The Process

The Contract is a legal document which creates a legally enforceable agreement between the vendor and the purchaser. Contracts for the sale of land must be in writing, and, in the course of being prepared by the vendor, are usually drafted in a way which ensures that the vendor has substantially more rights than the purchaser.

Even if you are fortunate enough to be in the practice of purchasing properties or have purchased a property before, you should never underestimate the complexities associated with each individual Contract.

Our Sydney Conveyancing Lawyers thoroughly consider each and every provision of the Contract and explain these to you in detail (and in plain English) in our letter of advice. By the time you have finished reading our letter of advice, you will understand:

• the rights and obligations you have under the Contract
• the risks involved with the purchase
• what further enquiries or inspections you will need to obtain
• whether any provision of the Contract needs to be renegotiated 

You should also ensure that you have pre-approval for finance and have the necessary funds ready for the purchase. Our Accredited Sydney Mortgage Brokers can help you obtain a home loan or ensure that your current loan is the most suitable for your circumstances and goals.

It is commonly assumed that when the time comes for the parties to sign the Contract, they sign the same Contract. This is not the case. The standard practice in New South Wales is that each of the vendor and purchaser sign separate, albeit identical, Contracts. However, a binding agreement does not come into existence simply because each of the vendor and purchaser have signed their own Contracts. The Contracts must be ‘exchanged’ in the literal sense in order for there to be a binding agreement between the parties. This is a physical process, whereby the vendor gives to the purchaser their signed Contract and vice versa. Of course, the process of exchange also necessarily involves the person conducting the exchange (usually the agent but sometimes the vendor’s solicitor) ensuring the Contracts are in fact identical. The date of the Contract is the date of exchange.

Normally, the purchaser must also provide to the vendor (often through the real estate agent) the deposit. However, this is not always the case. For example, where a cooling off period applies, the purchaser may have until the expiry of the cooling off period to pay the deposit.

After the exchange of Contracts, the purchaser must also ensure that their finance has final approval if they have not already done so, which is recommended. Alternatively, you may schedule an appointment with one of our Sydney based Mortgage Brokers to see if we can assist you in this department. 

Generally, the law provides for a 5 business day cooling off period as soon as Contracts are exchanged, during which time the purchaser is entitled to rescind the Contract. If you decide to terminate the Contract within the cooling off period, you will only forfeit 0.25% of the purchase price. For example, if the purchase price for a property is $100,000, you will forfeit $250 to the vendor. Once the cooling off period expires, you are unconditionally locked into the Contract. If you rescind the Contract at this point, you will likely lose the full 10% deposit and face further ramifications (such as being sued by the vendor for damages). Note that there are specific circumstances where there is no cooling off period such as if the property was purchased at a public auction.

Under the standard terms of the Contract, settlement (otherwise known as ‘completion’) is due on the 42^nd day after the date of exchange (though, this can be changed). At settlement, both parties fulfil their ultimate obligations under the Contract, that is, the purchaser pays to the vendor the outstanding amount owing on the purchase price and the vendor provides to the purchaser legal title and ownership of the property. It is not necessary for the purchaser or vendor to attend the settlement. 

Overall, settlement is not an overly complex procedure. However, there are many things which can and do go wrong at settlement (a common example is that a bank cheque is incorrectly drawn). It is therefore important that you have a diligent and meticulous Conveyancing Solicitor taking care of your conveyance.