The consumer’s options in conveyancing (the legal process of transferring the ownership of a property) were once limited to which lawyer he or she decided to hire. These days we now have the choice of employing a solicitor, engaging a specialist agent, or even opting to sidestep the professionals and do-it-yourself. While there are obvious costs associated with the first two options, the potential pitfalls of purchasing a house without good legal expertise are usually too daunting to seriously contemplate by-passing this important part of the purchasing process. Make sure that whoever you hire has plenty of experience in all aspects of conveyancing and is not also working for the vendor as your interests may be compromised in the event of a dispute. Ensure too that he or she has professional indemnity insurance to cover any damages in the event you suffer financially as a result of their negligence.
Standard contracts
Most properties are sold under a standard contract of sale into which the specific details of the property are inserted along with any other special conditions that may have formed part of the negotiation between vendor and purchaser. Most standard contracts are written in ‘plain English’ so they are easy for the non-legal person to understand. It is important however that your lawyer or conveyancer check the contract for any non-standard provisions or clauses. For example, a non-standard contract may include provisions such as special zoning requirements or limitations on the leasing out of the property. If you are buying a townhouse, your lawyer should also check all the documentation from the strata title and body corporate records.
Exchanging contracts
Usually once the terms of the contract have been finalized and the inspections, searches and any additional documentation have been collected to ascertain the legal and physical condition of the property, contracts between buyer and seller can be signed and exchanged. In the ACT, the vendor is now required to include all of this documentation with the contract before the property is put on to the market which means that the exchange of contracts can be completed as soon as both parties are satisfied with all the terms negotiated. Up to the point of exchange it is possible for either party to back out of the agreement without any legal repercussions.
Cooling -off period
Even after contracts have been exchanged, the buyer may still be entitled to a short ‘cooling off’ period (5 working days for ACT purchasers). If the buyer chooses to exercise his right to back out of the contract during the cooling off period (this is not permitted for properties bought via auction), he must pay the vendor a small ‘rescission fee’ (0.25% of the purchase price or $250 per $100,000) which is deducted from the deposit. After the cooling off period is completed, the buyer is legally obligated to purchase the property unless an undisclosed problem is revealed and there are legal grounds to cancel the contract.
Settlement
Settlement day is the day you take possession of the property and move in. It usually takes a few to several weeks following the exchange of contracts to ‘settle’ so that the remaining money can be paid (most likely via your mortgage lender) and all legal obligations are fulfilled. Check out our guide to Moving House! and take the stress and hassle out of your next move.
Word of Advice: If you have negotiated for any moveable items (such as white goods etc) to be included in the contract of sale, arrange a final inspection of the property the day before settlement to ensure these goods have not been removed. It may be worthwhile completing a final inspection in any case to make sure nothing has been damaged.
Insurance
As soon as the property becomes legally yours you must arrange insurance. You may need to do this at exchange or following settlement depending on the state you are buying in and whether the owner’s insurance will adequately cover the property in the event of disaster. There are several types of insurance and a range of policies to choose from. As with your mortgage, do some research and seek sound advice from a professional in this area in order to get a good grasp of your options. Shop around and compare prices if time permits, but do not put it off – if your house burns down and you have not insured it your greatest investment could turn into a huge financial loss.