I’ve Signed A Contract… Now What? - April 2023
April 27, 2023 / Written by Rich Harvey
While there are plenty of people who can buy a home, quite a few don’t know what happens in the aftermath of signing the contract. The property is not yours until all the necessary details have been attended to during that time between signing and finally being handed the keys – or as it’s more commonly known, the settlement period.
Here are some of the things you can expect during the long wait for moving in day.
The contract itself
There are many standard types of real estate sales contracts across all Australian states and territories.
The format of the contract will most likely be dictated by the selling agent. Regardless, make sure the contract will address all the nuances and variations that might be attached to the jurisdiction you’re buying in. For instance, some states will have different rules about cooling off periods, or there may even be variations in the types of ownership (or “tenure”).
A contract designed as a foundation for your state’s legislation should address all the necessary factors. At a minimum, you can use the standard contract proformas generated by the local Real Estate Institute or state law society.
When signing a contract, both you and the sellers must each designate your legal representatives in the deal, such as a conveyancer or solicitor. Your legal representative is crucial during the settlement process. All legal communication between you and the seller is done through your legal representative.
A copy of the contract must be forwarded in full to the legal folk once all parties have signed.
Your conveyancer will spearhead the process of bringing the property to settlement. They will prepare your settlement statement and highlight important dates in terms of contract conditions and finalisation.
In some states like QLD, once the contract has been signed by all parties, you as the buyer are responsible for having the property insured.
It is crucial that you arrange to have insurance in place immediately. If damage occurs to the property during the settlement period, for example because of fire or flooding, you will be responsible for repairs.
In other states such as NSW and VIC, the requirement for insurance is not required until settlement day – but you need to have a certificate of currency of insurance in place ready for settlement - otherwise your bank will delay settlement.
Contracts will require a deposit as a thing called “consideration” at the time of signing to make the contract legally binding.
In some instances, a partial deposit may be paid by the buyer, with the full deposit to be forwarded at a future date during the settlement period. For example, the balance of the deposit might be due once an acceptable building and pest report has been issued.
In any event, the deposit is paid into the real estate agent’s trust account to be held until settlement day when it will be distributed as part of the funds.
There can be any number of clauses the parties can agree to in a contract. There might be a clause which allows a leaseback period to the seller, or the sale could be subject to a favourable ruling by council for an extension to the home.
But far and away the most common clauses are those related to building and pest inspections and finance approval.
In all cases, clauses will set out something to be achieved to the satisfaction of the buyer or seller (or both) by a designated date for the contract to proceed.
For example, with a building clause, the buyer needs to satisfy themselves that the condition of the home in relation to its structure is satisfactory. They often do this by arranging for a qualified inspector to scrutinise the property and provide a report.
In cases like this, the selling agent will help arrange a suitable time for the inspection and will often attend on behalf of the seller.
Here’s an interesting thing about clauses that many people don’t know. Unless you make it known that a clause has not been met (e.g. the building report says the home is structurally unsound) by the designated date, it can be deemed that the clause has been met and cleared.
This can catch some buyers out. Say, for example, you sign subject to finance approval by 1st June 2023, but delays at the bank mean you aren’t going to get a response by then. You must request an extension of the finance clause. If you don’t – and 1st June comes and goes – you are legally bound to continue with the contract even if the bank says “no” to finance at a later date.
Managing a contract’s clauses and key dates is critical. Your conveyancer will help with this process, however if you want a more hands-on representative, use a buyer’s advocate. They will keep track of contract conditions, stay on top of things such as your finance approvals and even attend important inspections on a buyer’s behalf.
Final inspection and settlement
Just prior to the day of settlement, there’s an opportunity for you (or your buyer’s advocate) to conduct a final inspection of the property. This allows you to check up on any of the things the seller promised to do.
At these final inspections, there might be some minor repairs the buyer had to complete, or things left on site the buyer is required to remove. At this stage, you may be able to request these be completed before settlement, or in the case of repairs, even negotiate some money off the sale price so you can do them yourself.
Settlement day is most exciting, although you as a buyer don’t need to do much other than wait by the phone.
A settlement date and time will have been determined some days or weeks prior. At settlement, the buyer’s conveyancer, seller’s conveyancer and (usually) a financier’s representative will be in communication to make sure everything proceeds appropriately. Money will be transferred to the correct accounts and the title will be changed to designate the buyer as the legal owner of the property.
It happens in an instant, particularly with platforms nowadays such as Property Exchange Australia (PEXA) where everything is conducted over the internet.
As a buyer, you simply wait on a phone call from your advocate to say, “Pick up the keys, and move in!”.
Buying a home is thrilling, but the work extends well past simply signing a contract. Make sure your settlement period runs smoothly by having the right representatives taking care of your interests. A buyer’s advocate can guide you through the process and address any concerns. They are the team member you want on your side.
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