Today, we’ll go back to some basics and cover the complete purchase process from offer all the way to settlement, which I think is beneficial for everyone.
What I’ve found is that the high level purchase process is actually not too different as far as NSW, Victoria and Queensland are concerned.
But we’ll go into details and that should give everyone a clear indication on the subtle differences:
1. Contract review: Engage a solicitor/conveyancer to review the contract;
2. B&P check: If you are concerned about building and pest issues, do a building and pest inspection before putting through an offer.
Contract of sales for NSW doesn’t usually come with any B&P clause which you can terminate. You can certainly discuss with solicitor to request putting a special condition in for B&P clause.
3. Finance: In NSW, there is no finance clause which you can terminate on, so the seller would assume you have your finance sorted with banks or a mortgage broker before proceeding with an offer.
Like B&P, you can discuss with solicitor to include a finance clause under a special condition before putting in an offer.
Note: usually the more special conditions you’ve put in, the less attractive your offer is to the vendor.
4. Special conditions: Any other special conditions which you would like to be included should go through a solicitor to ensure they can be discussed, agreed and will be included in the contract of sale before an offer is submitted.
Mostly the same with NSW with exception of:
1. Contract review: Section 32 is where the special condition lies, so ensure this is checked by the solicitor/conveyancer before putting through an offer.
2. B&P clause: Like NSW, Victorian contracts don’t come with default B&P clause, so I suggest all buyers to put this in as a special condition. Typically, the vendor can accept seven to 14 days of the B&P clause.
3. Finance clause: Again, Victorian contracts don’t come with a default B&P clause, so I suggest all buyers to specify a finance clause upfront unless you have the ‘okay’ from your mortgage broker to waive the finance clause, which could make your offer more appealing to the vendor. A typical finance clause is 14 days.
Mostly the same with NSW with exception of:
1. Contract review: A special condition is located in a section within the contract. Ensure this is checked by the solicitor/conveyancer before putting through an offer.
2. B&P clause: Queensland contracts come with a section that allows a buyer to write the number of days for the B&P clause by default to protect the buyer.
Typically, a B&P clause is 14 days in Queensland, but can range between seven to 21 days, depending on potential B&P issues of the house.
3. Finance clause: Queensland contracts comes with a section that allows a buyer to write the number of days for finance clause by default, again in protection of the buyer.
A typical finance clause is 14 days in Queensland, but can go to 21 days depending on the bank institution.
It’s worth checking with a mortgage broker on how many days the finance clause should be in order to maximise buyer protection.
1. The offer is accepted by the vendor, contract signed by both parties, and the contract is exchanged. At this stage, the property will be taken off-market (no more offers will be accepted).
2. A small deposit (as specified in the contract of sales) is made by the purchaser to the agent’s nominated trust account.
3. Cooling off commences: In NSW, this is five business days from the date contract is exchanged.
4. If there are any other special conditions such as B&P or finance clauses, it will also commence from the date is exchanged and buyer would need to kick off the process to get the clause satisfied, i.e. engage a building inspector for a pre-purchase building inspection report, or seek an official confirmation from a mortgage broker that the bank has approved for the required finance in writing.
Mostly the same as NSW, with the exception of cooling off being three business days. If the B&P and finance clauses exist, then they will also come into effect once contract is exchanged.
Similar to NSW; cooling off is five business days and the B&P and finance clauses will commence once contract is exchanged.
This stage is common across NSW, Victoria and Queensland.
1. Once all criteria have been fulfilled and the special condition clauses satisfied by the vendor/purchaser, then contract goes unconditional.
At this point the buyer will be required to pay the remainder of the agreed deposit (usually 10 per cent of the purchase price) to the specified trust account. The buyer will also no longer be able to pull out of the contract.
2. Both vendor’s and buyer’s solicitors start preparing for settlement. From the buyer’s solicitor perspective, they may conduct various mandatory and optional searches on the property as requested by the purchaser.
Also, they will organise for a transfer of title process where the buyer will be required to complete and sign relevant documentations in preparation for the settlement.
3. From a finance perspective, mortgage brokers or banks will issue loan documents for the buyer, which the buyer will be required to complete, sign the necessary loan application and various documents required and return to the bank for processing.
Depending on the bank, the application time may vary, but do allow plenty of time for this process in order not to delay settlement.
Also as part of the bank’s policy, they may require the purchaser to provide a certificate of currency for insurance in order to cover any legal liability on injury or accidents of any person occurred at the property.
You should take the bank’s direction on this; if they need it, they will ask for it. If not, then you don’t need to organise it until after settlement.
4. This is the stage where plenty of activities occur behind the scenes which buyers may not be aware of.
Your team works hard for you to prepare all the necessary documents for settlement, but as a buyer you also need to take guidance from your solicitor and broker at this stage on what is still required and what is outstanding in marching towards the final settlement date.
Once all the paperwork from legal and finance are signed, submitted and completed, your solicitor will be able to book in the settlement date and time.
About five to seven days before the actual settlement date, your solicitor will work out the statement of adjustment; how the exact funds will be disbursed, who they will be disbursed to (vendors, agents, other parties as required) and how much is still required to be paid by the buyer.
This will be approved by the vendor, and then your solicitor will notify you in preparation to have remainder funds ready for transfer to their trust account, so settlement can proceed as planned on the settlement day.
You may also want to liaise with your property manager or solicitor to organise pick up of keys from the sales agent once settlement has been completed.
5. On the settlement day:
Your solicitor will represent you as the buyer in the settlement process; you do not need to be present.
Each party will have a representative at the agreed settlement location to review all documentation is completed and executed properly. If a document is not completed or properly executed at this stage, it may cause settlements to be held up or delayed.
Once all parties are satisfied with both documentation and funding transfer have been completed/exchanged, the incoming lender will take the title documents, transfer, discharge and mortgage to the land titles office for registration.
As you can see, the whole process is no easy feat, as there are lots of moving parts and that’s why if one party doesn’t communicate or haven’t executed what they are required to be done, then settlement may not occur as planned. Hence the reason why delays in settlements are quite common.
Hopefully this guide now provides some clarity around the process at each stage so every buyer can minimise the chance of a delayed settlement!