Buying a property, whether it's your first home or an investment property, is a big decision and one of the largest financial transactions you will ever make.
What are some of the issues you need to be aware before signing the contract?
In most contracts there will be a cooling-off period during which you can terminate the contract for no reason. There will be a financial penalty, which is usually 0.25 per cent of the purchase price. This is often referred to as a 'change of mind' clause.
This clause states the purchase is subject to finance approval (if you are seeking finance), within a set period, usually listed as a set number of days from the date of the contract. The purchaser is required to notify the seller once finance has been approved. If the seller is not advised of finance approval by the due date, the contract can then be terminated by the seller.
If you have pre-approval from a bank you should still make the contract subject to finance, as the bank will need to undertake a valuation and obtain other documents from you before providing final approval.
Importantly, if the bank does not approve finance, the purchaser can terminate the contract and have the deposit refunded.
Building and pest inspection
Most contracts will be subject to the buyer obtaining a building and pest report to ascertain that the property is to their satisfaction. This condition allows you to terminate the contract if a building or pest report is not satisfactory (eg. structural concerns or termite activity). It should be noted the purchaser is required to act reasonably, as minor defects in the property may be insufficient to terminate the contract.
Other special conditions
These can be added to the contract to suit your individual requirements. Some examples include, making the purchase subject to the sale of another property, the seller may rent the property from the buyer for a period after settlement, due diligence (investigation of the property) or you may want to list certain possessions that are to stay with the house after settlement.
It is important to know that bidding at auction generally requires the successful bidder to sign the contract on the day without any conditions on the purchase. The successful bidder must also pay a deposit, so you should always seek legal and financial advice prior to the auction. The cooling off period does not apply to sales via auction.
For any contract, once signed and the seller accepts your offer, it can be difficult to have the contract amended. This means you should ensure you thoroughly read and understand the terms before signing the document.
At an agreed fixed fee, Reveal Legal will review and advise on the terms of the contract, and most importantly the terms that are important for you. This provides peace of mind and ensures you are legally protected.