The Residential Contract of Sale.
When you’re in the stages of negotiating buying your home, there’s so much to consider.
You can make an in offer one of three ways:
- a verbal offer
- an informal written offer, most likely via email
- a formal written offer, which is presenting a signed contract to the seller. If it’s accepted and signed by the seller it’s legally binding.
Regardless of how you make the offer, but essential to know if you make a formal written offer, you need to be aware of exactly what contract terms you are agreeing to.
Along with whether or not the bank will lend you the money, you also need to ensure you know what terms and conditions to include in the Contract of Sale you are signing.
In Queensland we use the REIQ Contract of Sale (18th edition).
This is the contract that is signed once you (the buyer) and seller have completed your negotiations and have agreed on a price.
You may also want to read about how to make an offer on a home.
A few things to be mindful of first
1. Get a copy of the Contract of Sale early on
Many buyers (especially first home buyers) find the process of filling out and submitting the Contract of Sale intimidating.
I recommend you ask the real estate agent for a copy of the contract and have your solicitor / conveyancer review it.
I suggest that you do this as soon as you are keen to make an offer on the home.
It’s a good idea for you to take 10mins to read over the contract of sale.
Unless you have a legal or real estate background, there are going to be some terms and concepts that you’re probably not sure about.
I recommend you make some notes and get answers on a phone call with the person who’s helping you with the legal side of things.
To help familiarise yourself with it before you make an offer, we have a copy of the REIQ ‘Contract for Houses and Residential Land’ (18th edition) which is what we use here in Queensland.
Please check with your solicitor regarding your own contract before you sign it.
You can download this for free here.
2. Correct names
Make sure the contract has your full and complete legal names on it (including full middle name) and correct spelling as is shown on your passport and birth certificate.
3. The finance date must be achievable
Every so often one of my clients will tell me that an agent who’s selling a property has recommended that they put a short finance date on the offer as it will ‘hurry the bank up’.
Banks aren’t running any race and so the main person that will be feeling stressed with a short finance period is you.
We’ve always found that a more reasonable timeframe that allows adequate time for you to provide what is needed and then the bank to process the loan works much better for our clients.
As Mortgage Brokers we can advise you of this (as it varies between lenders and also at some busy times of the year you should allow more time).
Please check with your solicitor regarding your own contract before you sign it.
The Terms & Conditions I consider
In this next section I am sharing the terms and conditions I personally consider when I am signing a contract of sale on a property in QLD.
I am a Mortgage Broker so this is not in any way suppose to replace proper legal advice so please consult your solicitor before including these terms and conditions and signing any contract.
If you want to see the REIQ ‘Contract for Houses and Residential Land’ (18th edition), you can download this for free here.
Finance date (must have)
You will need to include a date, as to when you can get your home loan ‘unconditionally approved’. The date is usually 21 days after the date you sign the contract and as your mortgage broker we can advise you on this.
If for some reason your home loan has not been approved within that timeframe you have 2 options.
Firstly, you may choose to terminate the contract (as the loan hasn’t been approved). You should be able to get any deposits you have paid refunded.
The second option is that you can request and extension (which then gives you more time to get the loan approved with the bank).
If a short finance period is part of your offer, then 7 to 10 days may be acceptable, again, as long as you check this off with us first as you’ll need to be ready with all the relevant information for your application. In a competitive market, we have found that short settlement dates of around 5 to 7 business days can give you an edge to be the successful buyer.
The finance date is on page 3 of the Contract.
Settlement date (must have)
Settlement is the day when ownership of the property officially transfers across to you.
Your solicitor can assist you with a suitable settlement date however in about 95% of cases, allowing 2 weeks between the finance approval date (unconditional loan approval) and the settlement date works well for both the seller and the buyer.
The Settlement date is on page 6 of the Contract
Building and pest (must have)
When you go to make an offer on a property, it’s best to include a building and pest clause. Including a building and pest condition protects you and gives you the option to terminate the contract if there is an issue with the property that you weren’t aware of / can’t be fixed or you can’t reach a negotiated price reduction on.
You also need to include a date for when the building and pest period finishes which is usually around 7 to 10 days after the signing the contract. This means you must have done your building and pest inspection by this time.
The building and pest inspection date is on page 3 of the Contract.
Property to be professionally cleaned by seller prior to settlement
Surprisingly the vendors are under no obligation to have the property professionally cleaned when they vacate, which means come settlement day they can leave the property dusty and dirty. I highly recommend you consider a request for a professional clean to be a part of your offer to avoid any nasty surprises, however whether or not to use this clause will depend a little on how competitive the market is at the time you are buying.
This can be mentioned on page 6, under ‘Special Conditions’.
Pre-property inspection
Before the property settles, you will want to inspect the property to ensure it is in the same condition as you expected it to be. This can include (but not limited to) items like lights & electronics, plumbing, air conditioners & heaters, door handles & locks, appliances, curtains & blinds, windows & glass, flooring, pool & spa equipment, smoke alarms and general cleanliness.
This can be mentioned on page 6, under ‘Special Conditions’.
If there are no services like power, water, electricity or internet already connected
Ask for access to the property to arrange connections once your loan has been approved.
The longer the property has been vacant the more issues you may have getting services connected.
Having the water and electricity connected normally takes less than a week however the internet can sometimes take up to 3 weeks to connect.
This can be mentioned on page 6, under ‘Special Conditions’.
Arrange early access to the property for any work
You may want to get tradespeople into the home early before settlement, for example to get floorboards polished, walls painted, solar panels cleaned etc.
This can be done once your home loan is unconditionally approved.
This can also be mentioned on page 6, under ‘Special Conditions’.
Fixtures to remain in the property
If there are any items around the property that are included as part of the sale, these need to be listed. Common ones are light fittings, a dishwasher, sound system or a kids cubby house in the back yard.
This can be mentioned on page 6, under ‘Special Conditions’.
A final reminder that it is important that you talk to a solicitor or conveyancer about the conditions you are requesting along with your offer, before you sign the contract of sale. A solicitor will be able to advise you on the exact wording of the conditions to include and their implications.
If you don’t have a solicitor, check the contract of sale before you sign it and make sure you have them check it as soon as possible.
You may also be interested in the how to make an offer on a home, or the step by step guide to buying a home in Queensland.
This advice is general in nature and is based on my personal and professional experience as a mortgage broker. Please consult your solicitor or conveyancer.
