Understanding the Legal Side of Selling Privately
Despite the myths, you don’t need an agent to handle the legal aspect of selling your property.
In Australia, the process of buying and selling property is regulated by state legislation. Whether you’re selling privately or using a traditional agent, the legal aspect of selling property is handled by conveyancers (or solicitors, for our friends in WA). And thank goodness because that stuff is tough work.
In the simplest of terms, conveyancing is the legal process of transferring the legal ownership of real estate, either house or land, from one party to another. While the specific details differ from state to state, the common requirement is that you, the vendor, must prepare a Contract of Sale and a Vendor’s Statement.
A Contract of Sale usually incorporates the Vendor’s Statement into its terms and conditions, but essentially a Contract of Sale is a series of legal documents made up of specific information, mandatory disclosures, representations and warranties.
Queue your conveyancer!
If you’re looking for the nitty-gritty details of what a Contract of Sale outlines, look no further.
It captures all the agreements made between the vendor and the buyer including:
- The identity of the vendor and the buyer
- The address of the property
- The title details
- The price
- The agreed deposit
- The length of the settlement period
- Any fixtures or fittings being sold with the property
- Any special conditions, such as whether the sale is subject to the buyer obtaining finance approval by a certain date
- Any other special conditions that both parties agree to
State to State
Some states require the Vendor’s Statement to be quite extensive, providing buyers with plenty of information about the property. However, not all states are quite as strict.
For example, NSW and VIC both require vendors to disclose details like council information, zoning, water and available utility connections. However, QLD and WA are less particular, leaving buyers to fill in the gaps.
If your property is in NSW, you must have a ‘Contract of Sale’ prepared before your property goes live on the market. Otherwise, you’ll breach NSW law and could face penalties. Yikes!
If your property is in VIC, you must provide your potential buyers with a ‘Section 32 Vendor Statement’ before any contracts are signed.
Who Holds the Deposit?
The deposit is paid by the buyer to you, the seller when contracts are signed and exchanged at the time of sale. This, for all intents and purposes, concludes the sale of the property.
Generally, the buyer writes a cheque for the deposit amount, which is standardly 10% of the property’s sale price unless otherwise agreed. Your conveyancer/ solicitor holds the deposit in a trust account until the settlement date is reached. After which, the deposit is then transferred directly to your bank account.
This is a crucial step when selling property, as it is illegal for a seller to hold a deposit in any personal or business bank accounts – yes, even if you yourself are a conveyancer.
After the Dotted Line
Once all contracts are signed, guess what happens next? More legal paperwork!
Strap yourselves in, folks.
The ‘post-contract’ process is slightly different in each state, but it usually includes the following:
- Transfer of Land document – this document notifies the government that the property is changing hands;
- Tax documents – buyers often are required to pay stamp duty on top of the purchase price. If a property’s sale price is over $750,000, the vendor must lodge a capital gains tax withholding declaration;
- Client Authorisation document – this document authorises your legal representative to sign documents on your behalf. This is especially important for PEXA e-conveyancing (electronic conveyancing);
- Verification of Identity – these documents prove that both buyer and seller of the property have the authority to do so (cross-check of identification against paperwork and government documentation);
- Property rate adjustments – the purpose of these documents are to divide the rates (usually council and water) for the time that each party owns/ will own the property. They identify any debts outstanding on the property (land tax, certain utility connection agreements, etc) so that buyers have a clean slate upon settlement.
Leave it to the Experts
It’s critical that Contracts of Sale and Vendor’s Statements are prepared in accordance with the relevant legal requirements. While it’s certainly possible to do it yourself, with so many components to consider and your most valuable asset at risk, we encourage working with a conveyancer to ensure the process is being handled appropriately, in abidance of the relevant laws.
Have More Questions? We Have Answers.
– Should I have Contracts of Sale available at my Open for Inspections?
Having a completed Contract of Sale at your Open for Inspections is a great idea!
Rather than having 20 blank contracts printed for people to take home, save the trees by just having one copy available as a reference guide. This way, potential buyers can skim the contract during the inspection, it will help answer any questions that may arise.
Before your buyers leave the inspection, ask if they’d like an electronic copy of the contract, which they can then print or forward to their conveyancer for further review.
– Can I use an old contract?
Every property sale is unique, so it’s vital to have a new contract prepared each time a property is sold. This ensures that the information contained within the contract is correct, up to date, and relevant to your sale. This is important because if the contract’s information is false, a buyer may have grounds to terminate the sale, even if they have already signed on the dotted line. Yikes!
Your conveyancer will be informed, but it’s worth prompting them to ensure they are aware of any changes made by local governing authorities that may affect the sale of your property.