Making your property purchase

Auction versus private treaty

When it’s time to take the real estate plunge you’ll find there are two ways to buy your new home: at auction or by private treaty.

Auctions are attractive because the potential buyers decide the property’s value, though they can get very competitive and the property price may quickly escalate. You should be able to view the property’s contract before bidding on the sale – check for special clauses. There will be open inspections leading up to auction. It is very important you inspect the home for sale before bidding – there’s no cooling-off period.

When you buy through private treaty, the price is set, based on market value, but it’s more flexible than an auction – you can negotiate on price, and you have more time to inspect the property. Private treaty sales are usually driven by an agent, though some brave sellers go it alone. This can carry some risk; there are many essential steps in the conveyancing process that your adviser will undertake on your behalf, which will help safeguard you.

Finalising the real estate sale

When you have decided on your new dream home, have the finances in order and have obtained the appropriate legal advice, you will go on to sign the contract for sale.

Exchange

Once the seller signs their copy of the contract, there is an exchange of contracts and you pay a deposit, which will be placed in trust, usually with the real estate agent facilitating the purchase (or a solicitor if no agent is involved). This deposit will be transferred to the seller at settlement, unless both parties agree otherwise. You get a five-day cooling-off period after you sign, meaning you can back out, but you forfeit a percentage of the purchase price to the seller – generally 0.25 per cent.

Settlement

The standard real estate contract takes six weeks to settle, but this can be renegotiated. During this time, your legal representative will arrange property inspections, check ownership and any limitations on, or issues with, the property for sale (your legal representative can explain this in greater detail), and make sure any rates and taxes are paid by the seller when you settle.

Completion

When settlement takes place, the legal representatives for both parties meet, and the sale is finalised. You pay the outstanding amount, including any taxes; title deeds are handed over (if you have a mortgage, these go to the lender); you take possession of the property. The deposit is also released to the seller. Completion has then occurred. If you don’t settle on time, the seller may charge you interest or, in limited circumstances, may be entitled to cancel the sale.

Gazumping

Until you exchange contracts, your verbal agreement isn’t binding and you could be gazumped – that is, the seller might get a better offer on the property for sale and accept that over yours. You can minimise this risk: be financially ready to sign contracts; don’t delay getting contract advice so that you can sign as soon as you’re ready (you have a cooling-off period); and consider having a higher offer on standby if it’s within your means and you’re willing to pay more.