The Sale Process - Legal Info

A residential property cannot be advertised for sale until a Contract of Sale has been prepared.

The contract must contain a copy of the title documents, drainage diagram and a current Zoning Certificate (s 149) issued by the local council. If the property for sale has a swimming or spa pool, one of the following must also be attached to the contract from 29 April 2016:

  • a copy of a valid certificate of compliance, or
  • a valid occupation certificate (issued in the past 3 years) and evidence that the pool has been registered, or
  • a valid certificate of non-compliance.
  • This requirement does not apply:
  • to a lot in strata or community schemes that have more than two lots, or for any off-the-plan contract.

    If you fail to attach one of these documents to the sales contract, the purchaser may be entitled to rescind the sales contract within 14 days of exchange, unless settlement has already occurred. To check if the property with a swimming/spa pool has a valid certificate of compliance, visit the NSW Swimming Pool Register website.

    Please visit the Swimming pools page on the Fair Trading website for further information or contact your local council or an accredited certifier.

    Property exclusions must also be included and a statement of the buyer’s cooling-off rights must be attached. The draft contract must be available for inspection at the agent’s office. It is important that you consult your solicitor or conveyancer about preparing the contract to make sure that everything is in order.

    Land and Property Information NSW is the main authority for NSW conveyancing laws. More information is available on the NSW Land and Property Information website.

    There are two main ways of selling a residential property, by private treaty and by auction.

    PRIVATE TREATY

    When you sell your home by private treaty, you set a price and the property is listed for sale at that price. In general, the price is negotiable with the seller often asking a higher amount than they expect to sell the property for, and the buyer making an initial offer much lower than the asking price.

    The process of a sale by private treaty offers the following benefits:

  • greater control over the sale

  • time to consider offers by potential purchasers

  • the ability to extend the time for which your home is for sale indefinitely

  • potential purchasers must make offers for your property 'blind', without knowing what other buyers think it is worth.

    Selling privately is often just as tense as a public auction, and you will be faced with important decisions when you are presented with offers which are lower than your asking price.

    There are risks with selling by private treaty which also should be considered:

  • if the price you set is too high, your property may not sell

  • if the price you set is too low, you may miss out on maximising the selling price.


    CONTRACT AND DEPOSITS

    If you want to buy a home, land or investment property you’ll have to sign a contract of sale. The legal work involved in preparing the contract of sale, mortgage and other related documents is known as conveyancing. It’s possible to do your own conveyancing, however most people pay a licensed conveyancer or solicitor to do this work for them.

    THE CONTRACT OF SALE

    By law, a residential property cannot be put on the market until a contract of sale (the contract) has been drawn up. The contract includes the terms and conditions of the sale and valuable information about the land, which should be explained to you by your solicitor or licensed conveyancer.

    You have the right to examine the contract at any time once a property is on the market. If you are interested in a particular property, request a copy of the contract as soon as possible, so you can ask your solicitor or conveyancer to review it.

    If you wish to change any part of the contract (eg. the deposit amount or settlement period), your solicitor or licensed conveyancer can do this on your behalf. You should have this done before signing the contract.

    EXCHANGING CONTRACTS AND PAYING A DEPOSIT

    Exchanging contracts legally completes the process of buying a home. Up to this point, the agreement is usually not binding and both you or the vendor have the right to change your minds.

    After discussing the contract with your solicitor or licensed conveyancer and making the proper inquiries and necessary financial arrangements, you will be ready to exchange contracts.

    There will be two copies of the sale contract: one for you and one for the vendor. You each sign one copy before they are swapped or ‘exchanged’. This can be done by hand or post and is usually arranged by your solicitor, conveyancer or the agent. If the agent is handling the exchange, you must expressly authorise them to do so. This should be done in writing.

    At the time of the exchange you will be required to pay a deposit. While it is usual for a vendor to ask for a 10 per cent deposit, a different amount can be agreed on and recorded on the contract. Following exchange, you have a financial interest in the property so it’s wise to consider getting it insured.

    NOTE: A contract has not been made and is not legally binding before the exchange of contracts and the payment of a deposit.

    COOLING OFF PERIOD

    When you buy a residential property in NSW, there is a 5 business-day cooling-off period after you exchange contracts. During this period, you may get out of the contract as long as you give a written notice. The cooling-off period starts as soon as you exchange and ends at 5pm on the fifth business day after exchange.

    A cooling-off period does not apply if you buy a property at auction or exchange contracts on the same day as the auction after it is passed in.

    You can waive the cooling-off period by giving the vendor a ‘66W certificate’. This is a certificate that meets the requirements of section 66W of the Conveyancing Act 1919. The certificate needs to be signed by your solicitor or conveyancer. It is also possible to reduce or extend the cooling-off period by written agreement with the vendor.

    If you use your cooling-off rights and withdraw from the contract during the 5 business-day period, you will have to pay the vendor 0.25% of the purchase price. This works out to be $250 for every $100,000.

    Sometimes, there are more buyers looking for homes than there are properties on the market. This is called a sellers’ market. In this case, you may want to organise a quick contract exchange. This way you can reduce the possibility of someone beating your offer and get your building and pest inspections done during the cooling-off period. You will still be able to back out if there is a problem. However, it is important to have the contract checked by your solicitor or conveyancer before you sign it.

    If your solicitor or conveyancer has examined certificates from the appropriate authorities, a pest and building inspection has been done and your finance has been approved, then deciding to waive the cooling-off period could make your offer more attractive to the vendor.

    SETTLEMENT

    Settlement usually takes place about 6 weeks after contracts are exchanged (although a longer or shorter settlement period can be negotiated with the vendor). This is when you pay the rest of the sale price and become the legal owner of the property.

    On settlement day, your solicitor or licensed conveyancer will meet with the vendor’s solicitor/licensed conveyancer and representatives from your bank and the vendor’s bank. At settlement, each party will exchange the necessary cheques and documents for title in the property to be transferred to your name.

    Occasionally, this process does not go ahead smoothly and settlement can be delayed to another day following a minor mistake by one of the parties at settlement. This can cause a lot of problems if you have made arrangements to move into the house immediately after settlement. While you may be able to recover any loss you suffer caused by another party, any delay in settlement can be very inconvenient.

    Maintain regular contact with your solicitor or licensed conveyancer throughout the settlement period to ensure that your property is on track to settle on time.

    Remember, on the morning of settlement day, you should conduct a final inspection of the property to ensure it is in the same condition as when contracts were exchanged. The last thing you want is to pick up the keys to the property and find that the house has fallen down.

    PROPERTY SERVICES COMPENSATION FUND

    During the sale process, real estate agents and conveyancers are often responsible for holding money in trust for their clients. If an agent or conveyancer fails to account for that trust money, consumers may find themselves out of pocket. Find out how the Property Services Compensation Fund can assist in such cases by visiting the Fair Trading website.

    AUCTION

    To sell through an auction process, the amount you want for the property is generally not revealed to potential buyers who are encouraged to attend the auction and bid for the property against other potential buyers.

    Auctions have become an increasingly popular way to sell or buy residential property, but before you decide to go down that path, do your homework and familiarise yourself with the process and what it involves.

    SETTING A RESERVE PRICE

    The reserve price is the lowest amount you are willing to accept for your property. Before bidding begins, advise your agent what you nominate as the reserve price. This is usually not told to the prospective buyers.

    If the highest bid is below the reserve price, the property will be ‘passed in’. You will then either try and negotiate a price with interested bidders or put the property back on the market.

    If the bidding continues beyond the reserve price, the property is sold at the fall of the auctioneer's hammer.

    SUCCESSFUL BIDS

    The successful bidder must sign the sale contract and pay you a deposit on the spot (usually 10%). There is no cooling-off period for anyone who buys a property at auction. If the property is passed in at auction but contracts are exchanged on that same day, the cooling-off period still does not apply.

    CONTRACT EXCHANGE

    Exchanging sale contracts is the legal part of selling a home and happens regardless of whether you sell your property by private treaty or auction.

    There will be two copies of the sale contract: one for you and one for the buyer. You each sign one copy before they are swapped or ‘exchanged’. This can be done by hand or post and is usually arranged by your solicitor, conveyancer or the agent. At the time of the exchange, the buyer will be required to pay a deposit, usually 10% of the purchase price.

    The contract exchange is a critical point in the sale process:

  • The buyer or seller is not legally bound until signed copies of the contract are exchanged.

  • Buyers of residential property usually have a cooling off period of five working days following the exchange of contracts during which they can withdraw from the sale.

  • If the agent arranges exchange of contacts, the agent must give copies of the signed contract to each party or their solicitor or conveyancer within 2 business days.

  • The cooling off period can be waived, reduced or extended by negotiation.

  • There is no cooling off period for sellers. Once contracts have been exchanged, sellers are generally bound to complete the agreement.

  • There is no cooling off period when purchasing at auction.

    Information courtesy of NSW Fair Trading