So you’ve found your ideal property, made an offer and the seller accepted your offer. Offer accepted! Well done! What happens next? Well, one of two things can happen, either:
1. Contracts will be exchanged with a cooling-off period, handled by the real estate agent on the day that your offer is accepted (or soon thereafter) and you pay a holding deposit.; or
2. The agent will send a Sales Advice to your solicitor and the vendor’s solicitor. If this happens, no contracts are signed or exchanged.
Exchange with cooling-off period
When you exchange with a cooling-off period you will be given a period of 5 business days (excluding weekends and public holidays) in which you will need to complete your due diligence enquiries. The cooling-off period starts the next day after contracts are signed.
This period can be extended but only if the vendor agrees. It is at the vendor’s sole discretion as to whether to permit the request for the extension of the cool-off or not. When the cooling-off period expires, the exchange of contracts will be unconditional and both you and the vendor will be bound to complete the contract.
If you exchange contracts with a cooling-off period you will be required to pay a holding deposit of 0.25% of the purchase price. During this period, you will usually conduct your due diligence of the property and any building or pest inspections. If you decide to rescind the contract for whatever reason during the cooling-off period, then in so doing, you will forfeit your 0.25% holding deposit provided to the vendor.
Exchange without cooling-off period
The other way that contracts can be exchanged is where you make an offer which is accepted and the agent forwards a sales advice to the solicitors for the purchaser and vendor.
Technically speaking, no exchange of contracts occurs in this instance and no deposits are provided to the vendor. When this occurs, the buyer will undertake due diligence during the period before contracts are exchanged.
Although there is no time limit to you completing your due diligence, in practical terms, a vendor is unlikely to want to wait too long before deciding to accept another offer from a buyer who wants to exchange immediately and pay the full deposit.
With this method, after you have completed your due diligence you will sign the contract with your solicitor, your solicitor will sign a Section 66W certificate. Your solicitor will provide your signed contract and Section 66W certificate to the vendor’s solicitor who will then sign the counterpart. That way, contracts will be exchanged unconditionally (that is, there will be no cooling-off period).You will be required to transfer your 10% deposit (or other such figure as negotiated prior) to the sales agent’s trust account. Importantly, both the vendor and the purchaser will be immediately bound to complete the contract
Importantly, if you later decide to withdraw from the contract after the contracts are exchanged unconditionally, you will lose your full 10% deposit and the vendor will be entitled to sue you for their losses which might include the real estate agent’s fees, the vendor’s solicitor’s fees and if the vendor sells the property for less to the next purchaser the vendor will be entitled to claim that amount from you as well.
The above is not intended as legal advice. You should obtain legal advice in relation to your own specific circumstances. Allegiant Lawyers are experts in property and conveyancing law. For assistance in a property law matters please do not hesitate to contact us.
