Selling a property, or buying one, usually involves a buyer (purchaser), a seller (vendor), a lawyer (solicitor) or conveyancer, and a real estate agent.
Each of these people has a role to play for the transaction to be completed smoothly, without unnecessary drama or grief.
Problems can often arise when one of these people underestimates their role and fails to take all the necessary steps required of them so the transaction can be completed. This can occur not due to ill will, but because of a flawed understanding of responsibilities.
This article looks at the process of selling a property in New South Wales and what each party needs to do, including what they might not realise they need to do.
Property seller needs contract of sale and somewhere new to live
Deciding to put your house on the market can feel like a big decision, but it is only the first, small step in what can be a long and complicated process.
Before the marketing or inspections of your property can even begin, you need to find a solicitor or conveyancer to draw up the contract of sale (however this is different if you are selling a property in the country). For a fee, you may also choose to generate your contract online from the NSW Law Society's Digital Contract Service (DCS).
When the contract is being prepared, it is very important that you are aware of what is excluded and, more importantly, included in the sale of your property.
Once the contract of sale is ready, you can engage a real estate agent to start the marketing, manage the inspections and find a buyer ready to meet - or hopefully exceed - your price expectations.
You may also wish to have your lawyer review the agent's agreement, which includes their fees, expenses and commission, before signing them on as your real estate agent.
If you have not already found a new place to live, now is the time to start seriously looking, especially if you want to buy a new property and move directly from your old place to your new one.
This is because once a buyer has been found for your property, you will be locked into a timetable that might not necessarily align with the timing of the purchase of your next residence. This is often the cause of the most stress for people who are selling a property.
Once you find a buyer for your property, they will request a copy of the contract, which will be provided to them via the real estate agent for their review. If they are happy with the terms, they will sign it and you will exchange signed copies of the contract. This is often done via your lawyer, so you aren't dealing directly with the buyer yourself.
It is also during this time that you and the buyer will come to an agreement on the settlement date, which is normally six weeks after exchanging the contract, but can be different if both parties agree.
If you have doubts about whether you will have found a new property to move to within this timeframe, it may be something you need to raise and negotiate with the buyer, through your lawyer.
Once the contract is signed and exchanged, it is legally binding on both of you. This is also the time when the buyer will normally pay the deposit, which is paid to your lawyer to be held in trust.
Now that the contract is exchanged, the cooling off period officially begins. In NSW, the cooling off period only applies to the buyer (not the seller) and the period is five business days.
During this time, the buyer can withdraw from the sale. If they do, however, they will need to forfeit 0.25% of the purchase price, unless the sale was cancelled under allowance conditions within the contract.
After the cooling off period ends, or if the contract was unconditionally exchanged, the house is considered sold. Congratulations!
Settlement will occur as per the agreed terms in the contract. At this time, the buyer pays the purchase price, minus the deposit already held in trust by your lawyer.
Seller's lawyer prepares contract of sale and protects seller's interests
The first job of the seller's lawyer or conveyancer is to prepare the contract of sale. This happens at the very beginning - before the marketing or inspections begin (except for rural properties as mentioned above).
Under NSW legislation, an estate agent cannot show a property until they hold a draft contract which has the required statutory certificates attached to it.
At our firm, we issue our clients with a questionnaire regarding the proposed sale, including such items as any building additions, extensions, swimming pool certificates, what items are to be included and what is excluded. The responses to this questionnaire are used to inform the contract.
Sometimes we have great difficulty in getting our clients to complete such documents. However, we will not issue a contract until we have all the necessary statutory certificates to enable the preparation of a draft contract for submission to the agent.
Where there are matters that are not clarified by the vendor, we ensure that the draft contract has the word ''draft'' as a watermark across each page. This prevents the agent from exchanging the agreement, but provides them with a draft contract they can show to prospective buyers.
A contract of sale includes several items that must be included.
- Title documents (a copy of the certificate of title)
- Drainage diagrams to show sewer line locations
- Current zoning certificate (known as a "section 149 certificate" issued by the local council)
- Other documents creating easements, rights of way, restrictions or covenants
- Swimming pool certificate (if relevant)
- Property exclusions
- A statement of the buyer's cooling off rights
There are also other documents required if the property being sold is a strata title property.
The contract should also specify any other conditions that are in the seller's best interests, including certain items such as fixtures which they may want to retain, while still being fair to both parties.
Once we have the completed questionnaire which incorporates the inclusions, we can submit the draft contract to the agent. We expressly advise the agent that the contract should not be exchanged until they have communicated with the seller's lawyer and the seller about the terms and conditions of the arrangement.
After this point, the lawyer is not involved again until a buyer has been found. When this happens, the buyer is issued with a contract of sale, which they need to review (usually with their lawyer), and then if they decide to proceed, sign.
The signed contracts are then exchanged between the lawyers for the buyer and the seller.
Buyer needs to do due diligence and arrange financing
Once the buyer has found a property they like, they request a copy of the contract. (For more information please see What is the process for buying a home? - Simple guide and flowchart.)
The contract should be read very carefully - usually with your appointed lawyer or conveyancer. Once you are happy with the terms of the contract and you have done your due diligence, you sign it and it is exchanged with the seller. (Please see Buying off the plan? Be aware of the pitfalls and do your due diligence and Escaping city life and moving to the country? Make sure you do your due diligence for more information.)
It is usually at this point that you also need to be talking with your bank to ensure you have the correct amount of money available to transfer as a deposit. This is normally held in the trust account belonging to the seller's lawyer.
Once the contracts are signed and exchanged, you and the seller are legally bound. This is also the time the cooling off period commences for you. In NSW, you have five business days in which you can cancel the sale.
However, if you do proceed to do this, you will need to forfeit 0.25% of the purchase price to the seller, unless the sale is cancelled under allowance conditions within the contract.
The settlement date will have been decided at the time of exchanging the contracts. Normally this will be six weeks, however it may be something you wish to negotiate with the seller through your lawyer if, for example, you do not think you can have finance arranged in that time.
Once you reach the settlement date, you arrange for the rest of the purchase price to be paid, less the deposit which you already paid at exchange.
Now the house is officially yours!
Real estate agent - marketing, inspections and negotiations
The real estate agent enters the process once the seller has decided to put their property on the market and has organised a contract with their conveyancer or solicitor. (For more information please see Checklist for real estate agents - dealing with a lawyer or conveyancer on a residential property sale in NSW.)
The agent then issues a written guide to the seller that includes their fees, commissions and expenses for the seller to sign and officially appoint them as their agent. Once officially appointed, the agent markets the property, manages the inspections and works with the interested parties to negotiate a good price for the seller.
If there were any special conditions raised in discussions between the agent, the seller and buyer regarding the contract, the agent should ensure that those conditions are forwarded to the lawyers on both sides as soon as possible and prior to exchange of contracts. The seller's lawyer can then review the conditions and determine what additional special conditions may need to be added to the contract before the exchange of contracts takes place.
Once an offer has been made and accepted, it is the agent's responsibility to advise when the deposit is received. They must also immediately notify the seller's lawyer, as well as the buyer's representative, when the contracts are exchanged. This is essentially when the clock really starts ticking in the process, and all parties must be aware of it.
If it was the agent who exchanged the contract, they must email a scanned copy to each party as soon as possible, preferably the same day. It is particularly important this is done immediately if the sale is subject to a cooling off period.
As the seller of the property is often working to a completely different timetable in purchasing another property to move to, a tip for the estate agent is that they should discuss the matter with the seller and the seller's lawyer to try to have the timetables match up.
If they don't match up, the lawyer must advise the seller of the situation and ensure that they are able to satisfy the completion timetable or that they have alternative accommodation to go to.
Aim is to simplify and streamline the conveyancing process
Although buying or selling a property can involve a complicated interplay of numerous players, the lesson to learn is that if all parties are aware of what is required of them, and also of the other participants in the transaction, the conveyancing process can be simplified and streamlined.
David Thompson
Conveyancing
Stacks Collins Thompson
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
