Buying a house – whether it's your first home or an investment – is a big deal, and there has been a lot of debate in recent months about housing affordability becoming a key problem in many parts of Australia.
Knowing what you need to do if you have found your dream home, though, can be complex, particularly if you need to move quickly to finalise a purchase.
So what are the key things you need to be aware of in the contract you are about to sign?
Once the contract is signed and the seller accepts your offer it is very difficult to have the contract amended. This means you should ensure you thoroughly read and understand the terms before signing the document.
Standard clauses in most real estate contracts include:
Cooling-off period
In all contracts there will be a cooling-off period during which you can terminate the contract with no reason. There will be a financial penalty, which is usually 0.25 per cent of the purchase price. This is a 'change of mind' clause.
Finance clause
This clause will state that the purchase is subject to 'finance approval' if you are seeking finance, a set period listed for the buyer to obtain finance (eg. 14 days) and notify the seller once finance is approved. If this is missed, the contract can be terminated by the seller.
If you have pre-approval from a bank you should still make the contract subject to finance, as the bank will need to undertake a valuation and obtain other documents from you before providing final approval.
If the bank does not approve finance (or finance to your satisfaction under some contracts), you can terminate the contract and have the deposit refunded.
Building and pest inspection
Most contracts will be subject to the buyer obtaining a building and pest report to their satisfaction within a specified time frame. This condition allows you to terminate the contract if a building or pest report is not satisfactory (eg. where there are termites or the house footings are unstable).
Other special conditions
These can be added to the contract to suit your individual requirements, eg. the purchase is the subject of the sale of another property, the seller may rent the property from the buyer for a period after settlement, or you may want to list certain possessions (such as curtains) that are to stay with the house upon sale.
Sunset clause
These are commonly found in contracts for homes purchased off the plan, whereby if the developer has not completed the build within a certain period of time the buyer or seller can pull out of the contract. This gives scope to sellers to put the property back on the market for a higher price.
It is important to know also that bidding at auction generally requires the successful bidder to sign the contract on the day without any conditions on the purchase. The successful bidder must also pay a deposit, so you should always seek legal and financial advice before doing so.
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Alison and Jillian Barrett are both principals at Maurice Blackburn Lawyers. The Queensland sisters are experienced lawyers and passionate social justice campaigners. Alison juggles motherhood, as well as heading up a major legal practice area. Younger sister Jillian also leads a team of lawyers and sports a double degree in Law and Journalism.
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