Private Treaty vs Auction
There are two common ways to buy property: by private treaty or at auction. Both involve making an offer of sorts to the vendor, which is ultimately accepted or declined. This post is going to assume you’ve made an offer for a property, either at auction where it’s been the winning bid or on a private treaty sale and it’s been accepted. Now what?
The first deposit
In a private treaty sale, you’ll need to get a deposit over to the sales agent quickly, to avoid a higher offer coming in from another buyer. If yours was the winning bid at an auction, you’ll need to have your deposit ready with you on the day. You’ll also need to sign the contract of sale (which you should have already had reviewed by your conveyancer) and leave 0.25 percent of the purchase price as a deposit. In a private treaty sale, you now have 5 business days (in NSW, ACT and QLD). There is no cooling off period for property bought at auction.
Learn about the legal stages of selling a property
Prevention of another offer
When you sign the contract, ask the sales agent to change any marketing materials — signboards, print and online ads — to say “under offer”, to prevent another buyer making a higher offer during the cooling off period. This is generally frowned upon, but there’s no law that stops the agent from taking a higher offer to the vendor, who can rescind the sale, and accept the other offer instead. Better to be safe and all that. Alternatively, you may choose to waive the cooling off period.
Due diligence and full deposit
During the cooling off period, you should continue to do your due diligence, which may include building and pest inspections.
Checking that your finance is all in order is vital. Backing out at this stage means you’ll lose your deposit, even if it’s because your finance fell through.
Inspect the property again, and ensure all the “included items” in the contract of sale are there. If you’re still waiting on information from the vendor, ask your conveyancer to extend the cooling off period — you may not be successful in doing so, but it’ll put a rush on the vendor. After the cooling off period, you’ll be required to pay the full deposit of 10 percent minus the amount you’ve already paid (so 9.75 percent).
Other upfront payments and settlement
The period between paying the full deposit and settlement day is typically 30 to 45 days, though you may negotiate either a longer or shorter settlement with the vendor. During settlement, you’ll be required to pay apportioned strata, council and water costs for the calendar quarter during which your purchase occurs. If your loan covers less than 90 percent of the property price, you’ll also be required to pay the difference yourself.
Final inspection and settlement day
It’s a good idea to have a final inspection between 24 and 48 hours before settlement day. This is to ensure that the property is left in a reasonable condition before you move in, and to ensure that those included items are still there — you’d be surprised how often dishwashers, window coverings, and the like magically disappear before settlement. If there are any discrepancies, you can delay settlement until rectified. Finally, most states don’t action a property’s settlement until around 2pm in the afternoon. You don’t have to attend the settlement meeting, but you should know the time you’ll be able to collect the keys. Check with your conveyancer beforehand.