The Legal Side Of Buying & Selling: A Quick Guide

Buying or selling a property can be complex, but it shouldn’t be overwhelming.

I help guide people through the process every day. Here is a useful and quick guide to some of the terms and information you need to know before you start.

Private treaty sale versus sale by auction

For sale by private treaty is where a price is set by the seller and the property is listed at that price. A buyer may make an offer either at the asking price or lower and in some situations, competition can result in a sale price above the asking price. In a private treaty sale, the risk for the seller is the price is set too low and the sale price is not maximised, or it is set too high and does not attract enough buyers.

When selling via auction, a price guide is provided to potential buyers who must bid for the property against other buyers, either at or before the auction. The seller will set a reserve price which is usually the lowest price they are prepared to accept for the property. If the highest bid is less than the reserve price, the property will be “passed in”. The seller can then negotiate with the interested bidders or put the property back on the market for sale by private treaty.

Exchange of contracts

A residential property cannot be advertised for sale in NSW until a Contract of Sale has been prepared. There are two copies of this contract, one for the seller and one for the buyer. The buyer and seller each sign one copy before they are swapped or “exchanged”. At the time of exchange, the buyer must pay a deposit, usually ten percent of the purchase price. 

Settlement

This is the final stage of a property sale. The buyer pays the contract price to the seller and takes legal possession of the property. The “settlement period” is the time between the exchange of contracts and settlement and is usually 6 -12 weeks.

Conditional or unconditional offer

When offering to purchase a property, a buyer can make either a conditional or unconditional offer. A conditional offer means that the sale is “subject to” certain conditions, for example, subject to a bank valuation or pest & building inspection. If the conditions are not met, the buyer can refuse to proceed with the purchase without penalties, unless conditional contracts were exchanged and in this case the buyer forfeits 0.25% of the purchase price.

An unconditional offer means the buyer is prepared to go ahead with the purchase and is certain they can complete the transaction on settlement.

Cooling off period

In NSW, when you buy a residential property there is a five business day cooling off period after the exchange of contracts. During this period, the buyer may get out of the contract provided they give a written notice. If this occurs, the buyer will forfeit 0.25 percent of the purchase price to the seller. The cooling off period starts at the exchange of contracts and ends at 5pm on the fifth business day after exchange.

There is no cooling off period for a buyer who purchases at an auction. The successful bidder must sign the Contract of Sale and pay the deposit, usually ten percent, on the spot. The same applies if you buy the property on the same day as the auction, after it is passed in.

66W Certificate

The buyer can waive the cooling off period for a private treaty or pre auction sale by giving the seller a “66W Certificate”. This meets the requirements of section 66W of the Conveyancing Act 1919. It must be signed by the buyer’s solicitor or conveyancer. This certificate makes the contract immediately binding on the parties rather than at five days after exchange.

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