Selling a house is often a time consuming and stressful task because it’s a complex financial and legal process with many moving parts and multiple stakeholders. From reading the market, setting a realistic price, and sprucing up your house to finding a good agent, marketing your property, and managing the sale through auction or private sale — there’s a lot to think about and a lot at stake. That’s why it’s often a massive relief when you finally shake hands with a buyer over your property. However, before you crack open the champagne, you still need to ‘settle’ on the property to make the sale official before you can get paid and hand over the keys to your old house. So, let’s look at our two-part series to learn what happens during the sale process and how working with Sellable can save you a whole lot of stress.
What is a Contract of Sale?
The Contract of Sale is an important legal document that must be signed by you and the buyer for your property transaction to be completed. It includes your details and the buyer’s details, the property’s address, the sale price, the deposit amount, conditions of sale, date of settlement, and other personal property sold as part of the deal (if relevant). It becomes a legally binding document from the moment it’s signed by the buyer, although won’t be activated until you sign it too. This is important to note because the ‘cooling off’ period begins from when the buyer, not you, signs the Contract of Sale. You (or your solicitor) must provide your selling agent with a copy of the Contract of Sale before they can list your home for sale.
Section 32 and Contract for Sale: your responsibilities as the seller
In Victoria, if you are selling a house then it’s a legal necessity to provide a buyer with a Section 32 — or Vendor’s Statement as it’s also known — before a Contract of Sale is signed.
This document derives from Section 32 of the Sale of Land Act 1962 and requires you to disclose all information that affects the land you are selling. The Vendor’s Statement is prepared by the vendor’s lawyer, and includes information that may affect a potential buyer’s decision to go through with the transaction. This document includes, but is not limited to, the following information: the vendor’s details, the title details including boundary measurements, planning information, covenants on the title, building permits, statutory warnings to the purchaser, details of any outgoings such as rates or body corporate fees, and notices issued by the authorities. If you’re selling your home by auction, more stringent regulations exist about what information must be included in the Vendor’s Statement. This is required because there is no ‘cooling off’ period in an auction, so buyers must be made fully aware of the property’s credentials to help protect them from being burned by something they discover after they’ve signed the contract. It is a criminal offence to knowingly or recklessly provide false information in a Section 32, and heavy fines exist for those who break the law.
In other Australian states, similar rules around the disclosure of property information exist, however, they are not always mandatory.
In New South Wales, South Australia and Western Australia disclosure of property information documents are called: ‘Schedule 1 Prescribed Documents’, ‘Form one Disclosure Statement’, and ‘The Seller’s Disclosure Statement’ respectively. These documents are like a Section 32 (buy they require less detail than a Section 32). If you’re selling a house in NSW and SA, you’re legally required to provide these documents to a buyer before a Contract of Sale is signed. If you’re selling in WA, it’s not compulsory to do so.
In the ACT, no specific disclosure document exists but you must provide a buyer with an assessment of the property’s physical structure, and a statement detailing any restrictions that exist on the house and land.
There is no legal requirement to provide a potential buyer with information that may affect their decision to buy in the Northern Territory, Queensland, or Tasmania.
In many cases, even in states required to disclose relevant property information, buyers will conduct their own professional pre-purchase inspection reports to ensure peace of mind before they sign the contract.
It’s worth noting that failure to supply, or errors within, a Section 32 (or similar documents required in other states) can cause delay in the settlement process, and can lead to a buyer being able to retain their deposit and cancel their transaction even if the Contract of Sale has been signed.
What is the exchange of contracts?
Exchanging contracts means that both the vendor and the buyer sign the contract of sale, and each party receives an identical version of the contract of sale with the other party’s signature. The deposit amount specified in the contract also becomes payable at that time — usually 10% of the agreed purchase price.
What is a ‘cooling off’ period?
A cooling off period is a provision that exists to allow buyers to change their mind and not proceed with a property purchase. If you’re selling your house by auction, then there is no cooling off period. However, if you’re selling by private treaty, then the number of days in which a buyer can reverse their decision after signing a Contract of Sale varies across Australia from two to five days according to state regulations.
There are many reasons why a buyer might want to back out of the sale. For example, they may realise they don’t have the finances to fund the purchase, they may uncover unusual terms and conditions in the contract that put them off, or there may be something in the Vendor’s Statement that makes them nervous. Whatever the reason, it can stall settlement, and cause serious stress by putting you back to square one when it comes to selling your home.
It’s worth noting that in NSW the cooling off period can be waived to make the purchase immediately binding through a Section 66W Certificate. This certificate is typically used by a buyer who wants to exchange contracts promptly to secure their dream home and exclude other interested buyers from the transaction.
Usually, there is a cost associated for the buyer for withdrawing from the contract during the cooling off period. For example, in NSW it is 0.25% of the purchase price. For practical reasons, it is often common practice to accept this reduced amount at exchange of contracts (instead of the full 10% deposit). The balance of the deposit would only be payable at the final day of the cooling-off period if the buyer decides to proceed.
And if all of this sounds a bit much to take in, have a look at how Sellable can simplify the process for you: rather than organising the sale yourself and coordinating everything with your agent, your solicitor and the buyer, just leave it all to us! We pay you a Guaranteed Price when you move out, and manage the entire process from there. You’re free to move on while we do all the hard work. We’ll also do improvements to your property, and if it sells for more than the Guaranteed Price, we give you 75% of any additional upside. Learn more at sellable.com.au or give us a call on 1300 722 910.