Selling a home is usually an emotional and stressful time and can become a costly process if mistakes are made. A qualified lawyer, with property law experience, or a qualified conveyancer can simplify the procedure and limit the risks involved. In this article, we look at the steps which we take when managing a sale transaction on your behalf.
The Contract of Sale
When selling a property, a Contract of Sale must be prepared before a property can be marketed and shown to potential buyers. A Contract of Sale is a legal document setting out details of the property and sale terms, including:
- The purchase price;
- Details of the vendor;
- Relevant information about the property as required by law;
- The amount of the deposit to secure the property; and
- Any special conditions associated with the sale.
When you first meet with your lawyer, they will obtain a history of the property and information in order to undertake searches and to obtain copies of common documents such as Council regulations and sewerage service diagrams. Each property is different and the costs of preparing the contract can vary widely depending upon the number of documents that need to make up the Contract. New legislation also means that lawyers must now take steps to formally verify your identity and Australian or foreign residence status for taxation purposes.
Your lawyer will also discuss with you the fixtures and fittings which are to be included in the sale of the property. A fixture is anything which cannot be easily taken away without doing damage to the property and includes such things as built-in wardrobes, carpeting, baths and stoves. They will also discuss renovations made to the property in accordance with council regulations and any mortgagee or caveats that show on the title search.
Once the contract has been finalised, steps can then be taken to sell the property. The lawyer will send a draft contract to the agent for marketing purposes, subject to any changes. When a purchaser has been found your lawyer will prepare a final contract, incorporating any special terms and conditions which have been negotiated with the purchaser. A final copy of the contract will be sent to the purchaser’s agent and lawyers and your lawyer will liaise with the purchaser’s lawyers regarding any further amendments to the contract.
GST withholding notification requirements
From 1 July 2018 purchasers of new residential premises or potential residential land must withhold any Goods and Services Tax (GST) liability payable by the vendor from the contract purchase price and remit this directly to the Australian Taxation Office (ATO).
These reforms essentially affect all off-the-plan purchases or purchases of vacant land in a new subdivision.
Vendors selling residential property will need to notify purchasers in writing whether or not they will be required to withhold GST at settlement and, if so, provide relevant details including their ABN and GST amount. The notice may form part of the contract or be provided separately.
If GST is payable, the purchaser or their lawyer is responsible for submitting the relevant paperwork to the ATO on-line and making the payment on settlement. Vendors then lodge their Business Activity Statement (BAS) in the usual manner and will be entitled to a refund if the amount paid exceeds their actual GST liability for the relevant period.
Exchange of Contracts
Exchange of contracts is where the vendor and purchaser check, sign, date and swap identical copies of the contracts and the purchaser pays a deposit to the vendor, usually 10%, but often 5% with special conditions attached. Your lawyer will attend to the exchange of contracts with a representative of the purchasing party, such as the agent or the lawyer.
Once contracts have been exchanged, the property is no longer on the market, the purchaser has committed to buy the property and the vendor has generally committed to sell.
In some cases, the purchaser has a period of 5 days after exchange of contracts within which they can pull out of the sale by providing you with written notice. This is known as the “cooling off period”. In some cases the purchaser waives the cooling off period, particularly if all searches and inspections have been completed. If the purchaser does not proceed with the contract within the cooling off period, .25% of the deposit held is forfeited to the vendor.
Preparations before settlement
After exchange of contracts, your lawyer will take steps to ensure that settlement can take place, including:
- ordering the required certificates relating to council, strata, water, foreign resident status and other searches depending upon the property;
- finalising and reviewing all documents required for settlement;
- communicating with the:
- purchaser’s lawyers – regarding directions as to the distribution of settlement funds;
- strata management, if required;
- mortgagee – to make arrangements to ensure the mortgage is discharged on the date of settlement; and
- real estate agent – regarding payment of their commission and release of the deposit held by them.
Completion of the sale occurs when the legal and bank representatives meet to exchange the balance of the purchase price for the title to the property. In the past, the agents met at a settlement office to exchange cheques and titles, however, with the introduction of electronic conveyancing they now take place on a secure, online platform, the most used site is with PEXA. Any funds secured by the property are repaid to the bank and the mortgage is discharged in real-time through the Reserve Bank of Australia. Any surplus funds go to your lawyer’s trust account or your nominated account usually within the hour. The agent is then notified to release the deposit amount to you under a separate transaction.
After settlement, authorities such as local council, water and strata managers are automatically notified that you are no longer the owner of the property.
If you are looking to sell a property, a lawyer can assist you to understand the conveyancing process and ensure that the sale transaction runs smoothly.
If you or someone you know wants more information or needs help or advice, please contact us on (02) 9918 0222 or email email@example.com.