Help Me Understand Making an Offer (Unit in NSW)

• 

  jjjaar on 08/08/2023 - 20:46

  +3

  This is based on Vic experience, so apologies if there are any differences, but this is how it happens here.

  You can make your offer in writing (email) and note that it is subject to conditions. The conditions should include “amendments to the contract as follows” then list them all, very clearly. You can also add there the subject to finance etc.

  They will then edit the contract as requested and when you are happy you will sign it. Do not sign it unless all of your conditions are clearly included. You can also get your solicitor to review it again.

  At signing, this is when the cooling off period should actually begin.

  You will also send over a nominal amount (likely that 0.25%), sometimes this happens at the initial email offer, but sometimes this happens when you return the signed contract. This depends on the REA. They will only take the full deposit when the vendor accepts the offer. This will be 10% of the offer less the 0.25% you have already paid.

  If the conditions that have been listed on the contract aren’t met (ie finance is not approved) then your deposit is returned.

  Note that there are sometimes periods where cooling off does not apply. Read the contract of sale clearly to see if this may apply. In Victoria this is 3 business days before and after an auction date.

  • 

    animasoIa on 08/08/2023 - 21:54

    So the "exchange" part of the cooling off period which denotes when it actually starts, is when both parties sign the final contract, right? So cooling off doesn't actually start until all the amendments to the contract are completed as well as other conditions I've made with my offer?

    • 

      jjjaar on 08/08/2023 - 22:01

      You will need to check the contract.

      In Victoria, there is a cover page that outlines this information very clearly under the heading IMPORTANT NOTICE TO PURCHASERS - COOLING OFF. It states:

      You may end this contract within 3 clear business days of the day that you sign the contract if none of the exceptions listed below applies to you.

      • 

        animasoIa on 08/08/2023 - 22:05

        Just looking a Fair trading NSW:
        "When you buy a residential property in NSW, you have a 5-business day cooling-off period after you exchange contracts."

        What does exchange mean? When both parties have signed the final contract (amendments included)?

        • 

          jjjaar on 08/08/2023 - 22:10

          @animasoIa: If it’s not defined on that website, it’s best to contact your legal team for clarification.

        • 

          jjjaar on 08/08/2023 - 22:17

          @animasoIa: Found this on another page. Still, confirm with your legal team.

          In NSW, a property sale is binding on the seller and buyer when contracts are exchanged between the two parties. Exchange occurs when the seller signs their copy of the sale contract; the buyer signs their copy, and the two parties exchange their signed contracts. It is usual at this time for the buyer to pay a deposit, usually 10% of the purchase price.

          https://www.fairtrading.nsw.gov.au/housing-and-property/buyi…

• 

  rooster7777 on 08/08/2023 - 20:48

  +3

  there has to be a signed contract before cooling off starts

  a signed contract is the final contract…. the contract MUST include whatever sale conditions are agreed to.

  no amendments after the contract is signed…. so don't try to sign a contract subject to contract amendments! that is a technical nonsense.

  Usually a buyer will make a verbal offer which the vendor/REA will accept or reject. Sometimes an REA may ask you to sign a contract with the offered amount, "for presentation to the seller". In that case, the contract you sign MUST include all conditions you require.

  *** I am NOT a lawyer, so this is NOT legal advice. It is simply knowledge of one who has bought and sold property.

  ****** auction conditions are completely different from sale conditions ***

  • 

    animasoIa on 08/08/2023 - 21:54

    Thanks for this, I'll call my solicitor tomorrow, they haven't replied to my email yesterday.

• 

  AndyC1 on 08/08/2023 - 21:47

  Do you have a solicitor or a conveyancer? What did they say when you asked them the questions?

  • 

    animasoIa on 08/08/2023 - 21:52

    They just engaged the solicitors of the vendor for contract amendments that they flagged. I asked them again about my concerns yesterday but haven't replied. I'll call them tomorrow. Just wanted some outside perspective.

    • 

      AndyC1 on 09/08/2023 - 20:00

      So you are asking for someone else?

• 

  JIMB0 on 08/08/2023 - 22:27

  Wouldn't the parking and storage be on the title? You also can bargain a bit harder if they won't agree to vacant possession.

• 

  hasher22 on 08/08/2023 - 23:13

  +4

  I am in NSW and I went through a very similar situation with a friend with her first home.

  Though, best to always ask your solicitor as their process may be different but the links your found is pretty much the cookie cutter process.

  Q: Is the REA correct that I should I be making an offer first and have it accepted before the solicitors get involved in fixing up the contract amendments during the cooling off period?
  A: Best practice is yes, always make an offer because there's no point giving the contract to the solicitor who will charge you just to look at it when you didn't make an offer. This also shows you're interested in the home

  Q: Fair trading NSW says the buyer has to pay the vendor 0.25% of the purchase price(fairtrading.nsw.gov.au) when withdrawing the contract during the cooling off period. Does this also apply even if you made a conditional offer that wasn't satisfied?
  A: The 0.25% deposit is to lock in the contract for 5 business days (more if agreed) so that your solicitor and vendor can go through changes and more checks if need be. This deposit is like a safety net for other buyers not to swoop on your offer (conditions apply). The vendor and yourself agreed on X price, you both sign the contract, thus the next stage is paying the 0.25% to make the home "under contract". In the cooling off period you or the vendor can still back out, if you decide to back out, be aware that the 0.25% will not be fully refunded back to you.

  Q: Does this also apply even if you made a conditional offer that wasn't satisfied?
  No, to my understanding the 0.25% is payable when you and the vendor agrees on a price. How would the REA know the 0.25% deposit when there's no price?

  Q: Should I just make an offer with a number we're comfortable with and put conditions such as final finance approval, final inspection and contract amendments?
  A: You put in the offer pretty much instantly, people make offers literally on the spot when they inspect a home. Then they get the contract to give to their solicitors to look over but again, be aware that if the vendor rejected your offer and the solicitor is looking at the contract, you may get billed for the solicitors time/work. Usually vendors accept or reject or counter offer the next day or 2 or even the same day if there's time THEN you go to your solicitor and say "hey the vendor and I agreed on 800k, please look at the contract"

  Final finance approval: Occurs after the cooling off period when both parties are happy with contract and both parties sign, you put in another deposit to lock in the price. Next step is your broker or bank will discuss next steps and documents for your formal approval. For example the bank would want the signed contract on both parties that you agreed to X price so the bank knows how much to lend.
  Final inspection: Occurs a few days before the settlement date to make sure everything is the same when you looked at the property. No real damages, everything is working etc….
  Contract amendments: Occurs before and during the cooling off period. Your solicitor will go through the contract and anything they want amended or ceased will be in this phase.

  Q: Does the cooling off period only start once the final contract is available? Fair trading NSW says it "…starts as soon as you exchange…" Does it mean exchange contracts? Is it the final contract both parties are satisfied with or does it start even if there are still amendments to be made?
  A: The cooling off period starts when you pay the 0.25% deposit, then your solicitor will go through the contract properly and request changes or request to delete clauses

  Q: Are the contracts only exchanged once all conditions of the offer are satisfied?
  A: Exchanging contracts means when both parties are satisfied with the contract and then you move onto the next phase which is when the cooling off period ends and you pay another percentage ontop of the 0.25% to the REA to lock in the home.

  Q: What happens if the vendor is unresponsive during the cooling off period? Can't they just delay until the cooling off period is finished so you have no choice but to buy or pay the 0.25%?
  A: Highly unlikely unless something happened to the vendor. If such cases happens, your solicitor will work with you and the REA to extend the cooling off period.

  I am in NSW and I went through a very similar situation with a friend with her first home.

  Q: Is the REA correct that I should I be making an offer first and have it accepted before the solicitors get involved in fixing up the contract amendments during the cooling off period?
  A: Best practice is yes, always make an offer because there's no point giving the contract to the solicitor who will charge you just to look at it when you didn't make an offer. This also shows you're interested in the home

  Q: Fair trading NSW says the buyer has to pay the vendor 0.25% of the purchase price(fairtrading.nsw.gov.au) when withdrawing the contract during the cooling off period. Does this also apply even if you made a conditional offer that wasn't satisfied?
  A: The 0.25% deposit is to lock in the contract for 5 business days (more if agreed) so that your solicitor and vendor can go through changes and more checks if need be. This deposit is like a safety net for other buyers not to swoop on your offer (conditions apply). The vendor and yourself agreed on X price, you both sign the contract, thus the next stage is paying the 0.25% to make the home "under contract". In the cooling off period you or the vendor can still back out, if you decide to back out, be aware that the 0.25% will not be fully refunded back to you.

  Q: Does this also apply even if you made a conditional offer that wasn't satisfied?
  No, to my understanding the 0.25% is payable when you and the vendor agrees on a price. How would the REA know the 0.25% deposit when there's no price?

  Q: Should I just make an offer with a number we're comfortable with and put conditions such as final finance approval, final inspection and contract amendments?
  A: You put in the offer pretty much instantly, people make offers literally on the spot when they inspect a home. Then they get the contract to give to their solicitors to look over but again, be aware that if the vendor rejected your offer and the solicitor is looking at the contract, you may get billed for the solicitors time/work. Usually vendors accept or reject or counter offer the next day or 2 or even the same day if there's time THEN you go to your solicitor and say "hey the vendor and I agreed on 800k, please look at the contract"

  Final finance approval: Occurs after the cooling off period when both parties are happy with contract and both parties sign, you put in another deposit to lock in the price. Next step is your broker or bank will discuss next steps and documents for your formal approval. For example the bank would want the signed contract on both parties that you agreed to X price so the bank knows how much to lend.
  Final inspection: Occurs a few days before the settlement date to make sure everything is the same when you looked at the property. No real damages, everything is working etc….
  Contract amendments: Occurs before and during the cooling off period. Your solicitor will go through the contract and anything they want amended or ceased will be in this phase.

  Q: Does the cooling off period only start once the final contract is available? Fair trading NSW says it "…starts as soon as you exchange…" Does it mean exchange contracts? Is it the final contract both parties are satisfied with or does it start even if there are still amendments to be made?
  A: The cooling off period starts when you pay the 0.25% deposit, then your solicitor will go through the contract properly and request changes or request to delete clauses

  Q: Are the contracts only exchanged once all conditions of the offer are satisfied?
  A: Exchanging contracts means when both parties are satisfied with the contract and then you move onto the next phase which is when the cooling off period ends and you pay another percentage ontop of the 0.25% to the REA to lock in the home.

  Q: What happens if the vendor is unresponsive during the cooling off period? Can't they just delay until the cooling off period is finished so you have no choice but to buy or pay the 0.25%?
  A: Highly unlikely unless something happened to the vendor. If such cases happens, your solicitor will work with you and the REA to extend the cooling off period.

  My friend friend's timeline was like this

  Day 1:
  - Inspect the home as buyer is pre-approved > Buyer made an offer on the day and REA sent the contract to buyer > REA pitched the offer to the vendor
  Day 2:
  - Vendor counter offered +5k > Buyer agreed and happy to continue > Buyer sent contract to the solicitor to look at
  Day 4
  - REA advised another person is interested in the property and put in an offer but the REA was nice and said first come first serve > Buyer was nervous and told the solicitor to try look at the contract ASAP
  Day 5 & 6
  - REA hounding buyer if solicitor looked at the contract because there's another potential buyer > Buyer now really getting nervous and calling solicitor to try fasten the process
  Day 7
  - Solicitor happy with the contract but wanted to amend a few clauses but he advised to pay the 0.25% deposit > Buyer called REA to go to the next stage of 'under contract' and pay the 0.25%
  Day 8
  - Buyer paid the 0.25% and REA advised the 5 business days cooling off period will start the next business day
  Day 9-12
  - Solicitor made a few changes to the contract and pitched it to the vendors solicitor > vendors solicitor said yes or no to changes > buyers solicitor was happy with the changes
  Day 13
  - Buyer and vendor signed the new contract and buyer paid 10% deposit to the REA
  Day 14
  - Buyer went back to the broker and advised both solicitors agreed on the contract and move on to formal loan approval
  Day 15 - 25
  - Broker and buyer communicating to get paperwork such as building inspections and signed contract
  Day 30
  - Loan formal approved > buyer downloads FHB paperwork to fill out and send it off to the solicitor to submit
  Day 50
  - Settlement date in 2 days, solicitor will want the financial difference plus a bit more to cover any fees
  Day 52
  - Solicitors and REA will settle the property and keys are dropped off or picked up

• 

  ForkSnorter on 09/08/2023 - 09:10

  It's really dodgy nowadays, in my opinion. These rules are a relic of bygone days when both buyer and seller would sit in the same room and sign the contract in front of each other.

  Nowadays, with email, text message, digital documents, etc., signing a contract can be as simple as clicking a box on your phone. In this case, there is no way for the seller/buyer to see you physically sign the contract.

  In my opinion, the cooling off period should start from the actual date and time both parties have signed the contract. But the REA (or even your solicitor) may tell you it starts when you signed it, even if you don't get the signed contract back from the seller until several days after you signed it. That is really dodgy.

  • 

    star-ggg on 09/08/2023 - 10:43

    +1

    The contract clearly defines when the cooling off period starts. That's the whole point of a legal document.

    But I agree the whole process is really dodgy. REAs are dodgy by default. Personally, I think the solicitor industry is dodgy too. There's a standard contract in NSW for buying and selling, and for 99% of people buying property (ie hand over money, get property ownership) this is more than enough. However, it seems like solicitors justify their price but making inconsequential changes here and there. Changes which are for like very specific situations (eg if the vendor passes away during the contract period, the buyer can rescind the contract in 5 days instead of standard 10 etc.). The only things you really need to care about are:

    1) vacant possession or subject tenancy
    2) is land tax adjustable
    3) what covenants are on the title
    4) what those covenants actually are

  • 

    hasher22 on 09/08/2023 - 14:22

    When both parties sign the 5 business days cooling off period starts the next business day. This is by law and policy through fair trading.

    In the example below, technically it's 6 business days by close of business.

    Quote from fair work.
    "For example, if you exchange contracts at 10am on Tuesday, the cooling off period will end at 5pm on Tuesday the following week. During this period, you may get out of the contract as long as you give written notice."

    • 

      ForkSnorter on 09/08/2023 - 14:55

      What if, for example, both parties have signed it, but the buyer (who signed it first) has not yet received the signed contract from the seller's agent/solicitor with the seller's signature. This was the situation I was referring to. The cooling off period is ticking away, but the buyer cannot be 100% certain that the seller has signed.

      • 

        hasher22 on 09/08/2023 - 16:37

        Ah got you, thing is, you don't have to receive the vendor's signed contract for the cooling off period to start.

        If the REA or solicitor state the vendor signed then the cooling off period starts then you get a copy of the signed contract whether it's on the day or next.

        When you sign as a buyer first and send it off to the REA, you pretty much acknowledge the cooling off period starts the same day.

        I know it sounds weird and dodgy but you got to protect yourself.

        For example with my friend, she wanted 10 business days cooling off period but the solicitor said no, it's 5. So she purposely delayed the contract sign for 3 days so technically she gets 8 - 9 business days cooling off period.

• 

  freefall101 on 09/08/2023 - 10:49

  -1

  Tell the REA to bugger off and talk to your solicitors, if they're going direct to you they're trying to go around the solicitor to get the deal signed.

  I got the same runaround from my REA, asked a bunch of questions and they just keep saying it's all good, we'll sort it out when signed, don't worry about anything. I realised afterwards I opened myself up and got lucky on it.

• 

  Bdawg on 09/08/2023 - 12:15

  +2

  Looks like your questions have largely been answered but I can give you some non personalised general info as to my experience as a lawyer and multiple house purchaser:
  a) don't bother paying someone to look at a contract until your offer has been accepted, that's just a waste of time and money - you will probably have multiple offers rejected before you have one accepted, so you'd be wasting thousands of $$$.
  b) standard contract - I don't know about all states but all that I've worked with have a standard base/template contract that is generally used, such as the Real Estate Institute of (INSERT STATE). Then some conditions can be crossed out if N/A and special conditions added at the end.
  c) offer - I have either called the agent or emailed them and said I'd like to offer $X subject to finance, then if they're potentially interested they send through a draft contract and you negotiate from there - this is when I engage a conveyancer (or do it myself).
  d) conveyancer will be generally cheaper but if there's anything unusual or something goes wrong that may not be of much help, for an expensive transaction consider a solicitor or, a conveyancer that is attached to a legal firm (then if the conveyancer gets out of their depth a solicitor is on hand to assist them). Always get advice of what the cost will be, in writing.
  e) deposit - I have negotiated with agent to have the required deposit as $1000 (in the contract) then just paid the remainder at settlement (this may not be an option or may make your offer less attractive but was never a problem for me).
  f) conveyancer/solicitor will sit you down and walk you through the contract and process, ask questions and take notes.

  • 

    animasoIa on 09/08/2023 - 12:31

    Thanks, so prior to getting contract reviews with my solicitor, I should make offers like:

    "Hi,

    I would like to make an offer on X for $Y, subject to:

    • My lender providing final approval (pre-approval in place)
    • My solicitor reviewing the contract
    • Performing report reviews / inspections

    This offer is valid until Z."

    • 

      Bdawg on 09/08/2023 - 12:42

      That's basically what I do. I've never bought in NSW though, I'm in tassie. You can make the offer through your conveyancer or solicitor for peace of mind - they should know any specific nuances of your states laws that you need to be mindful of - this may also signal to the seller you are serious. Conveyancers generally charge you a flat fee (somewhere in the vicinity of $1000?) and will guide you through the whole thing.

      I always make sure to have a condition in the contract regarding satisfactory building report and pest inspection - again, solicitor or conveyancer should assist in this.

      • 

        animasoIa on 09/08/2023 - 12:44

        Mine charges around $80 per contract review and I believe they've been thorough, which personally I think is pretty affordable.
        Settlement process is another $1700 but only payable if successful/completed.

        • 

          Bdawg on 09/08/2023 - 12:48

          @animasoIa: When they give you the draft contact have a look through it yourself so you have an idea what to discuss with conveyancer/solicitor. Anything that is confusing or non standard.

    • 

      star-ggg on 09/08/2023 - 12:48

      No, you are confusing the offer step and the 0.25% cooling off period.

      The offer is simply you looking to see if the vendor is going to sell to you at X price. Without knowing that, there's no point doing anything else.

      Once you get confirmation then you immediately send the contract to the solicitor. They should be able to turnaround within 24hrs if there's anything they want to tell you or change. There shouldn't really be any changes for a FHB on a unit (unless you're buying a $10m penthouse OTP or something).

      Once you and vendor are both happy with the contract then you sign the contract, pay 0.25% and enter the cooling off period. This cooling off period is when you put in the conditions subject to finance and building report/inspections. If you cancel during this period then you lose the 0.25% no matter what.

      Edit: if your unit is in Sydney, be wary of advice from other locations. The market in Sydney is very competitive and fluid. Lots of ppl make offers and there are lot of investor vendors that wait out for a better price even if the offers are at the top of the price range. That's why you want to make sure the vendor is definitely selling to you first, but you also need to move quick to get to the 0.25% period because there's other ppl that will move quickly and the REA will go to them if you take too long.

      • 

        animasoIa on 09/08/2023 - 13:00

        Sorry, the 0.25% I mentioned was a penalty noted by Fair trading NSW when you pull out of a contract within the cooling off period. What do you mean by "…pay 0.25% and enter cooling off period"? When exchanging contracts, don't you have to pay the deposit stipulated in the contract? In my case, it would be 10% of purchase price, not 0.25%.

        • 

          star-ggg on 09/08/2023 - 13:05

          @animasoIa: Are you positive it's 10% first payment? Under auction it's 10% immediately. Outside of auction, it's normally 0.25% for the cooling off period then the remaining 9.75% at the end.

          The 0.25% is technically a "holding deposit" where the intention is the vendor cannot sell the property to anyone else even if they get a higher offer. This is the time for "subject to finance" "subject to building/pest report" "subject to contract changes" etc. but you will lose that 0.25% no matter what your reason is. The 10% deposit means you are completely locked into the transaction so on settlement you are expected to come up with the full amount.

          Don't look at the fair trading website. Read the contract. It's in plain english. Yes it's painful, but it's the only way you get the whole picture.

          • 

            animasoIa on 09/08/2023 - 13:13

            @star-ggg: Ah not sure, my solicitor just flagged a 10% deposit. Possibly that's the deposit prior to settlement, I'll clarify with them. Thanks!

            • 

              star-ggg on 09/08/2023 - 13:20

              @animasoIa: If you feel your solicitor is not responsive enough to your questions then get a new one. They might be being deliberately confusing so that they can invoice you for items.

              The bit where they just went ahead and engaged the vendor solicitor without speaking to you first is a red flag to me. What did they change? Why was it relevant to you? As I mentioned before, I feel like solicitors make a lot of very minor inconsequential changes just to say they made changes then charge for it.

            • 

              hasher22 on 09/08/2023 - 14:25

              @animasoIa: The 0.25% does not apply to auctions.

              The 10% deposit, most likely is the 2nd deposit to the REA when the cooling off period ends.

              You will need to make 2 deposits to the REA, one for the cooling off period and one when it ends.