Selling a home is usually an emotional and stressful time and can become a costly process if mistakes are made. A qualified lawyer or conveyancer can simplify the procedure and limit the risks involved. In this article, we look at the steps which a lawyer will take when managing a sale transaction on your behalf.
The Contract of Sale
When selling a property, a Contract of Sale must be prepared before a property can be marketed and shown to potential buyers. A Contract of Sale is a legal document setting out details of the property and sale terms, including:
- The purchase price;
- Details of the vendor;
- Relevant information about the property;
- The amount of the deposit to secure the property; and
- Any special conditions associated with the sale.
When you first meet with your lawyer, they will obtain relevant information about the property from you and undertake searches to obtain copies of common documents which are required to be included in a contract.
Your lawyer will also discuss with you the fixtures and fittings which are to be included in the sale of the property. A fixture is anything which cannot be easily taken away without doing damage to the property and includes such things as built-in wardrobes, carpeting, baths and stoves.
Once the contract has been finalised, steps can then be taken to sell the property. When a purchaser has been found your lawyer will prepare a final contract, incorporating any special terms and conditions which have been negotiated with the purchaser. A final copy of the contract will be sent to the purchaser’s lawyers and your lawyer will liaise with the purchaser’s lawyers regarding any further amendments to the contract.
GST withholding notification requirements
From 1 July 2018 purchasers of new residential premises or potential residential land must withhold any Goods and Services Tax (GST) liability payable by the vendor from the contract purchase price and remit this directly to the Australian Taxation Office (ATO).
These reforms essentially affect all off-the-plan purchases or purchases of vacant land in a new subdivision.
Vendors selling residential property will need to notify purchasers in writing whether or not they will be required to withhold GST at settlement and, if so, provide relevant details including their ABN and GST amount. The notice may form part of the contract or be provided separately.
If GST is payable, the purchaser or their lawyer is responsible for submitting the relevant paperwork to the ATO on-line and making the payment on settlement. Vendors then lodge their Business Activity Statement (BAS) in the usual manner and will be entitled to a refund if the amount paid exceeds their actual GST liability for the relevant period.
Exchange of Contracts
Exchange of contracts is where the vendor and purchaser check, sign, date and swap contracts and the purchaser pays a deposit to the vendor (usually 10%). Your lawyer will attend to the exchange of contracts with a representative of the purchasing party.
Once contracts have been exchanged, the property is no longer on the market, the purchaser has committed to buy the property and the vendor has committed to sell.
In most cases, the purchaser has a period of 5 days after exchange of contracts within which they can pull out of the sale by providing you with written notice. This is known as the “cooling off period”. In some cases the purchaser waives the cooling off period, particularly if all searches and inspections have been completed.
Preparations before settlement
After exchange of contracts, your lawyer will take steps to ensure that settlement can take place, including:
- finalising and reviewing all documents required for settlement;
- communicating with the:
- purchaser’s lawyers – regarding directions as to the distribution of settlement funds;
- mortgagee – to make arrangements to ensure the mortgage is discharged on the date of settlement; and
- real estate agent – regarding payment of their commission and release of the deposit held by them.
At settlement, all the relevant parties meet to exchange legal documents and transfer title of the property from the vendor to the purchaser and to arrange final payment of the purchase price. If there is a mortgage on the property, it is discharged at settlement. Settlement commonly takes place 6 weeks after the date of exchange of contracts.
Your lawyer will generally attend settlement with the bank or financial institution which has provided the mortgage over the property. You do not usually need to attend settlement in person.
After settlement, your lawyer will notify relevant organisations that you are no longer the owner of the property.
If you are looking to sell a property, a lawyer can assist you to understand the conveyancing process and ensure that the sale transaction runs smoothly.
If you or someone you know wants more information or needs help or advice, please contact us on 02 9790 7000 or email [email protected]