Once you have decided to buy a property, there are two ways that you can proceed to make the property legally yours, in other words, to sign the contract:
· Five day cooling off contract
· Unconditional contract
Five day cooling off contract
This is where the buyer signs a contract, either through the agent or with their solicitor, at their highest price. If the owner agrees to the price and terms they sign an identical counterpart contract. Both contracts are then dated. A deposit of 0.25% of the purchase price is paid and the balance of deposit must be paid before the end of the cooling off period.
In this five day period, the owner cannot change their mind about selling the property. They are committed. The buyer, however, has this time to decide whether they want to continue with the purchase or whether to pull out
ie: “cool off”. They have a choice. However, if the buyer decided to pull out of the sale within the five working days, they forfeit the 0.25% of the purchase price, to the owner.
This is where you have acceptance of your highest price verbally initially. A sales advice is then sent out to both solicitors. Both the owner and the buyer each sign a contract. The buyer pays the 10% deposit to the agent. Once the contracts have been exchanged, with the inclusion of a 66W certificate, both the owner and buyer are committed. The property is now unconditionally sold.
You cannot legally guarantee that you will be the successful purchaser until such time as contracts have been exchanged.
Gazumping- Occurs when the owner accepts a higher price from another buyer even though they had already verbally accepted your proposal (prior to the owner countersigning your contract).
THERE ARE ADVANTAGES AND DISADVANTAGES TO THE BUYER IN EACH OF THESE METHODS.
Only you can decide which is the better method for you.
Five Day Cooling Off Contract
Buyer cannot be gazumped after the contract has been countersigned by the seller. In other words, nobody else can buy the property while it is under contract.
You have five business days after signing the contract to complete any searches, building and pest inspections. Buyer has option to rescind contract in this period.
Buyer can sign a contract with a Solicitor, Conveyancer or Real Estate Agent.
Buyer forfeits 0.25% of purchase price if the contract is rescinded, e.g on a $500,000 purchase, 0.25% would be $1,250.00 payable to the vendor.