Once you've found a suitable property and a price has been agreed, the estate agent completes a contract of sale, which is signed by both parties.
In Australia most real estate agents are members of the Real Estate Institute of Australia (REIA) which has branches in all states. Within the states the institute is known as REI followed by initials denoting the state- so REI NSW is the institute of New South Wales, REIV is institute of Victoria and so on. Their methods of operating are similar and they all co-operate with their respective State Law Societies.
In Australian general law not all contracts between parties need to be in writing, but for sale of land written contracts are necessary. A hand shake is not a legally binding contract for land. Be careful!
Contracts in different states can differ in their terminology. The meaning of a word can be decided by state legislation and what is referred to as a fixture in one state can be referred to as a chattel in another state. Do not rely upon a dictionary or even a law dictionary as these do not necessarily give exact definitions. It is usual that an item attached firmly to the house, such as a hot water system, would be included in the sale but a picture hanging on a wall would not be. The same contract may cover both freehold and/or leasehold. There may be different versions for domestic property, commercial property, building units (apartments) and farms.
It would be wise to obtain a copy of a contract form before ever making an offer and read it thoroughly. Mark any areas of concern and request answers in writing from the real estate agent. A list of ‘Included Items’ annexed to the contract and signed by the vendor could cover those doubtful areas but this in turn could mean that any items not on your list are open to doubt. Copies of contracts for Queensland are available at legalkitspecialists.com.au .
Because a solicitor engaged in a conveyancing matter does not wish to study the intent of every contract put before him, the Law Society combines with their state Real Estate Institute to produce standard contracts which all within the state know and understand.
Usually, a branch of government, concerned with regulation of property ownership and also fair trading or dealing between parties, will have input into the content of the contract. Many of the contracts are now produced on software by the individual real estate offices or the solicitors but they should certainly carry the emblems of the Law Society and the Real Estate Institute of the relevant state.
Laws require, in most if not all states, that the first page of a contract should be an appended form which contains a Warning Statement about the rights of the purchaser and a ‘Cooling-off Period’ This form must be read and signed, and you should retain a copy. It also covers the deposit which the purchaser is required to pay. Read it carefully because attempting to pull out of a firm contract may cost money in that the vendor can retain a small proportion of the deposit.
If purchasing at auction extra care is needed because a sale is considered firm on the fall of the hammer and no cooling-off period applies.
The size of deposit that the vendor may require can vary between states. It is unlikely that it is set-down by law. In Queensland for example it can be as low as 5% though usually 10% is requested.
So – when you buy you should be sure that the contract is one which is produced by the Real Estate Institute. If you have any doubts defer your signing and visit the Real Estate Institute of Australia website for your state. You can put your doubts before them.
The general method of entering into a contract is that the real estate agent will complete it in at least duplicate which will carry details of the particular property, and of the intended purchaser and the price which he is offering for the property. Under "Special Conditions” it will mention of items considered important such as “Subject to the sale of my home", "Subject to finance being obtained", "Subject to pest and building inspections being satisfactory", for example. If you express your concerns to the agent he should word the concern appropriately. Make sure that he does put them in.
Read the contract very carefully and check all matters before you sign. Be especially careful in checking any ‘Special Conditions’ which may have been inserted on behalf of the vendor.
Conditional clauses or special conditions should all be individually initialled by both parties. They may refer to finance at an acceptable interest rate or being obtained within a certain time frame, for example. If the finance is not easily obtainable then you can withdraw from the contract. However, these conditions must not be considered as ‘get out of jail free’ cards! Frivolous action can be challenged in court.
The offer is then put before the vendor who does not sign it until everything is acceptable to him. If you have inserted special conditions and are later prepared to go ahead then the agent needs to be formally notified, the vendor is formally notified and the sale becomes ‘unconditional’. This means it is firm and binding under all normal conditions.
This article does not claim to tell all there is about real estate contracts but rather to provide some information relating to the purpose and content of real estate contracts within Australia. The reader is urged to take care before signing a contract and if necessary obtain expert advice. Assistance relating to the Queensland market can be obtained from Legal Kit Specialists .
Article written by: Fred Sparrow - Legal Kit Specialists