To Selling a House in NSW
Selling a home or apartment is one of the most significant biggest decisions of your life. Think about it, with property values gradually increasing (especially in Sydney with property prices going through the roof), you want to make sure you understand your legal rights before you start out.
Selling a new home is a huge commitment and you want to do your homework and cover all of the legal bases before you commit. Our guide will take you through the selling process and what to expect in terms of home price, legal costs and of course your rights as the seller.
Before You Sell Your Home
There are two main methods that you can sell a home in NSW, either through a private treaty or at auction.
In NSW, many people sell their homes by private treaty. This means that you (or your agent) advertise your property with a price you’d like to get for it, and when people who are in the real estate market for buying a home see your advertisement, they contact you (or your agent) and negotiate a final purchase price with you.
On the other hand, when you sell your primary residence by way of auction, your home is listed for a specific date for auction where potential buyers bid on your property, and the highest bidder pays you the winning bid to purchase the home from you.
The Contract for Sale
Regardless of how you sell your home (sale by owner or through an agent), the first thing you need to do before putting your property on the market is to prepare a contract for sale. This is required by NSW state law.
According to the Vendor Disclosure Requirements, the contract for sale must include all information related to the property. You must also provide warranties on the property you are selling.
Some common documents that are compulsory and therefore included in a contract for sale are:
- Zoning certificate that shows the planning of the area that may affect the property
- Drainage diagram that shows the location of the sewer lines and sewer mains
- Certificate of title that confirms you are the owner of the property
- Documents related to any easements, restrictions, and rights of way that may affect the property
If the property you’re selling is an apartment unit, then this means you are selling a strata title property, and so you will need to include:
- Property certificate for the lot and common property
- Strata plan that shows the lot
- Any change of by-law that affects the use of the common property
- Strata manager’s details on the front page of the contract
In some cases, you may need to include additional documents, such as a building certificate. It is best to consult your solicitor to find out what documents you need to include in the contract for sale.
The contract for home sale usually contains many standard terms, and some of these terms may not apply to the property you’re selling. It is a good idea that you instruct your solicitor to prepare the contract for sale for you and that you go through the contract with your solicitor in detail to make sure that the terms are in your best interests. In addition, most buyers will negotiate the terms or include additional terms in the contract. Your solicitor will negotiate these terms with the buyer’s solicitor to make sure that they are fair to you.
When you sell your home, you sell it “as is”, meaning that you will include all the fixtures in the sale. A fixture is an item that can’t be removed without damaging the property. For example, a wired-in stove is considered a fixture. If there are items that you don’t want to include in the sale, make sure that your solicitor makes a note of that in the contract.
Unless you sell your property by auction, in which case the highest bidder is bound to go through with the sale, there is usually a 5-day “cooling off” period in a property sale. During this period, the prospective buyer can hire someone to inspect the property before he/she goes ahead with the purchase. Sometimes you can ask the buyer to waive this period by having their solicitor or conveyancer provide you with a signed section 66W certificate.
Paying the Real Estate Agent
When you sell your property through a real estate agent, you’ll usually have to pay the agent a commission. These agents are required to provide you with a written guide to their fees, including commissions and other expenses, before you sign an agreement with them. If you’re not sure about the real estate fees, you should review the purchase agreement with your solicitor before you sign it.
When a buyer decides to buy your property, both you and the buyer have to sign and date a copy of the contract for sale. However, you’re not bound to sell the property until you exchange the signed contract with the buyer. If you sell your property by auction, the exchange of contracts occurs after you accept the highest bid.
When exchanging the contracts, the buyer has to pay a deposit, which usually amounts to 10% of the purchase price. Either your solicitor or your real estate agent will invest the deposit in an interest-bearing trust account. The interest earned will be divided between you and the buyer once the sale is finalised.
When you sell a property that was purchased after 1985 in NSW, unless the property was your own home, you may have to pay Capital Gain Tax (CGT). In addition, if the property you’re selling is an investment property, you will have to pay GST on the sale. It is highly recommended that you talk to your accountant and obtain the relevant advice regarding what taxes you may need to pay before you proceed with the sale of your home.
Finalising the Sale
The contract for sale contains a settlement date on which you officially hand the ownership of the property over to the buyer. However, there are times that a buyer may request to occupy the property before the settlement date. If you agree to the buyer’s request, you can create a licence agreement that runs until the settlement date. The buyer will need to pay an occupation fee and take out homeowner insurance on the property.
However, sometimes it’s risky to let the buyer move into your property before the settlement date and so you should consult your solicitor before you agree to such request. Your solicitor may also be able to help you change the settlement date to an earlier date, if desired.
In NSW, the settlement date is usually six weeks (42 days) after the exchange of contracts. However, as the seller of the property, you are able to change this to any length you want. Keep in mind though that inserting a very long or very short settlement date may deter many purchasers.
On the day of the settlement, the buyer needs to pay the amount owed to you, including all the taxes, fees, and rates/levies. If you have a mortgage registered on the property, your solicitor will arrange for the buyer to pay your bank the appropriate amount to release it from your mortgage lender.
Once the buyer pays all the money owed, he or she becomes the owner of the property. You don’t need to be present in person at settlement. Your solicitor, the buyer’s solicitor and sometimes a representative of all the banks involved will meet and complete the transaction.
If the buyer can’t settle on the agreed upon date, you can charge penalty interest on the amount owed. In some cases, you may also cancel the sale.
Buying and Selling at the Same Time
If you’re selling your old home and buying a new one at the same time, you should make sure that both transactions have the same settlement date. If the settlement date of the home you’re selling is before the settlement date of your new home, you may need to find accommodation until you can move into your new home. If the settlement date of your new home is before the settlement date of the one you’re selling, you may be forced to take out a “bridging finance” to pay for the new home.
Speak to Your Property Lawyer
The process of selling a house could be daunting, but your solicitor can help to guide you through it. If you are planning to sell a property, you should first talk to a solicitor who specialises in property conveyancing in NSW. Even if you are looking for a real estate agent to help you with the sale, first speak to your solicitor and ask him or her for recommendations. Remember, your solicitor deals with hundreds of real estate agents on a daily basis and so he or she will be able to refer you to a real estate agent that they highly recommend and work well with.
If you are looking to sell your home, speak to your solicitor sooner rather than later as he or she will be able to guide you throughout the entire process and help reduce any stress.