Buying your first property can be both confusing and daunting at the same time which can make the experience unbearable. Whilst this is general advice, there are a couple of things you can do to potentially strike a better deal if you understand what it takes before negotiating with the agent.
There are 3 conditions a buyer should satisfy before putting down your 10% deposit to exchange the contract unconditionally:
- Quality checks e.g. building and pest report or strata report; and
- Seek legal advice regarding the contract for sale.
The method of purchase will determine how the three conditions should be conducted.
What are the different ways of buying a property?
There are generally three ways to buy your first property:
- Private treaty
- Expression of interest – not common for first home buyers
Under a private treaty sale, the vendor sets a price and prospective buyers will negotiate a price with the vendor, generally through their selling agent, until an offer has been accepted. Once an offer has been accepted, the parties will exchange contracts with 5 business days cooling-off period (in NSW and can vary depending on the State and territories).
Auction is a sale by way of competition in the open market. A reserve price is set, which is the minimum price the owner will accept, the property is then sold to the highest bidder on the fall of the hammer, unconditionally. This means the purchaser will exchange contracts with no cooling-off period, under auction conditions.
Should you wish to attend an auction, we generally recommend as a minimum, you obtain appropriate finance, seek legal advice for the contract and conduct your due diligence before the auction.
“The property is sold by way of private treaty. I really like the property and I have inspected it twice. The agent has advised me another buyer is willing to make a higher offer. I don’t want to lose the property. What do I do?”
If you genuinely believe the agent’s representation, we recommend you contact a property lawyer to seek legal advice first before entering into the contract. You may elect to enter into the contract with a cooling-off period, by signing the contract and paying your deposit (0.25% of the price is payable on exchange and the remainder of the 10% deposit is payable on the expiration of the cooling-off period).
On the exchange of contracts, the vendor is prevented from selling the property to another buyer. You can use this cooling-off period to do your quality checks, seek legal advice regarding the contract and obtain finance. Should you wish to cool off, you must do so during the cooling-off period and you will agree to forfeit 0.25% of the price paid on exchange.
Please note, if you enter into the contract without having first sought legal advice or negotiated the contract, you enter into the contract on an ‘as is’ basis. In our experience, what this means for you as a buyer is that you have less bargaining power as contracts have exchanged, you have paid the 0.25% deposit and are at risk of losing same if you cool off. For this reason, we recommend you at least speak to a property lawyer first before signing the contract.
If you are sceptical of the agent’s representation, do not sign the contract and seek legal advice.
“I don’t want to risk forfeiting my 0.25% deposit if I sign contracts. I want to do all my checks before I sign the contract… but the agent has advised me there is another buyer. What now?”
If you believe there is another buyer and contracts have not yet exchanged, the vendor is at liberty to sell the property to another buyer. Some buyers prefer to do their checks before signing the contract however they are at risk of the vendor selling it to another buyer as there is no exchange of contracts and therefore, no legal relationship between the vendor and the purchaser.
Ultimately, this is a commercial assessment you will need to make and be comfortable with. Do not feel pressured into entering into the contract. Seek legal advice.
“I have inspected the property, obtained my reports and am satisfied with the outcome and have negotiated the contract. I also have the finance. I want to take the property of the market before it goes to auction?”
If the vendor is accepting offers before the auction, you may make an offer. If your offer is accepted, the agent will generally request that you waive the cooling-off period. In NSW, a buyer can only waive their cooling off through their solicitor or conveyancer.
Should you have further queries or require legal advice, please feel free to contact Anne Vo, Principal of Anne & Benjamin Lawyers.
Anne & Benjamin Lawyers
Level 35, International Tower One, 100 Barangaroo Ave, Sydney, NSW 2000
0447 977 777