What to check before signing a contract of sale

After attending open home after open home, you have finally fallen in love with a property that meets your immediate and future needs—but what comes next? You look at the contract of sale of course! 

Before crossing the t’s and dotting the I's on a contract for a new home, there are a number of items to run your eyes over once, if not twice. This guide will help break down what to check before signing a contract of sale. 

What is a contract of sale?

After negotiating a deal on the purchase price of a home, a contract of sale is presented. In essence, the contract of sale is a legally binding document prepared by solicitors or conveyancers that sets out the terms and conditions agreed upon by the buyer and seller. 

When a property is sold privately as opposed to at auction, the seller typically needs to have a contract of sale prepared and available for inspection before they can advertise the property for sale. In most cases, the contract will be prepared by either the seller’s solicitor, conveyancer or real estate agent. 

Once both the buyer and the seller have signed the contract, it is exchanged, meaning it is now a legally binding agreement.  

What does a contract of sale contain? 

There is no specific template for a contract of sale; however, it needs to have key details of the purchase. Typically, a contract of sale will contain the following information: 

• The names and addresses of the seller and the buyer. 

• The purchase price and deposit amount. 

• The date of the property settlement and whether there are any pending conditions. 

• Details of the property, including its chattels, fixtures and fittings, which may include items such as a dryer or curtains. 

• If you’re buying off the plan, a sunset clause that enables you to cancel the contract if the plan or development isn’t completed by an agreed date  

• Whether the property is vacant or subject to a lease. 

• An explanation of how money is to change hands and what will happen if there’s a breach of the contract. 

How to check the contract of sale 

It’s a good idea to check the contract of sale before beginning the purchase process. Far too often will purchasers look to navigate the ins and outs of a property contract after they have fallen in love with a property, only for the conditions to be deemed unsuitable to their requirements.  

Scan over all the elements on the property contract, making note of any language, conditions or terms that may present doubts. It’s also important to check the contract carefully with your conveyancer or solicitor, as they are working on your behalf after all.  

Ensure you go over all terms and listen to the recommended changes your conveyancer may note before signing the contract. If you decide to make changes, take these back to the seller, and they will choose whether to implement these changes or stand firm. Only sign the contract of sale once you are both satisfied with the final terms and conditions. 

What should you watch out for in a contract of sale? 

Contracts of sale don’t always have the best interests of both parties in mind. Regardless of how much you love the property, you need to carefully review the contract to avoid any issues down the road. When evaluating the contract of sale, you need to keep an eye out for the following: 

Inconsistencies  

Make sure the important details on the contract match (names, addresses, etc) and are consistent all throughout. For example, if you spot differing names on the documents, there may be issues with the property’s title, or the person selling isn’t authorised to do so. Ensure the vendor has the power to sell the property by requesting proper documentation. 

Terms and conditions  

The special conditions added to the contract of sale may favour the vendor more than the buyer. Enlist the help of a solicitor or a property law professional to make sure that the terms and conditions are fair. If there are clauses that may seem unfair, you could try negotiating them with the seller. 

Legal costs  

Some sellers may include a clause that makes the buyer responsible for paying for the seller’s legal fees relating to the sale of the property. Consult with a professional to understand your options regarding these conditions. 

Penalty rates  

A penalty is issued to the buyer if they fail to proceed with the purchase after the settlement date. The penalty rate decides how much the buyer must pay. Usually, the rates are between 6% to 12% of the property value; however, some contracts of sale demand a much higher amount.  

Key questions to ask 

The following questions form a fundamental basis for helping you come to terms with the ins and outs of a contract of sale. Asking these questions of your solicitor, conveyancer, or real estate agent can assist in allowing you to decide whether or not the property is right for you. 

• What am I buying? 

• Are there any special conditions that must first be met? 

• How much is the deposit? 

• What is the settlement date? 

• Is there a cooling off period? 

If you are ready to take the next step on your property journey, check out our range of competitive home loans or chat to one of our lending specialists to help you get one foot in the door of your next home. 

Disclaimer: The information provided in this article is general in nature and does not constitute financial or legal advice. Please seek professional advice tailored to your circumstances before making any financial decisions.

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