Legal Stages Performed by a Conveyancer or Lawyer
Many stages of the property sales process are emotional, market driven and based on opinions but the legal aspects need to be managed meticulously to prevent any ambiguity or risk of the sale of property not going through or ending up in a legal dispute. The example we give here is based on a private treaty sale method so be aware of the differences between it and an auction for example.
Real Estate Laws are State Laws
You should know that although Australia is a Commonwealth and our income taxes and company registrations are managed by the federal government (ATO and ASIC), property transactions are governed by the states (so to with any property taxes) and you may want to check with the respective government departments for differences or variations to these steps.
The same way you’ll be in regular contact with your real estate agent if you choose to use one, your conveyancer will be the go-to person for progress with any legal aspects of the property sales process – and it all starts with the contract for sale. Here are the broad legal stages of the property sales process:
- Prepare Contract for Sale
- Offer and Acceptance (and conditions)
- Paying the Holding Deposit (Under Contract)
- Due Diligence (building, pest and finance)
- Exchanging of Contracts
- Cooling Off Period
- Settlement
Contract for Sale
The Contract of Sale is a document, prepared by your conveyancer, that reveals all important information about your property, including easements, fixtures, terms and conditions, property address, current owners and any disclosures which may affect the value of the property etc.
If a buyer sees your property on an online portal like property.com.au or realestate.com.au they may ask the agent for a contract before even seeing the property. They’ll use this contract as a tool to conduct further research and may order more searches to supplement it.
Offer and Acceptance
After you’ve gone through the presentation, marketing, inspections and negotiation stages you’ll receive an offer that you are willing to accept. This is often formalised by the purchaser paying a holding deposit and on successful outcomes from their due diligence activities (their conditions). From this point on it’s up to the purchaser to satisfy themselves that the conditions are met and that they are happy to proceed to an exchange of contracts.
Paying the Holding Deposit
Many people think that this stage signals the end of the selling process and the successful buyer is found, but the deposit is very small and in most states refundable depending on the outcomes of the due diligence of the buyer. From the property sellers perspective many agents will keep other potential buyers close by in case the current first runner finds fault OR cannot get funding.
Due Diligence
This stage normally involves building and pest inspections and reports as well as receiving the OK from the bank or lender that they are happy to provide the loan funds for the property. If the reports come back negative the buyer can re-negotiate or opt out of the contract for sale.
Exchange of Contracts
At this stage the deposit for the property is made and although it is commonly 10% the actual figure is open to negotiation between the property seller and buyer. Except for the cooling off period (which is also up for negotiation) this deposit is usually non-refundable so for serious parties who just want to get this to settlement the time between exchange and settlement is really about logistics and timing – to get packed, finalise any paperwork and be ready to move into (and out of) the property.
Settlement
The settlement period is the time between exchange of contracts and the final full payment and although it is generally 4-6 weeks this period too is up for negotiation. There can even be conditions that need to be met before settlement can take place. The settlement date is decided at the time of exchanging contracts but like all contracts it can be altered with mutual agreement by both (or all) parties.
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