arrange to have left the sale property and to be en-route to the property you are buying while the settlement takes place. If this is the case, make sure you are available in case something goes wrong.
After Settlement
When settlement has been completed, your conveyancer will account to you for any of the proceeds of sale that are to be paid to you after all adjustments are made and any loan repaid. Any surplus funds will be electronically transferred to you on settlement. These funds should be in your account within 24 hours after settlement. The change of ownership details will be notified to Council, Water authority and Valuer General when documents are lodged for registration at the Land Titles Office following settlement.