We explain the steps involved in buying a property as well as many of the common terms. Browse through our FAQs below or download our guide here.
How much will it cost me to buy?
When buying a property, it can seem like everyone has their hand in your pocket.
The charges you should budget for are:
• Conveyancing fees and disbursements – We offer a fixed fee conveyancing price of $1200
• Transfer duty (previously called Stamp Duty) – this is variable dependent upon the purchase price and other factors. See our Stamp Duty FAQs
• Loan fees – This can be obtained from your initial finance enquiries – we provide more information under “How do I obtain finance?”
• Moving costs – These include your removalist fees and connection of
telephone and other utilities.
• Council and water rates – These are usually paid by the vendor in advance. On settlement, your proportion of amounts paid in advance is reimbursed to the vendor. We recommend you allow approximately $500.
What do all these words mean?
Completion is another name for “Settlement”
Cooling-Off Period is the period of 5 business days after exchange, during which time you will usually be entitled to pull out of the contract without a reason. If you do so, you will lose 0.25% of the purchase price. See page 11.
Deposit is an amount paid on exchange of contracts. The deposit is usually 10%.
Deposit Bond is a certificate (usually issued by an insurance company for a fee) generally accepted as a substitute for
payment of a cash deposit.
Disbursements Expenses paid by us on your behalf including the cost of pre-purchase inspection reports, survey reports,
title searches and enquiries of government departments.
Exchange is the time when the contracts signed by each party are swapped. The contract then becomes legally binding
and you are locked in.
Gazumping or being gazumped is when a vendor sells to someone else after having accepted your offer to purchase the property. You can only get gazumped before exchange.
Holding Deposit is normally paid when your offer is accepted by the vendor. Despite its name, the payment of a holding deposit does not secure the property or prevent the Agent from selling it to another purchaser (gazumping).
Inclusions are items sold with the property. Common inclusions (if present) are curtains, blinds, air conditioner, ceiling fans, stove, range hood, dishwasher, council bins, carpet and tiles.
PEXA is short for Property Exchange Australia. The electronic settlement and lodgement platform now used to finalise property transactions, including purchases, and transfer title.
Pre-Approval Loan is approval from a lender before you find a property you want to purchase.
Pre-Purchase Inspection Reports are reports obtained to identify any defects in the property. These include pest report, building report and a strata report.
Section 66W Certificate is a certificate signed by a lawyer waiving your cooling off period.
Settlement is the time when the balance of the purchase price is handed over to the vendor. You then become the legal owner of the property.
Stamp Duty (Now called Transfer Duty) is a tax charged by the NSW Government on the transfer of the property.
Strata Title is a type of title commonly used when a property forms part of a complex (eg an apartment, villa unit or townhouse).
Vendor is the person selling the property
*More information on these terms are explained under separate Q&As or can be viewed in our Buying a Property booklet downloadable here
What is stamp duty? (now called Transfer Duty)
Stamp duty or transfer duty is charged by the NSW Government on the purchase of the property. It is typically the biggest cost of buying a property. The amount of stamp duty varies depending on the purchase price and the amount borrowed. First Home Buyers may receive an exemption or reduction in their stamp duty – look under our First Home Buyers Q&A.
We will confirm the exact amount of stamp duty in our detailed estimate to you. A quick stamp duty calculator is available on realestate.com.au here
How do I obtain finance?
Most lenders have a procedure in place where you can make an application for a loan before finding the actual property – this is called pre-approval. By applying for pre-approval from a lender as soon as you make the decision to buy, you:
• Find out how much the lender will charge.
• Know how much you can borrow.
• Get an edge over other purchasers.
The last point is extremely important. The edge comes from being able to make offers on properties with confidence and by being able to proceed to an exchange immediately.
Put yourself in the place of the seller with two competing purchasers – one with finance pre-approved and the other without. Who do you think they would prefer to sell to? Formal pre-approval can usually be arranged through a mortgage broker or the lender directly.
We can recommend a mortgage broker or lender to assist you in arranging your pre-approval. Feel free to contact us for a recommendation.
You’ve found the right property, what now?
After finding a property, you negotiate a purchase price with the vendor. Usually you do this with the assistance of the Real Estate Agent.
It is not uncommon for both you and the vendor to put forward a number of different offers before you reach an agreement on the price.
When your offer is accepted, the Agent will normally ask you to pay a holding deposit. The holding deposit (despite its name) does not secure you the property or prevent the Agent from selling it to another purchaser.
The other major matter that you should attend to immediately is to obtain final finance approval. It is extremely important that you obtain the approval by the end of the cooling-off period.
You should now contact us to act on your purchase. We will then obtain a contract from the vendor’s Agent or representative.
Contact your mortgage broker or lender to secure final finance approval.
Do I need a pre-purchase report?
You purchase the property in its condition at the time of exchange.
The purpose of inspection reports is to identify any defects in the property. You can then either make an informed decision to pull out of the contract if the s are too costly, or you may be
able to negotiate a reduced purchase price with the vendor.
The most common forms of pre-purchase inspection reports are:
• Pest Report
• Building Report
• Strata Report (if purchasing a strata title property – see our Q&A on Strata Title).
Pre-purchase inspection reports should be organised promptly after your offer is accepted. The reports will usually take approximately three days to obtain and should be timed to arrive (for your review) prior to
expiry of the cooling-off period.
We can organise pre-purchase inspection reports for you. We will ask you whether you want us to organise the reports when you call or telephone us to act on your purchase.
The Agent may organise the reports, or you may want to organise them personally. We have no problems with this.
When should I sign the contract?
The only way to secure the property is to sign a contract and exchange contracts with the vendor.
Signing and exchanging are two separate steps (although exchange generally occurs very quickly after signing). Normally, you will see us to discuss the contract before signing.
The Agent may want you to sign the contract before you have met with us. Signing with the Agent enables the Agent to immediately effect an exchange on your behalf (and thereby secure the property for you).
For that reason, we have no objection to you signing with the Agent, provided you then immediately arrange an urgent meeting with us to discuss the Contract (before expiry of the cooling-off period).
Paying the deposit
Most contracts require a deposit of 10% to be paid on exchange of contracts. The deposit is usually held by the Real Estate Agent until settlement. Sometimes, if there is no Agent, the deposit will be held by the vendor’s
If you are unable to pay a full 10% deposit, we can negotiate on your behalf with the vendor’s solicitor for either a reduced deposit (usually 5%) or payment by way of a deposit bond (see Q&A below).
What is a deposit bond?
A deposit bond is a certificate (usually issued by an insurance company) for which you are required to pay a fee. It is in the form of a guarantee provided by the bond issuer and is generally accepted as a
substitute for payment of a cash deposit.
Because exchange usually occurs promptly after signing the contract, you should pay the balance of the deposit to the Agent ASAP after signing.
If you have not already paid the deposit to the Agent, you should bring it with you when you meet with us to sign the contract.
Deposit bonds are usually organised through your mortgage broker or lender but we can organise them for you.
When should I insure the property?
The contract provides some limited protection to a purchaser in the event that the property is damaged. If the property is damaged between exchange of contracts and settlement, you will generally still be required to purchase
the property (in its damaged state at completion) at market value (often less than the agreed price but not necessarily). The gap between what is paid for the property and the original agreed price is then available to you to effect the
repairs. The sting comes if the gap is not sufficient to restore the property to its original condition. This problem is alleviated by taking out insurance. We strongly recommend you arrange insurance on the property promptly after signing the contract.
Your lender must be noted on your insurance policy. Your lender will also require you to provide a copy of the policy to it prior to settlement.
When does exchange of contracts occur?
When both you and the vendor have signed identical contracts, either the Agent or us will exchange contracts.
Exchange of contracts occurs when the copy signed by you is delivered to the vendor’s representative and the Agent or us receives the original signed by the vendor – in a nutshell, the copies signed by each party are swapped.
The contracts are dated and (if you have not already done so), you must pay your deposit.
The contract is then legally binding and the vendor cannot sell the property to anyone else – no more risk of being gazumped!
What is the cooling off period?
You will usually have a cooling-off period (5 business days after exchange) to withdraw from the contract.
Your cooling-off rights can be exercised without giving any reason to the vendor. The vendor does not have any cooling-off rights – they are locked in from exchange.
If you withdraw within the cooling-off period, the vendor will retain 0.25% of the purchase price ($250 for each $100,000 of the price). The balance of the deposit will be refunded to you.
The cooling-off period is designed to allow you to secure the property immediately (and avoid being gazumped), whilst still having some time to ensure that you are happy to proceed with the purchase.
The cooling-off period can be waived. To do so, advice must be obtained and your representative must sign a certificate confirming that they have advised you of your cooling- off rights and the nature of the contract, and that you have decided to
waive your rights. This certificate is called a section 66W Certificate.
Prior to expiry (or waiver) of the cooling-off period, you should ensure that you have:
• Obtained our advice on the contract;
• Reviewed your pre-purchase inspection reports; and
• Received formal approval of finance in writing.
Is the contract subject to finance?
The standard contract does not include a “subject to finance” clause. The clause must be added if the contract is to be made conditional on finance. The standard finance clause usually accepted by vendors allows a period of 1-2 weeks to
obtain finance approval.
In our experience, negotiating for a subject to finance clause can delay exchange of contracts. Vendors will not always agree to a finance clause.
Accordingly, our preferred approach is to exchange without a subject to finance clause – relying on the cooling- off period to obtain your approval.
Once again, our preferred approach gives the vendor less reason to choose a competing purchaser over you.
However, in some circumstances, it may be appropriate to insert a “subject to finance clause” – we will discuss this with you at our first meeting.
What do I need to do right after exchange?
As soon as contracts exchange, there are a few things you should do. We will remind you when each of these items needs to be done and will assist you in completing any forms.
Firstly, you should pay the stamp duty or make your application for exemption (if you are a first home buyer).
Secondly, you must sign your loan contract and mortgage to finalise your loan arrangements.
What else happens between exchange and settlement?
During the period between exchange and settlement, we attend to a number of matters on your behalf without your direct involvement – for that reason, it can often seem like nothing is happening.
The matters we will be attending to (behind the scenes) include:
• Obtaining and checking title searches, to verify that the vendor is the owner of the property and has disclosed to you all matters which affect the title.
• Making further enquiries (as required) with government departments and authorities.
• Checking the amounts outstanding for council and water rates on the property.
• Liaising with your lender, to ensure that all their requirements have been satisfied.
When do I get the keys?
The keys will be available to you immediately after settlement of your purchase. You can collect them from the Agent.
What is settlement?
Settlement is when the balance of the purchase price is paid and title to the property is transferred to you.
This occurs electronically through PEXA – we manage all of this for you.
The contract specifies a due date for settlement. The date can be moved forward or back but usually only with the consent of both the vendor and you. The normal time period between exchange and settlement is 4-5 weeks.
What should I be doing to prepare for settlement?
We will tell you as soon as the settlement date is confirmed. As soon as the date is confirmed, we will send you a letter outlining the amounts you need to pay for settlement.
The matters you will need to do to prepare for settlement are:
• Pay to us the amount required to finalise your purchase (including our conveyancing fees and disbursements, the balance of the purchase price and council and water rates).
• Conduct a final inspection of the property. The purpose of a final inspection is to ensure that there has been no damage to the property since exchange and that all the inclusions are present. The final inspection should be arranged by contacting the Agent. You should try to arrange the final inspection for either the morning of or the day before settlement.
• If moving into the property, make arrangements for removalists and for the connection of electricity, telephone and gas.We will notify Council and Water on your behalf.
• Make sure your insurance is arranged and a copy of your policy has been provided to your lender.
• When the settlement date is confirmed, we will send you a check list reminding you of the things you need to do prior to settlement.
What happens after settlement?
We will send you a report with copies of all the important documents.
Most importantly – you can move in!
Want to know more? Contact our friendly team today
Why choose Mason lawyers for your conveyancing and property law needs? We provide tailored advice at every stage of buying and selling
- Over 20 years of experience handling a variety of property transactions
- Skilled in handling complex developments
- Specialised litigation and taxation knowledge
- Friendly, approachable and responsive
- Competitive, fixed pricing options
- We make even complicated issues easy to understand. We speak plain English, and keep you up to date every step of the way