The golden rule when it comes to any contract is don’t sign anything unless you know exactly what you are signing. This means that you should read through the document in its entirety and if you don’t understand anything within the contract, then seek out independent advice before you sign the document. The place to seek out independent advice about a contract is with a lawyer or solicitor. They will be able to explain a contract in simple terms and will also be able to explain any legal terminology.
So what does a contract of sale include?
Basically a contract of sale is a legal document that stipulates who is selling (the vendor) and who is buying (the buyer) a property. A contract of sale may vary slightly from state-to-state, but the basics of the contract of sale remain fairly consistent. These are as follows:
The Particulars of Sale
This section lists the details of the sale, such as the name of the vendor and the buyer and their agent and conveyancer details, the certificate of title for the land (volume, folio, lot and plan details), and the property address.
Goods Sold with the Land
If you’re buying an established home then this should be stipulated in this section, along with the home’s fixtures and fittings, if these are included in the sale. If you have negotiated to buy furniture items within the home or sheds, cubby houses or other items, then these should be listed in this section.
You may also find that any exclusions or items that are not included in the sale are listed in this section. For example, the agent may state that all house fixtures and fittings are sold with the home except the custom water feature hanging in the atrium. This then means that the buyer is not selling their custom water feature and that this is not inclusive in the sale of the property.
The total cost of the property will be written in this section of the contract. It is typically listed in the ‘Price $’ allocation. The deposit amount will be written under this dollar amount along with the date of the payment and any monies that have already been paid. The balance due at settlement will also be stipulated so that the buyer knows how much they will have to pay at the time of settlement.
An agent will ask a buyer for some type of deposit at the time of signing the contract. This is typically a figure that is negotiated between the agent, who is representing the seller, and the buyer. The deposit is a sign of the buyer’s authenticity and commitment to buy to property.
This section defines the date of settlement or when the property will be transferred from the vendor to the buyer. On the settlement date the buyer’s lender will transfer the money for the property and collect the deed for the property from the vendor’s lender. Once the settlement has been finalised the agent who was selling the property will be notified. They will then contact the buyer and let them know that they can collect the keys for the property.
If the property is currently tenanted, then ”subject to lease’ will be written in this section. The details of the lease should then be disclosed below this statement. The details of the lease should include the tenant details, when the lease expires, the rental amount and when the rent is collected. If the buyer requires vacant possession of the property, then they must notify the vendor, who will then give the tenant 60-days notice in accordance with tenancy laws.
If this section is blank, then it means that the property is not leased. The buyers are then able to move into the property themselves or they can elect to lease the property.
If the property is to be paid for by a loan, then this will be stipulated in this section of the contract. Details will include the amount of the loan, the date of the approval and possibly the lender’s details.
Any conditions that apply to the sale of the property will be listed in this section. Special conditions typically refer to any clauses that could affect the sale of the property, such as loan approval or the sale of another property or business. In most cases if there are conditions then these will be listed as ‘subject to’, which means that the sale of the property will not occur unless these conditions have be met.
Most contracts will also have a general cooling-off period of 3 business days (72-hours), which is effective from the time of contract signing. During this time either the vendor or buyer can change their minds about selling or buying the property. If they change their minds during this time then they can elect to dissolve the contract and the sale of the property will not go ahead.
It is vital that before signing the contract of sale that you make sure you read the document thoroughly. Ask as many questions as possible to clarify points. Check and then re-check details, such as names, addresses and the amount of money to be exchanged. Check the legal terms and conditions and make sure you understand everything associated. If you are positive all is in order and correct, then sign the contract of sale.
Are you about to buy a home? Contact eChoice today to find out more about your home loan options.
Written by eChoice