Buying property - What you need to know
Conveyancing is the process of formally transferring the ownership of property from the vendor (seller) to the purchaser (buyer).
So you’ve decided to buy a property but don’t know where to start!
Whether you are buying a home to live in, vacant land to build on or buying for investment purposes, here’s a quick guide to the process in NSW.
You need to ascertain how much you can borrow and get ‘pre-approval’ or ‘conditional approval’ so that you know your price range before you make an offer on a property.
Make an offer
When you have found the right property, make an offer. This process is usually done through a real estate agent who will negotiate between you and the vendor until an offer is accepted.
There is no binding relationship between you and the vendor at this stage. But once your offer is accepted you should feel comfortable taking the next step which is to engage legal advice.
At this stage you should arrange for pest and building inspections to be done.
*Many real estate agents will ask you to pay the deposit once your offer is accepted but it is not necessary. The deposit is not required until contracts are exchanged (see below).
Arrange legal advice
This is a critical step. It is essential that you use a law firm or licensed conveyancer that has experience in property law and conveyancing to advise you on the contract and conduct the contract negotiation process.
The real estate agent will send details of the sale to your solicitor and to the solicitor for the vendor.
The vendor’s solicitor will then forward the contract to your solicitor.
The first page of the contract will identify the vendor, the purchaser, the property, what buildings are on the land, what is included in the sale such as curtains, oven, heaters etc.
The contract then largely consists of a set of ‘standard’ terms which have been in use for a long time, are fair to both vendor and purchaser and are in every contract for sale and purchase of land in NSW. However the vendor can exclude any of these terms and can add ‘additional clauses’ or ‘special conditions’ which favours them, sometimes at your expense. The first thing your solicitor should do is make sure that the contract is not only legal, but that it also isn’t unfair to you.
Where a clause is not in your interests, your solicitor will advise you and negotiate with the vendor’s solicitor to have it changed.
Your solicitor should ensure that you understand any risks associated with the property. Such issues as a neighbour’s garage encroaching on the land, zoning which doesn’t allow for residential use, or the presence of a right of carriageway which gives someone else the right use your land, might be enough for you to walk away from the purchase.
It is crucial that you are correctly advised in this regard before contracts are exchanged because from the point of exchange you are buying the property ‘as you find it’. This means that you accept any issues such as those described above as well as any structural problems, pest infestations or other defects. Hence the importance of having pest and building inspections done.
Once you are ready to be locked in you will pay the deposit and your solicitor will ‘exchange’ contracts with the vendor’s solicitor - this is where each party is given a contract signed by the other party. You will then have between 5 to 10 days to ‘cool off’ and get out of the contract, but after the cooling off period ends both you and the vendor are bound by the contract.
Settlement is when the balance of the purchase price is paid to the vendor and you become the legal owner of the property. Where once upon a time your solicitor, the vendor’s solicitor, the outgoing bank and the incoming bank would all meet and swap title deeds and cheques, it is now mandatory in NSW for settlement to take place electronically. The move to electronic settlements has meant that the process is a lot smoother and of course can be done by a solicitor who is not in the same town as the property!
It is extremely important that you do a final inspection of the property with the real estate agent on the morning of settlement. This is done to ensure that nothing major has happened to the property since exchange of contracts. It is an opportunity to ensure for example, that the promised pizza oven is still in the backyard, that the vendor has repaired the bathroom leak as promised or that the garage hasn’t burnt down.
If something significant is identified in the final inspection you may be entitled to require the vendor to repair the issue of compensate you.
At Moin Morris Schaefer we have a dedicated and highly experienced conveyancing team of solicitors and paralegal staff ready to guide you through the process and make the experience of buying a property an enjoyable one.