Once a buyer and a seller have looked over the contract of sale on a property and both parties sign the contract, the contract is legally binding. It is important for both buyers and sellers to be aware that there is often little to no chance of backing away from a sale or purchase once the contract of sale has been signed and completed.
Properties are generally sold using either a private treaty (the conventionally listed ‘property for sale’) or by being sold at auction. A private treaty purchase begins with a verbal agreement between the buyer and seller as to the price of the property and the major terms of the sale. A buyer generally takes 1-2 weeks to conduct pest and building inspections and arrange finance. The next stage is the exchange of contracts and in many cases there is a cooling off period. During a cooling off period, a buyer may change their mind regarding the purchase. If a cooling off period exists on a sale it will be stated in the contract. A buyer who pulls out of a purchase during a cooling off period will be charged a cooling off penalty which is 0.25% of the purchase price. A property that is sold at auction has a stronger chance of settling as the contract will almost always have no cooling off period and will be unconditional.
If a deposit is accepted by the seller and there is no contract in place, neither the buyer nor seller is under any obligation to proceed with the transaction and if it doesn’t proceed, the deposit will be returned to the buyer. The buyer is responsible for all of their initial costs in relation to the property purchase such as inspections and legal fees.
For both buyers and sellers, the settlement period stated in the contract should give both parties enough time to comfortably meet the agreed date. The settlement period is usually 4-6 weeks to allow for such factors as the arranging of finance, organising a conveyancer and the logistics of moving in and out of the respective properties. Settlement periods can be made longer or shorter, depending on the mutual decision of the buyer and seller. After the contract has been signed, neither party is under any obligation to accept a change to the length of the settlement period.
If you would like to know more about the specifics of buying a property, contact your Mortgage Broker of Financial planner today.
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