Myth Busters … The Sale of Property Edition.

KEY TAKE-OUTS:

• Cooling-off periods don’t work both ways

• Get your Conveyancer involved early

• The highest offer isn’t always the best offer

• A late settlement doesn’t mean you can immediately cancel.

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Myth: I can always get out during cooling-off

If you are the Vendor (seller), you do not have the same right as the Purchaser to rescind (cancel) the Contract during the cooling-off period. The Vendor is actually locked in as soon as the Contract for the sale of residential real estate is entered into (signed and dated), so well before the expiration of the cooling-off period. The cooling-off period is only for the benefit of the Purchaser.

 

Myth: I don’t need a Conveyancer until I’ve found a buyer

A Real Estate Agent cannot legally list and advertise your residential property for sale until and unless they hold a Contract for Sale. So, it’s extremely important that you engage a Conveyancer well before you want your property to go on the market. In order to prepare a Contract for Sale, there are certain documents a Conveyancer needs to obtain from third parties so that they can be attached to it. The process and time associated with obtaining these documents can differ and so it’s important you give them ample notice to prepare the Contract.

 

Myth: The highest offer is always the best offer

I can see why you would think that, but price is only one part of the deal. When the Purchaser (buyer) makes an offer, not only do they put forward a price, but they may also put forward condition or ‘but’s’ if you will. For example, I am putting forward an offer of $1,000,000 but I need a 6-month settlement period. Longer settlement periods and reduced deposits are amongst the most popular conditions we see Purchasers put forward with their offer.

Consider this … you have two offers – one offer is $1,500,000 with a 6 week settlement period and a 10% deposit. The other offer is $1,530,000 with an 8 month settlement period and 5% deposit. Let’s break it down..

• $30,000 extra vs. speed: The second offer only gives you an additional $30,000, but ties up the property for an additional 6.5 months.
• Earlier access to funds: With the first offer, you will receive the balance of the purchase price 6 weeks after contracts have been entered into, rather than waiting 8 months.
• Saving on interest repayments – An earlier settlement means less time paying interest on your mortgage, depending on the amount of the interest repayments, this could save you thousands.
• Lower settlement risk: A 10% deposit ($150,000) provides greater security than a 5% deposit ($76,500) if the Purchaser defaults, subject to the contract.
• Certainty: A shorter settlement reduces your exposure to changes in the property market, the buyer’s financial circumstances, interest rates and other events over the extended settlement period.

 

Myth: If the buyer can’t settle on time, I can immediately cancel the contract.

For the purchase of residential property in NSW, certain steps must be followed before a Vendor can terminate the Contract because the Purchaser has failed to settle on time. Generally, the Vendor must give the Purchaser at least 14 days’ notice of their intention to terminate by issuing a ‘Notice to Complete’. This gives the Purchaser an additional period of time in which to complete settlement. The Vendor cannot terminate (cancel) the Contract unless the Purchaser fails to settle by the expiry of the Notice to Complete period.