All You Need To Know About The Contract Of Sale

Do you intend to purchase a property? The contract of sale is a document that details the terms of property purchase. Failure to understand the contract's clauses could expose you to legal or financial liabilities in the future.  

The excerpt below discusses what buyers should look for in a contract of sale. 

Disclosures

The seller should disclose all property defects. These could include a faulty drainage system, leaking roof, contaminated land or susceptibility to natural disasters such as floods or fires. It ensures the buyer knows what he or she is buying. 

Contingencies

Contingencies are conditions that each party should meet before closing the deal. They include:

1. A house inspection by a licenced and experienced professional. The buyer pays the house inspector. The inspector will examine the structural integrity of the house, the condition of amenities and interior fixtures, the presence of pests and the energy efficiency of the home.
2. If the property has a strata title, the owner should help the buyer to acquire the pre-purchase strata report. Typically, the seller will have to write a letter authorising the owners committee or property manager to provide the buyer with the report.
3. The contract of sale should compel the seller to repair or renovate the property if the inspection report identifies major property defects. Alternatively, he or she should be willing to lower the purchase price.
4. The contract should allow the buyer to back out of the deal if he or she cannot secure bank finance. Most sellers will ask you to provide your financial details or a loan-approval letter from your bank. However, there are cases where the bank may decide not to finance the purchase after approving your application. If this is the case, you should not have to incur any penalties.
5. The contract should also address gazumping. It is a scenario where the seller accepts an offer from a buyer who is willing to pay more. If this happens, the contract should compel the seller to pay a penalty (a small percentage of the asking price). 

Closing Date 

The closing date is the day when the seller transfers ownership of the property. By this date, you should have completed all payments. If not, you should have written to the seller explaining the reasons why you cannot purchase the property. You could have to incur penalties if you do not have a valid reason. It is a sure way to prevent jokers from wasting the seller's time.

The contract of sale is a crucial document that details how you will purchase a property. Other than the buying price, the agreement also addresses disclosures, contingencies and the closing date. For more information, contact local conveyancing professionals.