What to look for in a property contract before you sign
Purchasing or Selling property can be an overwhelming experience, particularly if it is your first residential transaction. Even more daunting is being handed a contract from an agent and being asked to sign on the dotted line when a purchaser or seller has little or no experience in what to look for in a contract.
We recommend in any case that your solicitor checks the contract prior to you signing. Even the smallest error on a contract can have short term or long term consequences and identifying any errors in the contract prior to signing can save you money in the long run and possibly avoid you losing out on the sale or purchase.
What buyers should look for in contracts…
Is my full name correct on the Contract?
Carefully check that your FULL NAME, including any middle names, is written correctly on the contract. If your mortgage documents include your middle name, but the contract does not, your bank will request that the contract be amended. This can cause possibly delays in obtaining finance or even settlement. In order to make any changes to a contract, authorisation needs to be sought from the other party. This can take time.
Many buyers will forward the contract to their solicitor after signing. It is important to include your solicitor’s details on the contract so that all parties to the contract know who to liaise with. This will also enable your solicitor to speak with your bank on your behalf regarding the contract. Failure to include your solicitor’s details on the contract may possibly delay finance or settlement.
Will I be obtaining Finance?
You must ensure that the finance amount, financier and finance date are fully completed. If you are unsure of the loan amount or the financier you intend to use, the terms ‘sufficient to complete transaction’ or ‘financier of Buyer’s choice’ will suffice.
If the finance condition is incomplete or some information is missing, then the finance condition does not apply. This means that if for any reason your bank declines your formal loan approval, you will not be able to terminate the contract and claim your deposit back.
Is my contract subject to a Building & Pest condition?
As with the finance clause, it is very important that the Building & Pest clause is also completed in full. Otherwise, you will not be able to terminate the contract if any issues arise from the Building & Pest Inspection.
What sellers should look for in contracts…
When does the deposit need to be paid?
The Buyer must pay any deposits as soon as possible. It is important that due dates for payment of the initial deposit and balance deposit are inserted into the contract. If no due dates are inserted for payment of any deposits, then it is not clear when the buyer needs to pay the deposit and when the seller can terminate for the buyer’s failure to do.
Matters affecting the property
All covenants, leases, easements or other encumbrances must be disclosed under the ‘Matters Affecting the Property’ section of the contract. Failure to disclose can result in the buyer being able to terminate the contract.
A title search should be conducted when the contract is prepared to make sure all encumbrances are listed on the contract.
If the property is to be tenanted at the time of settlement, the tenancy details must be included on the contract. Tenancies section is left blank, this means that the buyer is entitled to vacant possession of the property upon settlement.
If there is a tenancy and the tenants have not vacated by settlement, then you will be in breach of the Contract and the Buyer will be able to terminate.
Pool Safety Inspection
You will need to organise a Pool Safety Certificate to give to the Buyer if there is a non-shared pool on the property.
Selling a unit? You must sign a Disclosure Statement
The seller must sign a Body Corporate Disclosure Statement and give a copy to the Buyer prior to the Buyer signing the contract. Failure to do so before signing the contract can enable the Buyer to terminate the contract anytime up until settlement.
These are some of the important points to check and discuss with your solicitor prior to signing the contract. We can assist you with all of the above, please don’t hesitate to contact us.