Buying a home is a dream moment for every Australian family. Still, many people are often left confused about how to initiate a purchase or sale and continue to ask themselves, ‘What is the exchange of contracts?’ In essence, it is a key milestone in the NSW property conveyancing process when a property transaction becomes legally binding between the vendor (seller) and purchaser (buyer).
Once both parties agree to the terms, their agreement is documented in a formal Contract for Sale. In fact, under NSW law, it must be made available for prospective buyers to review when the property is first inspected.
The Contract for sale contains all key details and disclosures about the property to provide transparency and legal clarity for both parties, such as:
The purchase price
Council zoning documents
Water sewerage diagram
Land Titles Office certificate
Declarations concerning any known proposed use or interference with the property, i.e. easements, etc.
When you are selling a property or buying a house, the exchange of Contracts occurs when the buyer and seller have both reviewed, signed and exchanged copies of the Contract of sale. This exchange formally and legally records their interest and agreement in the transaction and its terms, providing a level of protection to both parties, such as:
The vendor will not attempt to sell the property to another third party
The purchaser will not withdraw from the sale
It is also the stage when the buyer pays a deposit — usually a percentage of the sale price — held in a trust account managed by the real estate agent or a solicitor, until it is released at settlement.
Whether you have identified new issues concerning a property or are facing unanticipated problems with financing, there may be occasions where prospective buyers may want or need to terminate a property transaction.
This opportunity to end the purchase and sale of a property is known as the “cooling-off period.” It activates as soon as Contracts are exchanged for private treat property sales and lasts until 5 p.m. on the fifth business day. There is no cooling-off period for houses and buildings purchased at auction, where the Contract of Sale is exchanged upon conclusion of the auction.
It is essential to speak to a property lawyer promptly if you need to lawfully withdraw from a property sale within the cooling-off period, as financial penalties — typically calculated as a percentage of the sale price — may apply.
Once Contracts have been exchanged, the conveyancing process continues with several important tasks, including:
Finalising title searches and documentation
Conducting further inspections
Finalising finance or settlement funds
Liaising with solicitors and lenders to prepare for settlement
Settlement generally takes place six weeks after exchanging contracts, or another timeframe negotiated by your solicitor. It involves paying the remaining balance of the purchase price (less the deposit paid), either from your savings or through funds released by your lender. Once this payment is complete, you become the legal owner of the property and receive the keys.
Navigating the NSW property conveyancing process can be complex, especially when it comes to understanding your rights at key stages like the exchange of Contracts. Whether you are buying your first home, selling an investment property, or managing a more complex transaction, Brydens Lawyers’ real estate conveyancing lawyers will provide the needed support to protect you from costly missteps and unexpected risks.
We have helped Australians confidently buy and sell property for over 50 years. Our team of dedicated property lawyers for conveyancing will guide you through every step — from reviewing your contract to negotiating terms and finalising settlement — so you can focus on the excitement of your property journey, not the stress.
Get legal help with your property transaction today — contact Brydens Lawyers online or call 1800 848 848 to book a consultation. #WeDoConveyancing.
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