Contract for Sale
The contract is prepared by the Seller’s Agent and sent to you — or your solicitor. If you have nominated your solicitor to receive the contract first, they will examine the Contract on your behalf to ensure it’s accuracy. Your solicitor will usually provide you with a summary review of the contract, bringing specific dates or requirements to your attention prior to signing, or meet with you to review.
The contract documents that will be sent to you or your solicitor include:
- The Contract and body corporate management statement.
- Disclosure statement: The disclosure document for an off-the-plan purchase is the seller’s disclosure to you, the buyer of the property, both prior to the development and following construction. Essentially, this document ties the land and the potential construction together to create the final property at settlement. The document therefore includes building development and all relevant plans including site plans and floor plans, the community management statement, body corporate fees and lot entitlements.
- Acknowledgment to use electronic means throughout the transaction.
Please note these are all legal documents which your solicitor will explain to you in detail. They are for your protection, as well as the seller’s.
Solicitor reviews contract
When your solicitor is satisfied with the contract, they will make arrangements with you either to come into their office or send the contract to you for execution.
Purchaser signs contract
Once you are comfortable with the contents of all documents you must sign the contract where indicated, and return them to your solicitor promptly. Remember time is of the essence and you have not legally secured the property until the contract is signed and dated by all parties.
Even at this stage the seller is quite entitled to sell the property to someone else if they feel you are taking an unnecessary amount of time to complete the contract without providing a reasonable explanation for the delay. If however, there are any details in the contract that you still do not understand or if you feel any of the information is incorrect, you need to discuss these issues with your solicitor immediately.
Seller signs contract
Once you have signed the contract your solicitor will then forward it onto the seller, or the seller’s solicitor, for contract signing (the execution of the contract). Up until this time the contract is not legally binding. It is only when the seller signs and dates the contract (the contract date), that the contract is binding. Please note it is only the last person who signs the contract who can apply the date to the contract. Of course, even after everyone who needs to sign the contract has actually signed, the contract is still conditional on the purchaser and seller completing their obligations under whatever specific terms and conditions are included in the contract.
In Queensland all purchasers of real estate have a cooling-off period of five days after the actual contract date. During this time you can decide for any reason whatsoever not to proceed with the contract. Other States have varying legislation regarding real estate contracts. At the expiry of this five day cooling-off period, the contract will still be conditional upon both the buyer and seller meeting any contract obligations included in the contract documents.
Pay balance of deposit
Sellers usually require purchasers to pay a deposit being part of the purchase price as a deposit.
What would happen to your deposit if the seller were unable to deliver a finished or completed product? Many mistakenly believe that the seller actually keeps the deposit monies to use. This is not the case — all deposit monies are held in trust for the purchaser in a solicitors’ or agent’s trust account. If for any reason the seller cannot complete the contract by delivering the property then all cash deposits are refunded in full to the purchaser. Of course, the charges you pay for deposit bonds or bank guarantees cannot be refunded.
After the seller has received the deposit and all other conditions of the contract have been satisfied (e.g finance and or building and pest reports), the Contract of Sale will become unconditional. Once this occurs, there is now a legally binding document in place and all parties, buyer and seller, will be legally bound by the contract. In the event that a purchaser in this instance decided that they didn’t want to proceed with the purchase, the seller has every right to claim the purchaser’s deposit and any other costs they may have incurred. Notwithstanding this, most sellers will allow a purchaser to exit the contract without penalty if there is a genuine reason — such as the death of a party to the contract.
When buying off-the-plan it is important to understand that banks will only provide approval in principle for finance. Generally, settlement of the property is too far in the future to approve a loan. Some banks will even pre-approve your finance for 12 months, but still require an update of your information prior to lending you the money and settling the property.
For this reason many off-the-plan contracts are not subject to finance. Putting this aside, you should still speak to your bank or finance broker before signing a contract to determine if your current financial situation would allow you to purchase a property. If you believe your situation at the time of settlement will be the same or improved, it is then appropriate for you to proceed with the contract.
Once the contract is signed we encourage you to stay in regular contact with your financier throughout the contract period. At a minimum, you must be in close contact with your financier at least two to three months prior to the expected date of settlement.
As the property nears completion you will be advised of the official settlement date and need to organise your financial arrangements in readiness for settlement.
During this process the bank will most likely order a valuation on the property you are purchasing. Generally banks will lend up to 90% of the property valuation if you pay for lenders mortgage insurance. If you are borrowing 80% or less of the value of the property or if you are providing additional security to the bank, for example another property, and the total borrowings on the combined security (the two properties) are 80% or less, then lenders mortgage insurance won’t apply.
Once you have secured finance for the property you are ready to settle.
There are two phases to settlement when purchasing off-the-plan.
- The first phase occurs upon practical completion. This triggers the issue of Certificates of Classification, which indicates that the building can be legally occupied.
- The second phase occurs when the titles are registered. This leads to settlement, which usually occurs 14 days later.
As you may have noticed, there are two major differences when purchasing a property off-the-plan.
The first is in the contract details. A contract for purchasing off-the-plan will be much more detailed given that construction may not have commenced, or may have only just begun. In this case, the contract will include everything from proposed body corporate assets and expenses to an outline and schedule of finishes for each property.
The second difference is in the settlement phase. While settlement for an existing property generally occurs 30 days from the contract date, purchasing off-the-plan allows more time between contract date and settlement.