What You Need to Know Before Buying Property in NSW

The following outline will guide you through the process of purchasing a property and how our team of lawyers can support you every step of the way.

Before Buying a Property

Before you start considering property purchases, it’s advisable to apply for pre-approval from a home loan provider to understand your budget. Your borrowing capacity depends on factors like income, financial circumstances, and the amount of deposit saved. A broker or bank can help identify the best home loan option for you.

There are two ways to buy a residential property:

1. Private treaty; and

2. Auction.

Purchasing through private treaty means the property owner sets a sale price via the real estate agent. Once a price is agreed upon, negotiations can continue until the contracts become unconditional.

An auction involves bidding on the property at a specific location and time with a pre-set reserve price. If you plan to buy at auction, ensure you have obtained all relevant property reports and negotiated any contract requirements or amendments before the auction.

Cooling Off Period

If a property is sold by private treaty, contracts may be exchanged with a cooling-off period. Buyers typically have five business days to withdraw from the transaction, forfeiting 0.25% of the price to the vendor. The cooling-off period can be waived, reduced, or extended through negotiation. Contact our experienced property and conveyancing lawyers for assistance with your property negotiations.

No cooling-off period applies if the property is sold at auction. If you are the highest bidder, the contract becomes unconditional, and no changes can be made post-auction.

Once You Find a Property

Once you find a property you’re interested in, an experienced property lawyer should review the contract of sale. The contract provides information about the property not visible during a physical inspection and may prompt further inquiries. It includes the legal description of the property and any interests affecting the land, such as easements or covenants. Our team will negotiate contract terms more favorable to you, as contracts are generally prepared in favor of the vendor.

Our experienced lawyers will review the contract with you, ensuring you understand your rights and obligations and answering any questions. This step is crucial to avoid ‘hidden surprises’ if you become the successful purchaser.

It’s advisable to obtain a building and pest report from a reputable inspector to identify any structural or pest issues (for houses) or a strata report for information on the owners corporation’s records (for units). The real estate agent may have these reports, or you may need to arrange inspections yourself. We can help arrange building and pest reports if needed, but any questions or issues should be directed to the inspector who conducted the inspection.

Exchange of Contracts

Once satisfied with the contract and reports, we will arrange the exchange of contracts. This occurs when two copies of the contract (one signed by you as the purchaser and one by the vendor) are swapped or “exchanged,” and the purchaser pays the agreed deposit (usually 10% of the purchase price).

No legal rights or obligations arise until contracts are exchanged. Exchange can be done through the parties’ lawyers or the real estate agent. The exchange date is noted on the front page of each contract.

After Exchange

In NSW, the typical settlement period is 42 days (6 weeks) after contracts are exchanged, but this can be adjusted through negotiation.

During this period, your lawyer will conduct property searches and inquiries to obtain outstanding council and water rates (and strata levies if a unit/townhouse) for settlement adjustment calculations and gather further information from the vendor that might not have been disclosed before exchange.

Your broker or bank will prepare the mortgage document outlining the home loan terms and conditions and arrange for you to sign it. Stamp duty and insurance requirements will also be discussed.

As settlement approaches, a settlement statement will be prepared detailing the final balance payable to the vendor, considering any rates, levies, or taxes due at settlement. Your property solicitor or conveyancer will advise the exact amount needed at settlement to cover the balance owed to the vendor, legal fees, stamp duty (if payable at settlement), and bank fees (if applicable).

A final inspection of the property should be conducted shortly before settlement to ensure no damage has occurred since your last inspection and all contract inclusions are present and intact.

Settlement

This is the completion of the property purchase. At settlement, the remaining purchase price is paid to the vendor, and property ownership transfers to you.

In NSW, settlements are now conducted electronically via PEXA. Unless otherwise stated in the contract, the property must be vacant for the purchaser’s possession on settlement day.

After settlement, the property keys can be collected from the real estate agent.