12 Sep What you need to know before you exchange contracts in NSW
Australia is a country of eight States and Territories, which each have their own, sometimes unique, laws.
The laws around real estate differ substantially across these regions, and there can be quite a few differences depending on which part of the country you are buying or selling in.
What’s required in Victoria may not be necessary in New South Wales or Queensland.
That’s why it’s so important that buyers and sellers access professional advice and assistance, to ensure that they’re fully aware of the legal requirements in each location.
We’ve outlined the principal differences in each State or Territory previously. In this article, we’ll delve deeper into what you need to know before exchanging sales contracts in New South Wales specifically.
The peculiarities of contract exchange in NSW
When buying or selling real estate in New South Wales, the Contract of Sale must come with a series of Schedule 1 Prescribed Documents.
These documents are prepared by the vendor’s conveyancer/solicitor to inform the potential buyer of relevant information about the property.
A principal difference with Victoria is that the Section 32 document – which is a compulsory vendor statement – is prepared to enable the selling agent to market the property. Once the property sells, the Contract of Sale is attached to the Section 32 to complete the exchange.
In NSW, on the other hand, a lawyer or solicitor will prepare the Contract of Sale to enable the selling agent to market the property. Then, once the property sells, they insert the purchaser’s details and price considerations into the contract.
According to the NSW Office of Fair Trading, the Contract of Sale must include a copy of the title documents, drainage diagram and a current zoning certificate (s149) issued by the local council.
Also, if the property has a swimming pool or a spa, then various certification forms must also be attached. Exemptions may apply to this, for example if the property is a lot in a strata or community titles scheme, or has been purchased off-the-plan.
The NSW sales process
One of the more interesting elements of the buying and selling of property in New South Wales is that there are two copies of the sales contract – one for the vendor and one for the buyer.
Regardless of whether the property is being sold by private treaty or auction, the physical exchange of sale contracts in NSW is the critical legal part of the sales process.
Each party to the transaction signs one copy before the two are swapped or “exchanged”. This process is usually facilitated by the legal representatives of both parties.
In NSW, this exchange of contracts is subject to a number of legal considerations. For example:
- Neither party is legally bound until the signed copies of the contract have been exchanged, which means that either party can simply walk away from negotiations before that point in time.
- Buyers of a property sold by private treaty generally have a five working day cooling-off period after exchanging contracts.
- However, this cooling-off period does not apply to sellers, which means they are usually bound to complete the transaction.
- When it comes to cooling-off periods, these can be waived, rescued or extended by negotiation before contracts are exchanged.
- There is no cooling-off period when purchasing at auction.
Preparing and exchanging contracts as a seller
Buying or selling real estate requires adherence to a number of laws. This is why legal representatives rightly play a vital role in the process.
In New South Wales, if selling property, you need to start the process by appointing a lawyer or solicitor to act on your behalf.
Once you have done that, you would instruct your representative to prepare a Contract of Sale for your property. By NSW law, a residential property can’t be offered for sale unless your sales agent also holds the proposed sales contract.
Your lawyer or conveyancer will also proceed with a number of other legal steps, which include:
- Ordering any searches legally required to be included in the Contract of Sale.
- Answering queries about the proposed sale of your property from prospective buyers or their legal representatives.
- During the negotiation process, they will also make any agreed amendments between the seller and the buyer to the contract before it is exchanged.
Once negotiations are completed, contracts are then exchanged between the seller and buyer.
The formal contract exchange is managed by legal representatives, and involves each party signing the final contract.
The seller then notifies their lender about the sale, and provides their bank with a signed discharge authority.
Preparing and exchanging contracts as a buyer
Buying property in New South Wales still requires the ability to negotiate, as well as an understanding of what you can afford to pay for a property.
To begin the process, therefore, you should speak to a professional mortgage broker to understand your borrowing capacity, and to ensure that you’re not trying to buy a property that you literally can’t afford.
Once you’ve done that, as well as thoroughly researched the market, it’s time to begin the search for your ideal property – whether it’s going to be a home or an investment.
In NSW, once you find a property, as a buyer you would then instruct the seller’s agent to send a copy of the contract to your lawyer or conveyancer for review.
Your legal representative will also act on your behalf during any negotiations, such as on price, or other conditions like the settlement date.
Once negotiations are successfully completed, you then organise to pay the agreed deposit.
The contract will be prepared by your lawyer for you to sign, and then sent to the seller’s solicitor.
Once the cooling-off period has passed, it’s time for the final legal and financial requirements to be fulfilled before the property is all yours!
The information provided in this article is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs.
This article was originally published on Intuitive Finance.