The Contract for Sale contains details of your property and the conditions of the sale. A solicitor or conveyancer will prepare this for you. The property cannot be placed on the market with an agent until they receive the contract.
Cooling off Period
Most Private Treaty sales are conducted under a cooling off period. Once you have accepted an offer and the contracts are signed by both the vendor and the purchaser, the cooling off period begins. This time allows the purchaser to conduct a pest and building inspection if they wish to do so and to finalise their finance. The standard cooling off period is 5 days, however it can often be extended.
If a buyer signs a contract under a cooling off period, they will leave a preliminary 0.25% deposit to secure the property during this time. If the buyer rescinds the offer for any reason apart from death or mental illness, you are entitled to keep this deposit.
At the end of the cooling off period (or if the property is bought at auction or by Private Treaty with a Section 66w Certificate) the buyer must pay the full deposit to secure the property. This is usually 10% of the sale price, however it is not uncommon to be negotiated to 5% of the sale price. The deposit is usually kept by the agent in a trust account and released once the property settles.
Section 66w Certificate
This is a legal document which can be provided by your solicitor or conveyancer if you are buying by private treaty but wish to void the cooling off period. If you provide a Section 66w, this means you are exchanging contracts unconditionally, therefore you must pay the full deposit in order to secure the property.
Once the buyer has paid the deposit, the agent will ask them to sign the contract and then ask you to sign an identical copy of the contract. The contracts are then ‘exchanged’, meaning they are sent to the other party’s solicitor or conveyancer for processing. If signing under a cooling off period, contracts are said to be exchanged ‘conditionally’, as the sale is subject to the buyer agreeing to continue once the cooling off period expires. Once the cooling off period expires, it is then known as an ‘unconditional’ sale. All purchases at auction are ‘unconditional’ sales.
Once contracts have exchanged the settlement period begins. If you have not done so already, you can use this time to find another property, move out or organise finances. The standard settlement period is 42 days, however it is not uncommon to negotiate longer or shorter settlement periods.
Settlement takes place at the end of the settlement period. This is when the buyer pays the balance of the purchase price and the property becomes legally theirs. Your solicitor or conveyancer will send you a cheque for this amount less their fees and will notify the agent that the property has settled by sending an ‘order on the agent’. Once the order on the agent has been received, the agent will release the keys to the purchaser and send you a cheque for the deposit less their fees.