Purchasing info – Conveyancing

Buying Guide

Before You Buy

Buying private
Buying at auction
Buying an apartment or townhouse
The pros and cons of buying “Off The Plan”

Once you Decide To Buy

The contract for sale
Identification documentation
Buying on your terms
Should you pay for inspections
What is included in the sale

Your mortgage documents
Types of ownership
What is exchange
Signing the contract is not always final
Final first home owners grant
Stamp duty and other tax
What happens behind the scenes?

Finalising Your Purchase

What exactly are you buying?
What happens at settlement?

Before You Buy

Buying private

A common way to buy a house or apartment in NSW is by private treaty. This is where a seller advertises the amount they would like to achieve for their property and then negotiates with prospective buyers. The contract for sale becomes activated once you exchange contracts with the seller. At this time, you will also have to pay the full deposit on your place (usually 10 per cent minus any holding deposit you have paid).

However, this does not always mean you are locked in.

The standard contract for sale includes a “cooling off” period during which you can change your mind. However, your solicitor can have this waived by signing a certificate and explaining the contract to you.

Buying at auction

Auctions can sometimes seem daunting; not least because there is no cooling off period. If the gavel comes down and you are the highest bidder you are usually bound to go through with the purchase, no matter how unfair the contract might be.

So long as you have your solicitor look over the contract for sale before you bid there is no reason an auction needs to be any riskier than buying by private treaty.

Before the auction, your solicitor will identify any terms that might not be in your favour and negotiate with the vendor’s solicitor to change them. They will also make sure you are buying exactly what you intended and that it is in the condition you expect.

That way if your bid is the winning one, you can be sure the contract you sign will be in your interest.

Buying an apartment or townhouse

Most apartments and townhouses in NSW are strata title, which means you are not only buying real estate, you are also buying into the rights and obligations of being a member of the owners corporation (or body corporate).

Being a member of the owners corporation means you will have a say on issues affecting the building, but it also means you will need to pay strata levies and the way you can use your property will be restricted by by-laws. By-laws are rules that try to make sure the strata scheme runs smoothly and that your building is generally a harmonious place to live. By-laws often cover issues such as parking restrictions, the keeping of pets and the use of common property.

You may also need to contribute money for communal issues, such as plumbing, roof and window repair and property maintenance, even when you are not directly affected.

Because this can affect the value of what you are buying, it is important you get a full picture of the owners corporation’s activities before you buy and that you know exactly what work is planned and whether there’s enough money to cover it. Obtaining a strata report on the records of the owners corporation can provide useful insights into the financial position of the owners corporation, and particular issues that have emerged in the running of the owners corporation. Your solicitor can organise such a report.

While a seller must attach some information about the owners corporation to the contract for sale, your solicitor will make sure you have everything you need to reach an informed decision before you buy.

The pros and cons of buying “Off The Plan”

Builders often raise capital for their development by selling units or townhouses before they are built. This can be a great way for buyers to get a reduced price and even make a capital gain before settlement.

However, it is not risk free. After all, the property market can move down as well as up, so you could end up losing money.

There is also a chance you may not end up with what you intended. For instance, a Sydney investor recently bought an apartment off the plan after the agent promised 180-degree water views. When the complex was finished, the buyer found a wall obstructed his view altogether. He argued that the contract for sale was void and asked for his deposit back. The builders refused.

The buyer took his case to the NSW Court of Appeal, which ruled in his favour. It found that he had relied on the agent’s misrepresentation when deciding to buy, so the contract was void. It ordered the builders to return the buyer’s deposit.

Changes to the law made in 2015 and 2019 make it harder for developers to rescind (get out of) off the plan contracts, but there are still considerable risks in buying something yet to be built, with finishes and inclusions yet to be added. Off the plan contracts have a 10 business day cooling off period because of the complexity of these types of contracts, giving purchasers more time to seek legal advice.

Once You Have Decided To Buy

The contract for sale

When you buy a property in NSW your rights depend, in large part, on what is in the contract for sale. However, there are some things a contract for sale must do, including properly identifying the property as well as the terms on which it is being sold. It should also attach a number of documents, the most common of which are:

A zoning certificate
A drainage diagram showing any sewer lines
A copy of the property certificate
A copy of the plan for the land
Copies of any documents showing easements (the right of someone else to cross or use the land), rights of way, restrictions, covenants etc.
Certificate of compliance or non-compliance for any swimming pool
Certificate showing whether or not land tax is owing on the property.

Sellers of strata title properties (generally units or townhouses) should also have attached:

A copy of the property certificate for the common property and strata plan
A copy of the by-laws for the strata scheme

Identification documentation

Under NSW laws, your solicitor will likely need to verify your identity.

Buying on your terms

Many of the terms in any contract for sale will be standard, which means they have been in use for a long time and are fair to both seller and buyer. However, a seller does not have to include these terms and instead may choose to include something in the contract which favours themselves at a buyer’s expense. That is why the first thing your solicitor will do is make sure the contract for sale is not just legal, but that it also is not unfair. Where a clause is not in your interests, your solicitor will negotiate with the seller’s solicitor to get it changed. This includes working out a time to settle the sale, which is when you will pay the balance owing and take ownership of the property.

Should you pay for inspections

Because you are expected to take the property “as you find it”, that means you will also sign up to any structural problems, pest infestations or other defects that might not be obvious to the naked eye. That is why it is always best to have someone who knows what they are doing look over the property. After all, you may be paying a few hundred dollars up front to save yourself thousands, or even tens of thousands of dollars down the track.

The real estate agent may be able to tell you if any inspection reports have already been prepared in respect of the property. But you should be aware of who they were provided for and any other limitations or disclaimers which may reduce your ability to rely on such a report.

Your solicitor should also check whether the contract includes:

A survey
A building certificate
A homeowner’s warranty insurance certificate for any renovations done on the property

If you are buying at auction it is important that you have any pest and building inspections carried out before the auction. Once the hammer comes down it is unlikely you will be able to get out of the contract.

Many of the terms in any contract for sale will be standard, which means they have been in use for a long time and are fair to both seller and buyer.

However, a seller does not have to include these terms and instead may choose to include something in the contract which favours themselves at a buyer’s expense. That is why the first thing your solicitor will do is make sure the contract for sale is not just legal, but that it also is not unfair.

Where a clause is not in your interests, your solicitor will negotiate with the seller’s solicitor to get it changed. This includes working out a time to settle the sale, which is when you will pay the balance owing and take ownership of the property.

What is included in the sale

Unless the contract specifically says otherwise, the property will be sold “in the state you find it”. That also means any fixtures are automatically included.

A fixture is anything that cannot easily be taken away without doing damage to the property. For instance, stoves are usually fixtures because they are wired in, whereas fridges are not because they only need to be unplugged. Sometimes a seller will attempt to exclude a fixture from a contract for sale. At other times, what constitutes a fixture isn’t so clear cut, for instance, removable floor coverings or an above ground pool.

Where anything is in doubt, it should be expressly included in the contract for sale. Your solicitor will help make sure you know everything that is included in the sale.

Your mortgage documents

To buy a property most people will need to take out a mortgage. A mortgage gives a lender rights over the land for which they are lending money, including the option of selling it if you default.

Types of ownership

When you buy a property with another person, there is usually two ways you can choose to own it.

Most couples choose to buy as Joint Tenants, which means they own the whole property jointly and if one person dies the other is immediately entitled to the whole property (regardless of what any will might say).

Business partners or people not closely related usually choose to buy as Tenants in Common, which means they each own a specified share in the property. That share can then be passed on or sold to anyone and can be left in a will.

What is exchange?

A contract to sell a property becomes binding when the buyer and seller each sign a copy of the contract for sale and exchange them. At exchange, the buyer also usually hands over a deposit (often 10 per cent).

At an auction, exchange happens immediately after the winning bid is accepted. For private treaty sales, exchange usually means you will deliver your signed contract to the seller’s agent and pick up the seller’s signed copy. However, it is common for contracts to exchange by mail or email. In all cases, a formal exchange of the contracts is done by either the seller’s agent or the seller’s solicitor.

Signing the contract is not always final

Sometimes you will be able to get out of the contract for sale and get your deposit back, even when you have signed the contract for sale (and that includes when you have bought a property at auction).

For instance, sellers must always comply with the “vendor disclosure requirements and warranties”. These rules require anyone selling a property to let prospective buyers know certain information about the property they are selling in the contract for sale. This includes making promises about the property and attaching certificates that reveal such things as any rights of way, drainage and zoning.

Your solicitor will be able to tell you if the seller has not complied with these obligations and whether you will be able to recover your money and pull out of the contract.

Final first home owners grant

If you are buying your first home, you may be entitled to a little help from the government. For more information visit the Revenue NSW.

Stamp duty and other tax

In NSW, the purchase of property is taxed. This tax takes the form of stamp duty, which is calculated based on the price of the property. Usually you will need to pay this duty at or before settlement. However, your obligation to pay is sometimes waived if you are a first home buyer or if you are buying a newly constructed home. For more information visit the Revenue NSW.

If a property is not purely residential in its nature, the sale may incur GST. Investment properties can also be subject to Land Tax. It is important your solicitor goes through the contract for sale to make sure the cost of these taxes it is not unfairly passed onto you as the buyer.

What happens behind the scenes?

While you are getting ready to move into your new house, your solicitor will be working so that everything proceeds smoothly to settlement. To make sure the seller has not left something out of the contract, your solicitor will be carrying out enquires about the property with the local council and government departments.

Finalising Your Purchase

What exactly are you buying?

Technically, owning a property means having “title” to it. From a practical point of view, this means once you have bought your name will appear on the Certificate of Title (sometimes known as the title deed). Because most land in NSW operates under Torrens Title, your solicitor will register a transfer at NSW Land Registry Services so everyone knows you are now the owner.

Generally, when you buy a house or apartment in NSW you get one of the following:

Freehold, which gives you ownership over the land and the buildings on that land
Leasehold, which means you have ownership of the land and the buildings on it for a certain period of time (often 99 years)
Strata title, which usually applies to apartments or town houses and gives you the rights to the internal part of your unit
Company title, which is a less common way of apartment ownership. You buy shares in a company and this in turn entitles you to the use of an apartment
Community title, which often works in combination with strata title on large developments and gives you rights – along with other owners – to common land

What happens at settlement?

When you sign the contract you will usually agree to a settlement day. Most commonly this will be six weeks after the date of exchange.

At settlement, you will need to pay the seller everything you owe them to settle the purchase of your home. This amount will take into account any utility bill, strata levies and tax calculations that your solicitor makes.

If you cannot settle by the date stipulated in the contract for sale, you are likely to be charged interest. In some circumstances, the seller may even be able to cancel the sale and keep your deposit (and sue you for any additional losses).

You should let your solicitor know as soon as possible if it looks like you cannot make the settlement date so they can attempt to come to an arrangement with the seller’s solicitor.

Contact us to discuss the specific property you are considering buying.