About Conveyancing - A General Overview
Exchange of Contracts
This is the making of the contract between the parties. There are two identical contracts, one signed by each party to the transaction and the contracts are "exchanged" so that each party holds the contract signed by the other party, the deposit is paid at this time and the contracts are dated on the day of exchange. It is at this point that the parties are bound to the transaction and the contract contains all the conditions of the sale.
Cooling off Period
Purchasers have a period of 5 working days after exchange of contracts in which to "cool off", if they do so they forfeit to the vendor 0.25% of the sale price. There is no cooling off period if the contract is explained by the purchaser's conveyancer and a section 66W certificate is signed by the conveyancer. This is normally the case if the purchaser has had finance approval and all inspections are done before they enter into the contract. There is no cooling off period if the property is sold at public auction or on the same day as the property was listed for auction sale.
The amount of stamp duty payable on the contract is determined by the sale price of the property, the higher the price the higher the duty. Stamp duty is paid after contracts are entered into and usually before settlement of the transaction.
First Home/New Home Buyers Stamp Duty Consessions
If you are buying your first home which is a new home and never lived in before and the sale price is $550,000.00 or less you can have the stamp duty payment waived all together. If the price is between $550,000.00 and $650,000.00 you pay a discounted amount, the discount is reduced as the price increases until at $650,000.00 the full duty is payable. You should consult your licensed conveyancers or the Office of State Revenue to confirm that you qualify for the stamp duty concession.
If you are buying vacant land on which a new home is to be built and the sale price is $350,000.00 or less you can have the stamp duty payment waived all together. If the price is between $350,000.00 and $450,000.00 you pay a discounted amount, the discount is reduced as the price increases until at $450,000.00 the full duty is payable.
First Home Buyers Government Assistance Grant
If you are buying your first home, or you are building your first home, or buying a vacant block of land to build your first home, you may be eligible for the First Home Buyers Government Grant. You should consult your licensed conveyancer or the Office of State Revenue to confirm that you qualify for the Grant.
New Home Buyers Government Assistance Grant
The New South Wales New Home Grant Scheme was introduced on 1 July 2012 to stimulate the construction of new homes. The scheme provides a grant of $5,000 towards the purchase of new homes, homes off the plan and vacant land on which a new home will be built. You should consult your licensed conveyancer or the Office of State Revenue to confirm that you qualify for the Grant.
Foreign resident capital gains withholding payments
Where the market value of the property is $2 million or more, the purchaser is obliged to comply with a foreign resident capital gains withholding payment obligation (regardless of whether the vendor is in fact a foreign resident), in which the purchaser must withhold 10% of the sale price at settlement and remit this to the Australian Taxation Office (ATO), unless the vendor supplies to the purchaser a Foreign Resident Capital Gains Tax Clearance Certificate.
This must be organised before you commit yourself to the contract to purchase. The contract is not normally conditional on finance approval and once you are committed to buy you must complete the contract regardless of whether you have finance to do so or not. If you are unable to complete the purchase you stand to lose the deposit paid and also to be sued for any loss that the seller may incur.
Title to property is held on one of two ways. Joint tenants, means that each person owns the property jointly and on the death of one of them the property automatically passes to the remaining joint tenant or tenants. Tenants in common, means that each person owns a share in the property and on the death of one party that share passes to whoever inherits their estate.
Insurance risk passes on settlement day. All building insurance should be put in place before the purchase is settled. Your lender will want a copy of the policy before they agree to settle so this will need to be done a couple of weeks before settlement.
A purchaser is entitled to, and should always have, a final inspection of the property prior to settlement to make sure that the property is in the same condition as when first inspected and to see that all inclusions are left in the property.
This is the day on which all monies are handed over in exchange for the title deeds and the day on which possession is given to the purchaser.
Conveyancing transactions are moving towards electronic settlements wherein all parties can link up to provide an efficient way of settling matters electronically without the need of manual paper settlements and the conveyancer attending settlements. PEXA provides a platform for electronic conveyancing to be done from start to finish of the conveyancing transaction.
A deposit bond is a guarantee of payment of the deposit to the vendor if the purchaser defaults. A bond is used in lieu of a cash deposit when the purchaser does not have the cash to pay as a deposit or for any reason that the purchaser does not want to pay a cash deposit. It is usually used when a purchaser is selling a property and all their assets are tied up in that property and they do not have the cash to put down on a property purchase. It is cost effective and while it can only be used if the vendor will accept the bond it is becoming more common practice as time goes by.
VOI - Verification of Identity AND
VOA - Verification of Authority (aka 'right to deal')
NSW's LPI introduced new Conveyancing Rules that require a Conveyancer to take "reasonable steps" to verify the identity of each of their clients and the authority to enter into a conveyancing transactions and to also retain copies of such verification documents for a period for seven (7) years.
This will require your conveyancer to undertake a verification of the identity of each party to the conveyancing transaction. The verification process will require original identification documents to be produced to the conveyancer. Alternatively, the conveyancer may arrange for an authorized Verification Agent (Australia Post, ID Secure or Zip Id) to undertake the verification process on their behalf.