What is open to negotiation in a contract when buying a home?

You’ve found your dream home, and now it’s time to sign the sales contract. But you don’t have to agree to the vendor’s terms lock, stock and barrel. Nearly everything is open to negotiation.

With a private treaty, obviously price is the critical item to try to talk down, although that’s not an option with a property won at auction where the price has been fixed by the process.

“Then the next most common items to be negotiated are the period of time for settlement and the deposit,” said David Smith of conveyancers B & M Property Transfers.

“The vendor might need to sell before they buy … so might ask the purchaser for a longer settlement.”

Similarly, the purchaser might want a longer settlement for their own reasons. They might have time left on a rental lease they’d prefer not to break or need to arrange a job transfer to a nearer location.

Then there’s the size of the deposit.

In a standard contract, that’s 10 per cent, but is sometimes negotiated down to 5 per cent.

During uncertain COVID-19 pandemic times, when losing jobs, businesses and incomes have hit so many people hard – according to some reports, as many as one in 10 new purchasers are unable to settle and risk losing their deposits – this could be wise.

Property valuer and investment advisor Anna Porter, the principal of Suburbanite, recommends trying for a smaller deposit as a matter of course nowadays. “Negotiate a smaller deposit and do not have a ‘reversion to 10 per cent’ clause in the contract,” she said.

“You’ll want something that is more in line with the actual financial loss the vendor would sustain if the purchase didn’t go through. This should be discussed with and drafted by your solicitor or conveyancer.”

Another regular clause in the sales contract that people may change is the terms for the release of the deposit from the purchaser, which is normally held in a trust account until settlement, direct to the vendor instead.

“The vendor might want to use that deposit if they’re asset-rich but cash-poor to use for their next purchase themselves,” said conveyancer Ann Blannin-Ferguson of her eponymous firm. “But it does amount to a short-term, interest-free loan from the purchaser to the vendor.

“And agreeing to it can lead to problems. What happens, for instance, if you release the deposit to an 86-year-old to buy another place and then they die? Their estate might take three to four years to sort out, and your money will be tied up for all that time.”

What’s included in the sale, and what’s excluded, is another rich area open to negotiation. Usually whatever’s screwed in or nailed down to the lot comes with the property, but you can’t assume anything.

Ms Blannin-Ferguson has seen disputes arise over everything from a wall-mounted TV to children’s play equipment like a cubby house affixed to a tree, from plants in the garden to the fish in a fishpond.

“We’ve found people from Scandinavian countries especially, where different rules apply, move out and take light bulbs with them, and even stoves and dishwashers,” she said.

“We had one buyer of a home in Mosman threaten to pull out if the vendor didn’t bring back the lovely gilt mirror in the bathroom that had been hanging on the wall.

“There are a million different inclusions or exclusions but it’s important to go through them. One vendor, for instance, never told me she would dig up her rose garden to take with her the rose plants her husband had planted for her 40 years before …”

Added to those are some special conditions that can also be negotiated. One of the most major conditions is land tax adjustment.

“If it’s an investment property and the vendor is paying land tax then they’ll generally request, depending on the time of year, say, a three-month refund from the purchaser,” said Garth Brown of Brown & Brown Conveyancers. “If the purchaser can negotiate that down, that will obviously mean they’ll pay out less at settlement.”

For an off-the-plan purchase, a buyer can also negotiate the council rates and water rates that are stated in the contract, if the vendor is willing to engage. Often they’re just an estimate of what they’ll be, as the council hasn’t yet fixed the sums.

“And the vendor might agree as it’s probably only around $300 to $400 they might be losing,” said Mr Brown. “They’d rather pay that than run the risk of losing a sale that could be much, much more!”

What you can negotiate when buying a property

• Price (not negotiable for properties sold at auction)
• Length of the settlement period
• Size of the deposit
• Vendor access to the deposit
• Inclusions and exclusions
• Land tax