When you find the residential property you want to buy, you’ll most likely want to make sure that the seller does not “gazump” you that is, you’ll want to make sure the seller does not sell the property to another competing purchaser.
When buying a residential property, the best way to avoid being “gazumped” is to sign the Contract which the seller’s real estate agent presents to you, and then allow the real estate agent to exchange the Contracts (once he or she has had the seller sign the Contract). Once the Contracts have been signed by you and the seller, and the Contracts have been exchanged, the seller cannot sell to another purchaser and the seller is bound to sell the property to you at the agreed price stated in the Contract.
The seller does not have any “cooling off” period BUT YOU DO!
You have a “cooling off” period of 5 business days within which to obtain:
(a) pest and/or building reports on the property;
(b) formal written finance approval; and
(c) legal advice on the contents of the Contract for Sale.
It is also important that you pay (to the seller’s real estate agent) the full 10% Deposit at the time of exchange of Contracts. The Deposit will be held in the Agent’s trust account. Sometimes the seller will accept less than a 10% Deposit on exchange of Contracts. If a “less than 10%” Deposit is agreed to by the seller, then a special clause needs to be written into the Contract before the Contract is exchanged.
Another thing to do, which will improve your chances of securing the property, is to make sure you have a current “pre-approval” of your loan from your proposed financier. If you have your loan pre-approved, the process involved in you gaining a “formal” written approval of finance will be much quicker than otherwise would be the case. Check with your lender as to how long your “pre-approval” is good for.
The aim is to make sure that by 5pm on the 5th business day following exchange of Contracts:
a) you are happy with your pest and/or building reports;
b) you and your Lawyer are happy with the final terms/contents of the Contract for Sale; and
c) your finance has been “formally” approved in writing by your lender.
During the Christmas/New Year period, it is often necessary to negotiate a longer period of “cooling off” time because of all the public holidays and, also, because many pest inspectors and building inspectors (and many law firms) close for the Christmas/New Year period. It is not uncommon for a cooling off period of 10 business days or 15 business days to be negotiated by the purchaser with the seller prior to the signing and exchange of Contracts when the transaction is occurring around the Christmas/ New Year period.
If you wish to pull out of your purchase contract within the applicable “cooling off” period, you can do so but you will forfeit to the seller (from the Deposit paid) a sum equal to 0.25% of the purchase price. However, you will receive a refund of the balance of the Deposit.