Attwood Marshall Lawyers Property Lawyer, Raphaelle Worrall, discusses why it is important to overcome “FOMO” and ensure you get the right legal advice from an experienced property lawyer when buying and selling property.
Owning property has long been known as “the great Australian dream”. Over the years we have seen significant events take place which impacted homeownership, including sky-high interest rates in the 1980s where the average interest rate was 16.63% right through to today where we have seen some of the lowest interest rates in history helping drive incredible sales and movement in the property market.
Currently residential real estate in Australia is worth an estimated $8.8 trillion dollars. This is partly a result of a significant increase we have seen in property prices over the past year due to the COVID-19 pandemic. Eighteen months into the pandemic and the property boom is continuing well into 2021, although at a slower and steadier pace than what we witnessed in 2020. With property moving so quickly, buyers are feeling the pressure and have a fear of missing out on the deal. As a result, many buyers are willing to offer more than asking price to secure a property.
The current market really is in the favour of sellers with many sellers achieving exceptional prices.
But it’s not just sellers who are reaping the rewards of the current market; there are plenty of incentives for buyers with interest rates under 2% as well as government incentives for eligible people such as the HomeBuilder Scheme and the First Home Owners’ Grant and Concessions.
What consequences can people face if they rush into buying property?
When competition is fierce and people have a fear of missing out, they can make decisions before having the opportunity to really think it through and run through all the finer details to make sure what they are buying meets their needs and expectations.
At Attwood Marshall Lawyers, our property team have seen firsthand the serious consequences that come from people feeling pressured to sign a Contract on the spot. Unfortunately, when you rush into such a big decision, and don’t do your homework or carry out your due diligence, there can be nasty surprises waiting for you just around the corner.
In Queensland, a common mistake that can arise from rushing to sign a contract is failing to add all the necessary special conditions you should have in the agreement.
For example, if you are obtaining a loan to purchase your property, it is not only imperative that a finance condition is inserted into the contract, but it is also important that the condition is completed correctly. If the finance details are not completed correctly, the contract will not be subject to the buyer obtaining finance approval for the purchase.
The buyer will then be deemed in default of the Contract if they cannot complete settlement because they don’t have the necessary funds and the seller may elect to forfeit the deposit and sue the buyer for damages as a result of the sale not going through. If the property is resold at a loss, the seller can recover this amount form you in addition to the forfeited deposit.
Terms and conditions to consider
Terms and conditions can be tailored to suit the unique circumstances of each sale contract. Every property, and every buyer and seller’s situations are different, so there could be many different things to consider. The standard terms and conditions you see in most Queensland Contracts of Sale are finance clauses, where the Contract is subject to finance approval, and pest and building inspections, where the Contract is subject to the buyer obtaining a satisfactory pest and building inspection report.
There are any number of other special conditions you may also choose to include such as:
- The contract being subject to the sale of the buyer’s property
- The contract being subject to a body corporate records search
- The contract being subject to any repairs or maintenance being carried out, just to name a few.
What happens if you sign a Contract, pay the deposit, but change your mind?
When purchasing residential real estate in Queensland, unless you are buying at an auction, the standard Contract of Sale provides you with a five-business day cooling off period, which begins on the date you or your lawyer receives the signed Contract.
The cooling off period gives you the right to terminate the Contract for any reason during this time. It is important to note that if you choose to terminate the Contract, you can still face a penalty which the seller has the right to impose on you. The penalty is 0.25% of the purchase price and is generally taken from the deposit before it is returned.
If you buy a property at an auction and then change your mind, there is no cooling off period. This means if the sale does not proceed, the buyer will be in breach of the contract and likely lose their deposit and be required to compensate the seller for other costs or consequential losses.
What else should buyers be aware of?
When purchasing a property, it is important to conduct certain searches on the property both prior to and after signing a contract.
The main search to do before signing a contract is a “Title” search. Title searches provide key details about a property and it is important that a title search is ordered and reviewed prior to signing a contract to confirm if there is anything on title, such as any registered or unregistered dealings.
A Title search may also list any easements. An easement is a right given to another person who does not own the property, to use the property for a specific purpose. This may include service worker access to service electricity poles or a right of way access for a neighbour’s driveway.
An easement can either benefit or burden the land and may also restrict the use of the land. It’s important you’re aware of easements before you buy as they can also prevent you from building on top or around the easement.
Another dealing that can be listed on a Title search is a caveat. This is a legal notice lodged with the state land registry and is essentially a warning that another person or company has an interest in the property. If someone has a potential claim to part or all of a property, they may lodge a caveat over the property, preventing the owner from selling their property.
Once the contract is signed, usually when it has gone unconditional, we will order searches relating to the property. This includes rates and water – to make the relevant adjustments on settlement, a contaminated land search, roads and transport search and a land tax search. If the property Is a unit, we also order a copy of the community management statement which outlines the by-laws and a body corporate search noting the current period levies.
These searches not only provide further information on the property but will also confirm that there are no outstanding notices or orders on the property or any outstanding charges.
Instructing your lawyer to not order the applicable searches to save costs may have significant consequences. For example, not ordering a Land Tax search which will show whether there is unpaid land tax due (usually paid on settlement), will result in the buyer being liable for any outstanding land tax by the previous owner.
Other optional searches
You can also instruct your lawyer to order other optional searches such as:
- A final Inspection certificate to confirm extensions or alterations to existing buildings have been completed in accordance with the council’s regulations;
- Body Corporate Inspection of Records if the property is a unit, which will provide details of the Body Corporate including the Minutes of Meetings, history of disputes, financial statements and any upcoming special levies.
These are just some of the considerations people should keep in the front of their mind whether they are house hunting or considering putting their current home up for sale.
Attwood Marshall Lawyers – helping you make an informed decision when buying and selling property
It really is so important for people to be thorough and ensure they seek advice from an experienced property lawyer who knows the local area when you are making such big financial decisions.
Many buyers and sellers look to save money wherever they can when they are going through the process of buying or selling property. Going down the cheap conveyancing road and cutting corners by not doing thorough checks and searches on a property can open buyers up to a lot more expense and heartache later on when you need to address the issues you were not aware of when buying the property in the first place.
Our property lawyers can help you review the Contract of Sale and offer FREE pre-signing advice on all Queensland Contracts. Our team will thoroughly run through the terms and conditions with you, as well as help you negotiate these so that they reflect your best interests and meet your expectations. It is important to do all this before you sign anything!