Understanding the Contract of Sale
Purchasing a property involves more than just reaching an agreement between a seller and a buyer. Often, negotiations revolve around price, property conditions, and other necessary compromises. Once both parties have hammered out the details, a contract of sale is signed, binding both the seller and the buyer in a legally enforceable agreement. This negotiation process typically involves solicitors or conveyancers, and it's crucial to have your own legal representation to ensure a solid and successful contract. In complex cases, solicitors can also negotiate on behalf of the parties to ensure the contract aligns with their needs. It's important to note that the process varies from state to state, highlighting the importance of having an expert guide you through it.
Once both parties have signed the contract, it becomes legally binding, committing both the seller and the buyer to the sale. At this point, the buyer is also required to provide a deposit.
Who Prepares the Contract of Sale? The contract of sale can be prepared by a conveyancer, solicitor, or real estate agent, depending on how the property is being sold and its complexity. For instance, when a property is sold privately, it's typically the real estate agent who drafts the contract and presents it to potential buyers. This underscores the importance of choosing the right real estate agent, one with the experience to create and manage a robust contract. Contracts are scrutinised and approved by solicitors or conveyancers for both parties, with negotiations often conducted by legal representatives in conjunction with the real estate agent.
What's Included in the Contract? A contract of sale must include several crucial details, such as:
- The names and addresses of both the seller and the buyer.
- The property's address.
- The deposit amount and due date.
- The sale price.
- The property settlement date and any associated conditions, which could involve financing or additional inspections. Each condition must be numbered and initialled by both parties.
- Whether the property is available as "vacant possession" or "subject to a lease."
- Any other properties included in the deal.
- Inclusions and exclusions, often referred to as the "chattels list," covering fixtures, fittings, carpets, curtains, and more.
Keep in mind that each state has its own requirements for contract content, so thorough research is crucial. When in doubt, seek advice from an expert. Once signed, the contract is legally binding and cannot be undone, so accuracy is paramount.
Key Considerations After Signing After signing the contract, both the seller and the buyer have several tasks to manage between the exchange and settlement:
- Finance: Buyers need to secure financing for the property, which may involve obtaining a new loan, using a loan portability feature, or arranging bridging finance. Prompt action is essential to ensure timely payment.
- Conditions: Any conditions outlined in the contract, such as inspections or valuations, must be fulfilled during this period. This may also include any work required by the seller.
- Handover: A pre-settlement inspection must be scheduled, and once the buyer is satisfied with the property's condition, the seller will hand over the keys to the real estate agent on settlement day.
Red Flags to Watch Out For Not every contract of sale proceeds smoothly, so both parties should exercise due diligence before signing. Watch out for the following:
- A party unwilling to negotiate on the property price.
- Lack of disclosure by the seller regarding the property's condition and history. Without this information, buyers enter the contract without essential knowledge.
- A bank valuation coming in lower than the asking price. Buyers have the right to request an upfront valuation.
- Consider the possession condition of the property; does it align with your needs if it's subject to a lease?
Review the contract of sale early in your property search process. Many buyers only examine the contract once they've fallen in love with a property, but there may be clauses that don't suit your requirements. If these cannot be negotiated, it's best to avoid a lengthy and potentially unsuitable process.
Once you're satisfied with the contract and its conditions, don't hesitate to sign. However, be sure to review every clause and ensure that negotiations are conducted properly. A thorough understanding of the contract of sale, its essential components, and how to make the process as smooth as possible is crucial. Property transactions are significant financial decisions, so why make them more complicated than necessary?
When you need assistance, whether you're a seller or a potential buyer, our experienced Tait Real Estate agency is here to help. We offer expert guidance and extensive market knowledge to ensure a seamless buying or selling experience.
DISCLAIMER: This information is provided for guidance and informational purposes only and should not replace independent business, legal, and financial advice, which we strongly recommend. While the information is considered accurate at the time of publication, changes in circumstances may affect its accuracy. Tait Real Estate accepts no responsibility or liability for any reliance on this information, including its accuracy, currency, or completeness. For inquiries, please contact us at [email protected] or 0493 674 245, and visit our website at www.taitrealestate.com.au.