Found your dream home? Before you sign the contract and commit to the purchase, there are a few important things worth checking. We’ve collated 6 of the most important issues to consider before you put pen to paper.
1. Get the contract reviewed
A Contract for the Sale and Purchase of Land is a legally binding commitment between the purchaser and the vendor.
If you’ve submitted your offer to the vendor and it’s been accepted (or alternatively, there is a scheduled auction) you must have your solicitor review the contract and advise you on any conditions imposed within that may adversely affect you.
Despite what many believe, the terms of a contract do not simply lose their binding effect once the matter has settled. Many contracts are drafted with specific non merger clauses. This means that specific promises, warranties, or rights from a contract continue to exist even after the property has been transferred to the new owner and the parties remain bound by them accordingly.
It may also be the case that there are encumbrances on the title which could adversely affect your use and enjoyment of the land if not discharged. It is paramount that you ensure you get the contract reviewed so that you are aware of your rights and obligations each step of the way.
2. Obtain pre-purchase enquiries
Purchasers are bound by the principal of caveat emptor. This is a Latin phrase that roughly translates to “let the buyer beware” and places the full burden of due diligence on the purchaser to inspect and verify the quality, condition and value of any property purchase they are considering.
Individuals must acknowledge that purchasing property carries inherent risks and that they assume those risks when proceeding with a purchase. The seller makes no representation as to the condition of the item and may sell it in its existing state.
That’s why in conjunction with your physical inspection and walk through of the property, obtaining pre-purchase reports such as building and pest inspections and strata inspection reports, are crucial before committing to a purchase. Investigations carried out by professionals can uncover costly issues that aren’t always obvious during an inspection.
3. Check what’s included
If it’s not listed as an inclusion in the contract, don’t assume that items such as appliances, blinds, pool equipment, solar panels or other miscellaneous objects will
remain in the property once title passes on to you. If there have been discussions regarding inclusions with the vendor and/or their agent during negotiations, ensure you tell your legal representative so that adequate provisions may be made before exchange.
Notify your legal representative of any representations that have been made to you, so as to ensure that they are honoured in the contract. At the end of the day, the contract forms the entire legal agreement between the parties – anything that falls outside of its parameters is uncertain.
4. Think about future plans
If you’re buying a property with the intention to renovate, extend or build, check with the local council and your legal representative to ensure that there are no planning controls, easements or other restrictions that could affect your ability to carry out these plans. Once contracts have become unconditional, you are bound to complete.
Once again, your must rely on your own enquiries of the property and the land on which it sits to ensure that it’s fit for your proposed future use.
5. Get ready for exchange
Before exchanging contracts, you should ensure you understand the key commercial terms of the transaction, including:
1. the length of the settlement period;
2. the settlement date;
3. the amount of the deposit and the due dates for any deposit instalments; and
4. the details of where and how the deposit is to be paid.
There are also a number of practical considerations to address before committing to the purchase. If you require finance, have you obtained unconditional finance approval? Are your funds readily available, or are they tied up in investments or other assets that may not be accessible before settlement?
If you are relying on the proceeds of another property sale to fund the purchase, it is important to ensure that the settlement dates align. Ideally, your sale should settle on or before the settlement of your purchase to avoid any funding shortfall or delay in completing the transaction.
6. Know your rights before you sign
Before signing a contract, it is important to understand exactly when you become legally bound and what rights, if any, you have to withdraw from the transaction. While some residential property purchases in New South Wales are subject to a cooling-off period, there are significant exceptions, including properties purchased at auction and contracts where the purchaser has waived their cooling-off rights.
Once contracts are exchanged, a purchaser will generally be committed to completing the transaction. Failing to do so may expose the purchaser to financial penalties, including forfeiture of the deposit and potential claims for damages. For this reason, it is essential to carry out all necessary enquiries, obtain any required finance approvals, and seek legal advice before signing or exchanging contracts.
In short: do not assume you will have an opportunity to change your mind after signing. Make sure you fully understand the contract and are ready to proceed on its terms before becoming legally committed to the purchase.
If you’re thinking of buying residential property in or around the Sutherland Shire, contact our Property and Commercial team for an obligation-free chat to discuss.