I HAVE FOUND A PROPERTY - WHAT HAPPENS NOW?
ALSO: SEE OUR FAQ PAGE FOR A DISCUSSION OF MANY OF THE ISSUES WHICH ARISE WHEN BUYING A PROPERTY.
Your agent probably wants
you to sign a contract he has in his office already prepared by the
vendor's solicitor. If you do, you have a 5 day (business days- weekends
and holidays don't count) cooling off period but at a cost of 0.25% of
the price of the property if you decide not to go ahead (On a $400,000
property, this is $1,000 - it is a lot!!). This is called a COOLING OFF
EXCHANGE, vis. you enter into contracts subject to the buyer (not the
seller) having a cooling off right if he changes his mind.
DO YOU SIGN NOW? The
advantage is you lock the vendor in (after the vendor signs also). He
cannot change his mind. The disadvantage is it costs a lot to rescind
the contract if you end up changing your mind. The most common reasons
for rescinding are a bad pest or building report, a finance approval
refusal, or you simply change your mind. Nothing annoys a buyer more
than losing the cooling off fee when the cause of rescinding is a bad
pest or building report.
The alternative is not to
sign the contract. Reach a verbal agreement, pay a holding deposit of,
say, $500 (you can get this back), don't sign anything, and ask for
a copy of the contract to bring to us (or even someone else if you
must!). Most vendors these days in a tough market do not change their
mind. They are usually more worried that you will change your mind. We
can order your pest and building reports if you want them (they take
about 3 days to produce) and you can progress with your finance
Another advantage of this
method is we have a better chance to tidy up the contract. Often there
are annoying little provisions in a contract where standard provisions
are changed to the buyers disadvantage; usually involving some sort of
fee or cost being passed onto the buyer or potentially passed on to the
buyer. You have a better chance of us tidying such provisions up if you
do not have about $1,000 to lose by backing out. It is a common feature
that the standard contract is changed, often in quite bizarre ways, to
the detriment of the buyer.
If you are inclined to
sign on the spot to lock the vendor in ( there are many cases where this
is exactly what you want to do); ask the following questions:
Is there a
clause in the contract passing on the vendor's land tax as a settllement
adjustment (ie you pay part of the vendor's land tax for the year
current at the time of the sale if he is not exempt from land tax)? If
so, get rid of it and don't tolerate any argument. It is not on. If the
vendor is liable for it, it is a commercial tax of the vendor's. You do
not want to know about it; let alone pay it.
Can a clause
be put in the contract to extend the cooling off period to 7 to 10 days
(5 days is usually not enough to obtain a written finance approval - 10
is best, 7 at least takes you into the second week)?
Is the price
GST inclusive? Usually, it is but you do not want a clause that says you
pay it in case there are circumstances the vendor is liable for GST.
That is his problem; not yours. residential houses should always be sold
on a GST inclusive basis.
Can I pay a
deposit of .25% of the price now and the balance of the deposit at the
expiration of the cooling off period. Use the words "at the expiration
of the cooling off period" to cover the circumstance where the cooling
off period might be extended.
Can I use a
Deposit Bond for the deposit (a deposit bond is NOT money. It is a
guarantee by an insurance company that the vendor will be paid the
deposit if you default under the contract and the vendor is entitled to
the deposit as damages).
If we have
agreed on a 5% deposit (often this is the case), can I pay the deposit
with a Deposit Bond for 5% of the price (if you want to use a deposit
bond). Vendors (or their lawyers, more to the point) have this strange
fixation that any bond must be for 10%. If you agree on a 5% deposit, it
should not matter that it is satisfied with a 5% bond.
I want a default interest rate of no more than 8% (Trust us on this one - we will explain later)
want a 42 day settlement period at least (or more if you specifically
agree on a longer time). This time begins from the date of the contract
exchage, NOT the date of the expiry of the cooling off period. Many
contracts are drafted with short settlement times.
Don't take the answer; "Don't worry about that. Your
solicitor will fix up all of that later". The whole point is to get the
contract in order from the beginning on important matters.
If you do sign a cooling
off contract, make sure it is sent to your lawyers straight away. There
is nothing worse than receiving a contract with a 5 day cooling off
period 3 days into it.
Get on with your finance application straight away.
Remember, if you want to rescind the contract by exercising your cooling off right, a written notice
must be served. It can be by post, fax or delivery to the agent, the
vendor or the solicitor for the vendor. If your lawyer has disappeared
at the crucial moment, do it yourself. Just write and say, "We exercise
our cooling off rights under the contract and rescind the contract".
That will do the job. Ringing up the agent to say you do not want to go
ahead will NOT be effective.
The above is
not comprehensive advice. It reflects our experience of a lot of buyers
who want to know what to do at that first point of deciding on a house
and having an agent ask them to sign a contract. This often occurs on a
weekend when lawyers are not around to ring up, in the norm. As soon as
you get over the first hurdle, come Monday morning further discussions
can take place.TO CONTACT US, PHONE, EMAIL, OR SUBMIT AN ENQUIRY ON OUR PURCHASE ENQUIRY FORM