In New South Wales the law requires that prior to offering a residential property
for sale there must be available to prospective purchasers a draft contract for
sale of land. Regardless of whether the property is residential, it is helpful to
the purchaser if the contract is thoroughly prepared and includes sufficient documents
to enable the prospective purchasers to clearly understand the full nature of the
property they are purchasing.
Accordingly it is our recommendation that if you wish to improve your chances of
getting a quick sale for the best possible price then the contract should include
an up to date survey and a Council Building Certificate in relation to the property.
A survey will indicate to prospective purchasers the location of the improvements
on the land relative to the boundaries. It will show where the fences are located
relative to the boundaries and whether there are any encroachments across the boundaries
by improvements on the subject property or by improvements on neighbouring properties.
A Council building certificate indicates to purchasers that the local Council will
not issue work orders against the property in its current configuration for a period
of seven (7) years. This may be taken by the prospective purchasers as an indication
that the improvements on the land were built with Council approval and comply with
building regulations. Neither a survey or Council Building Certificate are compulsory
documents however they can have the effect of putting the purchaser at ease by demystifying
the property and therefore can lead to a quicker sale for a better price.
The Contract
If it is intended to avoid delays in selling a property then the contract should
not be drafted in such a way that it is so one sided in favour of the vendor that
purchasers are reluctant to agree to its terms. Of course the contract should provide
the vendor with sufficient protection without loading the document up with unnecessary
or onerous special conditions. Some contracts for sale of land can be seen to be
drawn with an excessive number of special conditions most of which are heavily biased
to the vendor however this often leads to delays in getting the contract exchanged
while the purchasers attempt to negotiate out the unfair terms. The delay in getting
to exchange increases the chance that the purchaser will lose interest in the property.
The Selling Agent
Potentially costly problems can arise when a property is listed by more than one
selling agent. If not handled properly the question of agency can resolve in the
vendor being liable for paying more than one sales commission. To avoid the problems
appropriate terms must be included in the contract for sale and appropriate enquiries
made before exchange of contracts.
Delays in Exchange
The time between the vendor and purchaser reaching agreement on price and the Lawyers
exchanging contracts can be a worrying time for both vendor and purchaser. It may
be in your best interest that this period be kept to a minimum to reduce the risk
of the other party electing not to proceed. The time between exchange of contracts
and completion is normally six (6) weeks however this is completely negotiable between
the vendor and purchaser.
Normally if you are putting your property on the market with the intention of purchasing
another property then we recommend that the completion period be specified as either
ten (10) or twelve (12) weeks in order to improve your chances of finding a new
property before completion of the sale of the property you are selling.
GST Liability
If you are selling a property that is not residential then it is crucial that during
the negotiations you are aware of whether you are negotiating a GST inclusive or
GST exclusive price. In fact it is best that you clearly establish your GST liability
before deciding whether to put the property on the market, and certainly before
you decide on the asking price.
Specific Disclosures
Generally you will improve the chance of a smooth sale if you make appropriate disclosures
about the property in the sale contract. The general principle is that once contracts
are exchanged the purchaser cannot make objections or claim compensation in relation
to anything that is disclosed in the contract. For this reason you would be advised
to disclose in the contract matters such as improvements that were constructed without
Council approval, fences that are a long way off the boundaries, swimming pool fencing
that does not comply and any favours you may have done for your neighbours such
as allowing them to lay drainage pipes through the land.
Pest and Building Reports
Generally purchasers will obtain their own pest and building reports on the property
prior to exchange of contracts. However if you have regularly had pest inspections
it may be useful to provide the selling agent with copies of the pest inspection
certificates. It is not appropriate however that these documents be included in
the contract for sale.
Tax Advice
If you are selling a property that is not your principal place of residence then
you should ask your accountant to determine your liability for land tax, capital
gains tax and GST as these will greatly affect your net return from the sale.
Selling with a Tenant
If you are selling a property that has a tenant then you must consider whether you
wish to sell with vacant possession or subject to the tenancies. Some properties
sell best with a tenant in place with a long term lease. For example commercial
premises and factories. On the other hand residential properties are generally more
likely to be attractive to a wider range of prospective purchasers if they are being
sold with vacant possession.
Inclusions and Exclusions
When you decide to sell your property you should at that time decide on the list
of inclusions. Inclusions can be divided into fixtures and fittings. Generally fittings
must be taken away from the property by you prior to completion unless they are
specified in the contract as inclusions. On the other hand fixtures must remain
at the property unless they are specified in the contract as exclusions.
The Agency Agreement
Prior to signing an Agency Agreement with the selling agent you should consider
carefully the terms of the Agency Agreement including the amount of commission payable
on the sale, whether the property is to be sold by auction or private negotiation
through the agent, the amount to be paid to the agent as a marketing budget and
the ways in which that amount will be spent. You should also consider the appropriate
term of the "exclusive agency period".
The Deposit
Normally the deposit paid by the purchaser on exchange will be retained by the selling
agent in their trust account pending completion. In appropriate circumstances you
may be able to negotiate release of the deposit to you prior to completion however
this is normally only agreed to on the basis that you will only use the deposit
as the deposit on the purchase of another property within in New South Wales.
The prospective purchaser may ask you whether you will accept a deposit bond or
bank guarantee in lieu of a cash deposit. You may also be asked to accept a deposit
in an amount of less than 10% of the purchase price. In these cases appropriate
special conditions should be added to the contract.
Early Access to the Property
You may be asked to allow the purchaser to have access to your property prior to
completion. If the property is vacant you may be asked to allow the purchaser to
move in or commence refurbishing or alterations. You may also be asked to allow
the purchaser's tenant to move in. Generally it is our recommendation that the purchaser
not be given any access to the property at all prior to completion except for a
final inspection shortly before completion.
Budgeting
It is probably prudent for you to prepare a detailed budget of all of the expenses
you will incur when selling a property, particularly if you intend to use the proceed
of the sale to purchase another property. You should identify all of the possible
items of expenditure throughout the transaction and allow generous amounts for each
allowing for worst case scenarios. Potential costs may include agent's sales commission,
costs of paying out the existing loan, legal fees and disbursements, survey, council
building certificate and removalist's cost.
