You had been patient as your home went through open inspections, faced a hard bargaining, and finally determined which furniture you want to keep and what to donate. But what really happens once you have accepted an offer?
There are three main processes you need to undergo to complete the sale of your home:
- Exchange contracts and get the deposit
- Survive the cooling-off period.
So what happens at each stage?
- Exchanging of contracts
Through this process, you acquire a legally-binding document that verifies the price and conditions of the sale.
The buyer will sign the Contract of Sale document. The document includes the price, the deposit amount, the amount owing at settlement, property details, the settlement period, and other terms of the sale, such as the property being covered by finance.
Other items included in the documents are the buyer’s and seller’s names, and information on each of the party’s legal representatives.
During this period, the buyer transfers the deposit, which is usually 10% of the purchase price but can be as little as 0.25% deposit if opting to exchange contracts with a cooling off period.
This deposit should never be paid directly to the seller; it should be given to their agent to be entrusted in a trust account until settlement.
- The cooling-off period
Like what the name signifies, the cooling-off period is the time given to the buyer in case they reconsider their decision and terminate the sale.
The buyer should inform the seller or their lawyer in writing if they have a change of heart during this time. Afterwards, the deposit will be returned to the buyer, less the applicable penalty.
The rules around the cooling-off period differ in each state and territory, including those related to its duration, the penalties that might apply, the property types that it applies to. For example, in NSW, the cooling-off period is 5 days.
Regardless of the location of the property, the cooling-off period doesn’t apply to properties purchased at auction.
Here are the different rules relating to cooling-off throughout Australia:
|Victoria||3 business days||$100 or 0.2% of the purchase price , whichever is higher.|
|New South Wales||5 business days||Buyer forfeits 0.25% of the purchase price to the seller.|
|Queensland||5 business days||Seller may keep 0.25% of the purchase price from the deposit paid by the buyer.|
|South Australia||2 business days||Any deposit paid that was over $100 will be refunded in full, but the buyer forfeits any holding deposit.|
|Northern Territory||4 business days||Both purchase deposit and holding deposit will be refunded to the buyer.|
|Western Australia||No cooling-off period applies unless contract specifies a cooling-off period||No cooling off period applies unless contract specifies a cooling-off period|
|Tasmania||No cooling-off period applies to any sale of property in Tasmania||No cooling-off period applies to any sale of property in Tasmania|
|Australian Capital Territory||5 business days||Buyer forfeits 0.25% of the purchase price to the seller.|
- Settlement period
When the cooling-off period expires, the sale begins the settlement phase.
Usually between 28 to 42 days in NSW, this period lets buyer arrange their finances, and lets both parties double check that all aspects of the Contract Sale are fulfilled.
Settlement can be delayed by a range of issues, from the buyer not able to complete their loan documents to the vendor failing to provide vacant possession. To ensure a smooth settlement period, both parties should work closely with their lawyers from start to finish.
On settlement day, the buyer’s lawyer will ensure the money to be used to purchase the property is available, before assisting the buyer in getting the title or freehold to the property.
When the final signature has been affixed and the last cent has exchanged hands, it is finally time to pop the champagne!