Purchasing property can be a rewarding and exciting experience. However, often our excitement is quickly dulled by the prospect of the plethora of steps required to complete that purchase transaction. At BPC Lawyers, we can guide you through every step of your transaction to make your path to the purchase summit as smooth and straightforward as possible. The following is a brief introduction to the initial steps of your purchase transaction.
STEP 1 – Obtain and arrange finance
It is best to find a lending institution and obtain financial approval before you venture into the property market. This way you will be financially equipped to proceed with sale negotiations as soon as you find your dream home. Even though you may not have any final approval until you have chosen your property, you can obtain a preliminary loan approval to support your interests when negotiating your purchase price.
STEP 2 – View the contract
You have found your dream home and yes, it is a wonderful and exciting time. Now it is time to view the contract. The “contract for sale of land” is the legal document that describes the property and contains the provisions that will protect the rights and interests of you and the vendor (seller). The vendor’s solicitor usually prepares the contract and attaches all required statutory searches and certificate. The vendor then provides you with a copy of the contract once you have negotiated a purchase price. The contract generally includes:
- Property details-This includes details of the vendor, purchaser, both parties’ solicitors and the real estate agent. Because the vendor has prepared the contract, the purchase price and your contact details are left blank to complete once you are happy with the contract.
- Special conditions, implied terms and warranties
- Inclusions-You may think that everything you saw when you inspected the property is up for sale. However, many items may not be included as part of the sale and may be easily removed from the property. This may even include hot water systems. This is why it is important that all the items that you wish to be included as part of the property are marked as inclusions in your contract.
- Various documents and certificates including:
- A title search from the NSW Land and Property Information, which provides proof of ownership and outlines any encumbrances
- A survey to ensure the measurements and boundaries of the property are the same as the title search
- A local council certificate
- A drainage diagram from Sydney Water showing drainage and sewer lines
- Building and pest inspection reports
- A strata inspection report if the property is part of a strata scheme (such as units or townhouses)
- Copies of other relevant documents showing restrictions to the use of land
It is imperative that you are completely happy with your contract for sale before you proceed with any other steps of your purchase. Speak to us at BPC Lawyers to ensure you understand and are satisfied with everything contained in your contract for sale before proceeding with the purchase.
STEP 3 – Undertake any necessary inspections
Purchasing a property is quite similar to any other shopping transaction where the principle of “buyer beware” is paramount. This means that the vendor is under no obligation to disclose to you any defects on the property or title other than legally required under the contract.
The responsibility thus shifts to you to do your research, like what you see and know exactly what you are getting yourself into. You should carry out all inspections and be fully satisfied that you are not buying anything that this, for instance, structurally defective, termite infested or in need of electrical re-wiring. You may also wish to check whether the property complies with any building codes and swimming pool regulations.
STEP 4 – Prepare your deposit
You will usually need to pay an initial deposit to demonstrate to the vendor that your offer to purchase is serious and genuine. Normally, a minimum of 10% deposit is required, however in certain circumstances it may be less.
STEP 5 – Organise exchange
Exchanging contracts is an important step in the legal process of purchasing a property. The exchange of contracts is where legal representatives of both the vendor and purchaser meet and ensure each contract is identical. It is only when the contracts are identical that it means both parties agree to the same terms and conditions of the contract. Once both parties are happy, they each sign and date the contracts and physically swap them. As purchaser, your 10% deposit is also handed over to the vendor and you and the vendor become legally bound under the terms of the contract.
STEP 6 – Exchange & beyond!
Once the contracts are exchanged you will have successfully surmounted one major, legally binding step in your purchase! You are now ready to proceed in preparation for “settlement”, which is essentially the culmination of the conveyancing process where solicitors for the vendor (selling party) and purchaser (buying party) meet with their respective bank representatives to exchange legal deeds, pay the balance of the purchase price and complete other payments such as stamp duties.
This information has been prepared by BPC Lawyers and is general advice only. This article does not take into account your personal situation. Before acting you should obtain legal advice in relation to your particular circumstances. The information contained herein is current at the date of publication, the law frequently changes and as a result the information can be updated and no longer correct. This article is for the information of clients of BPC Lawyers and is not intended as an advertisement or promotion.
By Barry Beilby
Publish Date: October 1, 2007