Often pressure is put on the purchaser to sign the Contract on the property they have found and to pay a deposit at the Agent’s office on a weekend, or an evening before the purchasers can talk to their Solicitor.
So long as certain rules are followed by the purchasers in that situation the risks involved can be minimised.
Important things to check!
Set out below are things the purchaser should look for in the Contract before signing it:
- It may appear obvious but it is important that you ensure that your names are correctly spelt and that they are the same as you used if you have already applied for finance – so for instance make sure your middle name is included if you used your middle name when applying for finance.
- On the front page is a list of “inclusions”. These are items that go along with the sale and should be there when you go to the property after you have paid the purchase price. It is important you check those items to make sure everything that you saw when inspecting the property and which you believe is included in the sale is listed there on the Contract. For instance if there is air conditioning, or there are curtains, or an oil heater or whatever then make sure it is listed on the front page. If this has not been done then request the Agent to hand write that item onto the front page.
- Obviously check that the price is correct and that the time frame for Completion is sufficient for you to be in a position to pay the balance of the price. The Completion period is shown on the front page about two thirds of the way from the bottom of the page next to the words “Completion”.
- Not far from the Completion point on the front page there will be two boxes for you to mark in regard to whether the sale is subject to an “existing tenancy” or is subject to “vacant possession”. If the Contract says that the sale is subject to an existing tenancy then the purchasers cannot move into the property until the existing tenants have vacated the property. Even if there is a Lease which has an expiry date in the near future, it is possible for the tenants to simply camp in the property and refuse to move out. Getting the tenants out could take several months. Therefore if there is a lease and the Agent tells you that the Lease will be finished before the Completion date and the tenants will have moved out then you should insist that the “vacant possession” box is ticked. If you do that then you do not have to finalise the purchase until the vendor has removed the tenants from the property.
- If there were any special promises made during the sale inspection or negotiation stage, such as that the property was going to be repainted or that something would be repaired, you should ask the Agent to show you where in the Contract it promises that that will be done. If it is not in the Contract then you should insist that the Agent write it into the Contract before you sign it.
- If it is residential property then the purchaser is entitled to a “cooling off period” of a minimum of 5 working days. You should ask the Agent to show you where on the Contract the cooling off period is specified and it should say in plain English that you have at least 5 working days. The importance of this is if for some reason you change your mind or you realise your Finance Application will not be successful, or something else happens, then within the first 5 working days after you sign the Contract you are entitled to simply terminate or withdraw from the Contract and all you lose is the 0.25% deposit.
- In the case of residential property you should only have to initially pay 0.25% of the purchase price as the deposit.
The Agent may say something like “those changes to the contract can be sorted out between the Solicitors”. That is dangerous because once the contracts are exchanged the vendor can refuse to agree to any requested change to the Contract.
New South Wales Law
In New South Wales a Real Estate Contract is not legally binding unless:
- The Contract is in writing;
- The Contract has been signed by both the Vendors and the Purchasers;
- The purchaser has paid a deposit.
Unless and until all of the above occurs a purchaser can change their mind and withdraw from the Contract, and get back any deposit they have paid.
If you are thinking of going out and looking for a property to buy, here at Adams & Partners we are happy to sit down with you and go through the things that you should look out for in this regard before you go out and start inspecting properties.
If you do sign a Contract and pay a deposit it is important that you see the Solicitor very quickly thereafter and certainly well within the 5 working day period. It is imperative that the Agent gives your Solicitor a signed and dated copy of any such Contract within 1 – 2 working days.