What is conveyancing? What are the steps involved in a conveyance?
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Conveyancing is the process of legally transferring the legal title for real estate from the vendor to the purchaser.
Where the land is already registered (ie not an off the plan contract), these are the essential steps that are involved in a standard contract for sale of land if you are looking to buy or sell property:
- Obtaining finance
It is essential that a purchaser has adequate finance to cover the cost of the purchase, stamp duty and any other applicable fees and charges before they proceed with a property conveyance.
- Contract prepared
The vendor’s property solicitor will prepare the contract for sale.
A property cannot be advertised for sale until such time as a contract is available.
Interested purchasers are able to make an offer for a property once it is listed for sale.
Upon an offer being accepted by the vendor, the purchaser needs to act quickly to secure the property. This is because, until contracts are exchanged, the vendor may still be able to sell the property to another purchaser.
- Exchange of contracts
At exchange, the following takes place:
- The vendor signs and dates their copy of the contract.
- The purchaser signs and dates their copy of the contract.
- The purchaser pays the required deposit. This is usually 0.25% of the purchase price.
- The contracts are exchanged with the vendor receiving the purchaser’s signed copy and the purchaser receiving the vendor’s signed copy. It is upon the exchange of the contracts that a binding legal agreement is made.
- Cooling off period
After contracts are exchanged, the purchaser is allowed a cooling off period within which they can change their mind to not proceed with the purchase. Usually, a cooling off period will be five days. But this can be extended if the vendor agrees.
During the cooling off period, the purchaser’s conveyancer does the following, in consultation with the purchaser:
- Reviews the contract of sale to ensure the required documents are included and advise on the terms of the sale, including any special conditions
- Negotiates changes to the contract of sale with the vendor’s home conveyancer.
- Arranges for pest, building and/or strata reports.
The purchaser’s conveyancer should be advising them by, or before, this stage of:
- How much stamp duty they will have to pay.
- Whether they are eligible for a first home owner grant or other grants or concessions.
By this stage the purchaser should also have written confirmation from their bank that their loan is fully and unconditionally approved.
If the purchaser decides to pull out of the contract within the cooling off period, then they will lose 0.25% of the deposit
A purchaser will not be entitled to a cooling off period in certain circumstances. These include:
- If a property is to be purchased at auction.
- If a property is purchased on the day of the auction.
- If a certificate under section 66W of the Conveyancing Act is signed by a solicitor or conveyancer waiving the purchaser’s cooling off rights.
- The contract becomes unconditional
The purchaser is required to pay the balance of the deposit on or before 5pm on the day the cooling off period expires. 10% of the purchase price is the usual deposit. But other percentages can be negotiated through the property lawyers acting for the parties.
Upon the purchaser paying the balance of the deposit, the contract becomes unconditional.
If a party defaults under the contract following it becoming unconditional, there can be consequences including:
- If the purchaser defaults, then they will forfeit the full deposit they paid and the vendor can sue for damages.
- If the vendor defaults, then the purchaser can seek specific performance of the contract or sue the vendor for damages.
- Pre-settlement actions
After the contract becomes unconditional and before settlement, the following takes place:
- Executes loan documents
- Execute stamp duty documents through their property lawyer.
- Their conveyancer orders council, water and strata (if applicable) rates certificates and prepare adjustments to determine the total amount owing to the vendor at settlement.
- Conducts a pre-settlement final inspection of the property.
- Arranges for the discharge of any mortgage on the property.
- Provides the purchaser’s conveyancing solicitor with a Foreign Resident Capital Gains Withholding Certificate – if the contract price exceeds $750,000.
- Stamp duty
Stamp Duty is payable in NSW on any purchase or transfer of land. Stamp Duty liability falls at the earlier of settlement or within three months of exchange of contracts.
A purchaser’s incoming mortgagee (if applicable) will require stamp duty to have been paid by settlement and NSW Land Registry Services will not register the certificate of title until stamp duty has been paid in full on a purchase.
Settlement generally occurs 42 days after exchange of contracts. However, different periods can be negotiated through the parties’ property lawyers.
If settlement does not occur by the settlement date because the purchaser is not in a position to settle, then most contracts have a provision where there will be penalty interest and costs.
In NSW, most transactions are settled electronically which means that neither party is required to attend settlement. However, our Liverpool Conveyancing Lawyer and Parramatta Property Lawyer are conveniently located in those those suburbs for face-to -face consultation.
Once settlement has taken place, the purchaser can move into the property.
NSW Land Registry Services will notify council and Sydney Water of the new ownership details.
If property is subject to strata, then the relevant change of ownership notice will need to be provide to the Owners Corporation.
At Opal Legal our convyancers are conveniently located at Liverpool and Parramatta for all your home conveyance services.
Suite 8, Level 1, 131-135 George Street,
Liverpool, NSW 2170
4/52 George Street,
Parramatta, NSW 2150
Conveyancers Liverpool | Parramatta | Sydney
A Basic Guide to Buying Property at an Auction
Buying property at an auction can be an exciting and rewarding experience. But, beware, those special rules apply when buying at an auction.
Here are some basic things to be aware of before buying at an auction:
Know the market and decide a final and firm bid price before the auction. Do not get caught up in a bidding war and bid at a price beyond your means. Once your bid is accepted, there is no turning back.
- Review the Contract
Have the contract reviewed by your conveyancing lawyer before attending the auction.
If you intend to develop on the property, make sure you tell your property lawyer and make enquiries with the Local Council about their rules and limitations.
- Pest Report, Building Report and Strata Report
A common term in the property market is “caveat emptor” (‘buyer beware’). Essentially, the term means that a purchaser buys the property as it is; and cannot raise defects after the purchase.
Also, spending a few hundred dollars to obtain a pest and/or building report; and in the case of a strata property, a strata report, should provide you with information about major and minor problems with the property.
Always, always, always have approval for finance before bidding.
If you are a foreign resident, ensure that any necessary approvals have been obtained.
- Stamp Duty
Find out how much stamp duty liability you will have to pay on your highest bid price.
Unless you are eligible for a grant or concession, stamp duty is an unfortunate additional cost to your purchase which you have to factor in.
Have the deposit ready in the form required by the auctioneer. The deposit will be 10% of your bid unless a lower percentage has been agreed to prior to auction. If this has been agreed, ensure you take the paperwork confirming this to the auction.
- Register with ID
Normally there is a final inspection before the auction – so arrive early, take a final look and register the names of all purchasers.
All purchasers must be present at the auction to sign the contract unless you have a written authority and you have confirmed with the auctioneer, prior to the auction, that this is acceptable.
ID will be required. Ensure that the name on your ID, contract and mortgage documents all match. Otherwise there will be complications with the sale going through.
- Be 100% sure, as there is no cooling off period
If you are successful at an auction you do not have a cooling off period* to change your mind.
If you do have a change of heart and rescind (pull out of) the contract, the vendor (seller) will keep your deposit and can sue you to perform the contract or pay damages.
Much like television shows, the auctioneer will call the sale several times before bringing the hammer down and saying ‘SOLD’. If you are the highest bidder, there is no turning back.
- Passed in?
The vendor will advise the auctioneer of a reserve which is the lowest price he/she is willing to sell the property for. If this price is not reached, the property will be ‘passed in’ meaning it has not been sold at the auction.
- Buying on the day of auction
If the property is ‘passed in’ at auction the highest bidder will then get the first chance to negotiate a deal with the vendor.
Importantly, if the property is ‘passed in’ and you make an offer on the same day as the auction, you will be bound by auction conditions ie you will not be entitled to a cooling off period.
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However, if you wait at least a day and then make an offer with a cooling off period, you will then forfeit only 0.25% if the purchase does not go through.
*A cooling off period arises once contracts are exchanged (signed and dated by both parties and swapped ie the buyer receives the sellers signed contract and vice versa). It is usually a period of 5 business days within which a purchaser can rescind the contract. If rescission occurs within this period, the purchaser will forfeit to the vendor 0.25% of the price.
By Namrata Singh | October 11 th, 2016