When you have found the home you like and have reached an agreement on price you will be required to sign and exchange a contract for the sale and purchase of land.
The Vendor’s real estate agent may wish you to sign the contract almost straight away or, alternatively, the contract may be sent to your solicitor or conveyancer for review and you will sign it with them.
Generally, if you sign the contract early with the agent, you will pay a preliminary deposit of 0.25% of the purchase price and an exchange of contracts will take place subject to a five day cooling off period.
The five day cooling off period will give you time to see your solicitor or conveyancer and ensure all is in order before the end of the cooling off period at which time the contract will become unconditional and you will not be able to withdraw from it.
If you withdraw from the contract in the cooling off period, you will forfeit the 0.25% preliminary deposit paid but during that time the vendor is unable to sell to anyone else.
The cooling off period may not apply if you go to see your solicitor or conveyancer to review the contract but you will be guided by them as to when to unconditionally exchange the contract.
In either case, prior to the contract becoming unconditional and to you being bound to pay the full purchase price, it is important that you obtain loan approval from your bank or through your loan broker. It may therefore assist if you start enquiries in relation to your loan as early as possible when you are thinking of purchasing.
A loan approval in writing must be obtained prior to the unconditional exchange of contracts otherwise you will risk breaching the main obligation of the purchaser which is to pay the full purchase price under the contract. Failure to do this could mean that you lose the full 10% deposit you have paid and risk being sued for damages in a court in addition.
You should also attend to the following due diligence prior to an unconditional exchange of contracts:
- Obtain a pest and building report. Following becoming committed under the contract you will be largely taking the property in its present state and condition. A pest and building report should only take a few days and is well worth the cost involved.
- Discuss with your solicitor or conveyancer as to whether you should obtain a survey of the property and details of Council approvals relating to the structures on the land. This could be even more important in the case of new additions.
- Consider any other due diligence matters. Whilst conveyancing procedures are fairly standard following an exchange of Contracts, each property is different and there can be various other considerations depending on the particular property. For instance issues such as zoning, contamination and geotechnical factors may need to be considered and before you exchange contracts unconditionally. Your lawyer or conveyancer will have conducted numerous conveyancing transactions in the past and can assist you with these important questions.
When you have exchanged the contract unconditionally, you are then on the road to settlement of the contract which is when you obtain the keys to your new home. Remembering the above, may assist you with a smooth transaction and to obtain a good investment.
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