Buying and Selling Real Estate
The transactional process for buying and selling real estate is called conveyancing.
This section goes through the process of conveyancing though it does not claim to be a ‘conveyancing kit’. Readers should not rely on the information contained herein to complete their conveyancing without obtaining professional advice. The information provided herein relates generally to common issues regarding residential properties.
Entering a Binding Contract
Unlike some other types of contracts, to be enforceable a contract for the sale of real estate must be in writing. There are certain formalities at law that must exist for an enforceable agreement for the sale of real estate.
Buying Real Estate
In Tasmania purchasing real estate remains ‘caveat emptor’ – buyer beware. It is not a good idea to buy on impulse without proper investigation into for example the nature of the Title of the property, the condition of the property, possible heritage listing, and any zoning restrictions that may apply and to consider what conditions you will require in making your offer to purchase. For some time it has been discussed that draft legislation will be introduced in Tasmania to put greater responsibility on Vendors to make disclosure of known problems with a property. At the date of production of this chapter, that legislation has not yet been formally introduced.
Making an Offer: costs and finance
In Tasmania the common practice to make an offer to buy real estate is by the Purchaser signing a formal offer in the form of a Contract which outlines the important terms of the transaction.
Currently there is a ‘pro-forma’ Contract for Sale of Real Estate commonly used by real estate agents, conveyancers and solicitors.
This Contract is in 2 parts:
- Standard Conditions of Sale; and
- Particulars of Sale
which together form the Contract. Use of this form of Contract is not mandatory and this form of Contract can be adapted by agreement between Vendor and Purchaser needed.
The Purchaser’s formal offer to purchase the Property will include details such as:
(a) The purchase price being offered by the Purchaser;
(b) The details of the deposit offered;
(c) The description of the property and details of chattels (e.g. stove, curtains, heaters) being sold with the Property;
(d) The time frame proposed by the Purchaser for settlement;
(e) ‘Conditions precedent’ required by the Purchaser which may commonly include:
(i) A finance condition – that the Purchaser can get the money they need to buy;
(ii) A building inspection report condition – the Purchaser has had the property independently inspected;
(iii) A condition regarding the offer being subject to the sale of the Purchaser’s home – if the Purchaser cannot buy a new house without selling their current house;
(iv) A condition that there are no legal restrictions on the use of the Property which may hinder or prevent its use for the purpose proposed by the Purchaser (e.g. the Purchaser may only wish to purchase the Property if they can secure Council approval for development for units, for example).
Negotiations for the purchase of the property then commence. If the property is listed for sale through a real estate agent, generally the real estate agent will handle negotiations between the Vendor and Purchaser.
The negotiation process may generally involve the real estate agent presenting the Purchaser’s formal signed offer to the Vendor. There may be counter proposals by the Vendor such as a counter offer to the price offered by the Purchaser or proposal to change the conditions precedent proposed in the Purchaser’s offer.
Some sales may occur ‘privately’, without involvement or assistance from real estate agents. It is recommended that legal advice and assistance be obtained as to preparation of a valid and enforceable Contract in those situations.
Once a Vendor and Purchaser have reached agreement the final Contract should:
(a) Contain all terms and conditions that both Vendor and Purchaser have agreed upon;
(b) Be signed and dated by the Vendor, the Purchaser and each of their signatures should have been witnessed by an independent adult person.
In Tasmania there is currently no ‘cooling off’ period regarding real estate contracts. This means that once a formal Contract has been signed by both Vendor and Purchaser that there is no allowance for a ‘change of mind’ and automatic withdrawal from the Contract. For example some other States have formal ‘cooling off’ periods to allow parties to withdraw for any reason within a certain period of time such as 2 days after signing.
An example of the Contract for Sale of Real Estate is available through the Law Society website.
It is recommended that legal assistance and advice be obtained.
Buying at Auction
Some properties are sold at auction and are sold ‘unconditionally’, meaning no protection as to the need to still secure finance or any due diligence or enquiries. It is wise that prior to attending an auction you contact the real estate to obtain a copy of the Particulars of Contract that they should have available.
The Particulars of Contract should detail the terms of the contract that you agree to enter into if you are the successful bidder at auction. You should ensure that you take advice as to the terms of the Contract, have unconditional finance approval in place before attending an auction with a view to making a bid and importantly conduct any due diligence on the property given the nature of a sale by auction is generally not to reserve any conditions for protection of a purchaser seeking to withdraw.