Morning all!! Today we’ll go back to some basics and cover the complete purchase process from offer all the way to settlement, which I think will be beneficial to everyone
What I found is that high level purchase process (as far as NSW, VIC and QLD is concerned) is actually not too different. But we’ll go into details and that should give everyone a clear indication on the subtle differences.
1. Pre-Offer Stage:
During this stage:
1. Contract Review – engage a solicitor/conveyancor to review the contract
2. B&P Check – if you are concerned about Building & Pest issues – do a Building & Pest inspection before putting through an offer.
Contract of Sales for NSW doesn’t usually come with any B&P clause which you can terminate. You can certainly discuss with solicitor to request putting a special condition in for B&P clause.
3. Finance – in NSW there is no Finance clause which you can terminate on so seller would assume you have your finance sorted with banks or Mortgage Broker before proceeding with an offer.
Like B&P, you can discuss with solicitor to include a finance clause under special condition before putting in an offer. Note usually the more special conditions you’ve put in the less attractive your offer is to the vendor.
4. Any other special conditions which you would like to be included should go through a solicitor to ensure they can be discussed, agreed and will be included in the Contract of Sale before offer is submitted.
Mostly the same with NSW with exception of:
1. Contract Review – Section 32 is where the special condition lies so ensure this is checked by the solicitor/conveyancor before putting through an offer.
2. B&P clause – Like NSW, VIC contract doesn’t come with default B&P clause so suggest all buyer to put this in as a special condition. Typically the vendor can accept 7 -14 days of B&P clause.
3. Finance clause – Again the VIC contract doesn’t come with default B&P clause so suggest all buyer to specify Finance clause upfront unless you have the OK from your Mortgage Broker to waive Finance clause (which could make your offer more appealing to the vendor). Typical finance clause is 14 days.
Mostly the same with NSW with exception of:
1. Contract Review – special condition is located in a section within the the contract called “special conditions” so by far the easiest to identify. Also ensure this is checked by the solicitor/conveyancor before putting through an offer.
2. B&P clause – QLD contract comes with a section that allows buyer to write the number of days for B&P clause by default so to protect the buyer. Typically B&P clause is 14 days in QLD, but can range between 7 to 21 days depending on potential B&P issues of the house.
3. Finance clause – QLD contract comes with a section that allows buyer to write the number of days for finance clause by default, again in protection of the buyer. Typical finance clause is 14 days in QLD but no surprise when it goes to 21 days depending on the bank institution. It’s worth checking with Mortgage Broker on how many days the Finance clause should be in order to maximize buyer protection.
2. Offer accepted and contract exchanged stage:
During this stage:
1. Offer is accepted by the vendor, contract signed by both parties and contract is exchanged. At this stage the property will be taken off-market i.e. no more offers will be accepted.
2. A small deposit (as specified in the Contract of Sales) is made by the purchaser to the agent’s nominated Trust Account.
3. Cooling off commences – in NSW this is 5 business days from the date contract is exchanged.
4. If there are any other special condition such as B&P or Finance clause, it will also commence from the date is exchanged and purchaser would need to kick off the process to get the clause satisfied i.e. engage a building inspector for a pre-purchase building inspection report, or seek an official confirmation from Mortgage Broker that bank has approved for the required Finance in writing.
Mostly the same with NSW with the exception of cooling off being 3 business days. If the B&P and Finance clause exist then they will also come into effect once contract is exchanged.
Similar to NSW – cooling off is 5 business days and the B&P/Finance clause will commence once contract is exchanged.
3. Contract goes unconditional till settlement stage:
This stage is common across NSW/VIC/QLD.
During this stage:
1. Once all the criteria has been fulfilled and the special condition clauses satisfied by the vendor/purchaser, then contract goes unconditional. At this point buyer will be required to pay remainder of the agreed deposit (usually 10% of the purchase price) to the specified Trust Account. The buyer will also no longer be able to pull out of the contract.
2. Both vendor and buyers’ solicitors start preparing for settlement. From buyer’s solicitor perspective, they may conduct various mandatory and optional searches on the property as requested by the purchaser. Also they will organize for a transfer of title process where buyer will be required to complete and sign relevant documentations in preparation for the settlement.
3. From Finance perspective, Mortgage Broker/Banks will issue Loan Documents for the buyer where buyer will be required to complete, sign the necessary loan application and various documents required and return to the bank for processing. Depending on the bank the application time may vary but do allow plenty of time for this process in order not to delay settlement.
Also as part of the bank’s policy they may require purchaser to provide a Certificate of Currency for insurance in order to cover any legal liability on injury or accidents of any person occurred at the property. You should take Bank’s direction on this – if they need it they will ask for it, if not then don’t need to organise till after settlement.
4. This is the stage where plenty of activities going on behind the scenes which buyers may not be aware of. Your team works hard for you to prepare all the necessary documents for settlement. But as a buyer you also need to take guidance from your solicitor & broker at this stage on what is still required and what is outstanding in marching towards the final settlement date.
Once all the paperwork from legal and finance are signed, submitted and completed, your solicitor will be able to book in the settlement date and time.
About 5 to 7 days before the actual settlement date your solicitor will work out the Statement of adjustment – how the exact funds will be disbursed, who they will be disbursed to (vendors, agents, other parties as required) and how much is still required to be paid by the buyer. This will be approved by the vendor and then your solicitor will notify you in preparation to have remainder funds ready for transfer to their Trust Account so settlement can proceed as planned on the settlement day.
You may also want to liaise with your Property Manager or Solicitor to organize pick up of keys from the sales agent once settlement has been completed.
5. On the settlement day:
– Your solicitor will represent you as the buyer in the settlement process – you do not need to be present
– Each parties will have a representative at the agreed settlement location, review and be completely satisfied that all documentation are completed and executed properly
– If a document was caught not completed or properly executed at this stage it may cause settlements to be held up or delayed
– Once all parties are satisfied with both documentation and funding transfer have been completed/exchanged, the incoming lender will take the title documents, transfer, discharge and mortgage to the land titles office for registration
– Keys getting picked up by Property Manager or Solicitor from the sales agent office.
As you can see the whole process is no easy feat – lots of moving parts and that’s why if one party doesn’t communicate or haven’t executed what they are required to be done, then settlement may not occur as planned. Hence the reason why delay in settlements are quite common…
And that’s why hopefully this guide now provides some clarity around the process at each stage so every buyer can minimize the chance of delayed settlement!
As usual, if you have any questions about any of the above content feel free to reach out via the contact page.