Buying or selling a property is one of the biggest financial decisions most of us will ever make. Whether you’re a buyer or a seller you’ll be entering a contract of sale which brings with it all sorts of legal obligations that you need to understand.
The conveyancing process (the legal aspects of buying and selling property) can be extremely complicated, which is why most people engage a licensed conveyancer or lawyer to steer through the potential legal pitfalls that can arise.
Of course there are different things you need to consider if you’re buying or selling. Let’s take a look at some of the key considerations for sellers.
The contract of sale
The first thing to do before putting your home on the market is to prepare a contract of sale. Under the law, all sellers must make certain promises or ’warranties’ about the property they’re selling. These obligations are known as the Vendor Disclosure Requirements.
There are a number of documents you may need to include with your contract of sale, such as a zoning certificate, drainage diagram, copy of the certificate of title confirming that you own the property, and copies of any documents creating easements, rights of way, restrictions or covenants.
If you’re selling a strata title property, you’ll also need to include a copy of the strata plan, copy of the property certificate for the lot and common property, and a copy of any change of by-laws affecting the use of common property.
If you don’t comply with the Vendor Disclosure Requirements and there turns out to be a problem with the property, the buyer may be able to cancel the contract for sale and you’ll have to return their deposit.
A property is generally sold ‘in the state it’s found’ unless otherwise specified in the contract. ‘Fixtures’, which include anything that can’t easily be taken away, are automatically included unless you expressly exclude them in the contract for sale. It’s not always clear cut, so make sure you carefully consider anything that you don’t want to include in the contract and talk to your conveyancer about them.
Exchanging contracts
A contract to sell a property becomes binding when the buyer and seller sign their copy of the contract for sale and then ‘exchange’ them. At exchange, the buyer usually pays the deposit as specified in the contract, generally 10%.
Exchange happens immediately at an auction after the winning bid is accepted. Your solicitor or agent will usually effect contract exchange by delivering your signed contract to the buyer and collecting the buyer’s signed copy as well as the deposit.
Finalising the sale
‘Settlement’ is when the buyer pays you the remainder of what they owe to ‘settle’ the purchase. This amount will take into account things like utility bills and tax calculations. If you owe money on the property you’re selling, your conveyancer will talk to your financial institution to work out exactly how much you need to pay to ‘discharge’ the mortgage. They’ll let the buyer know this amount so that they can make out a bank cheque to your lender. They’ll also tell the buyer who you’d like the balance to be paid to.
Settlement is usually six weeks after the exchange date, but you can specify a different settlement period in the contract of sale (a buyer can also request a change to the settlement date before the purchase). If you’re buying another property at the same time, it’s usually a good idea to line up the settlement dates so you have access to the new property to move into and you can avoid expensive bridging finance to pay for your new property.
Sydney Law Group offers conveyancing services, along with family law, criminal law and wills and probate. Whether you’re buying or selling, we can take care of the detail and ensure you avoid any legal pitfalls.