Paying an 'expression of interest'

Once you have made an offer on a property, you may be asked to pay an initial deposit. This won't mean that the property is yours or that it gets taken off the market. It only proves to the seller that your offer is serious. The seller or agent can take as many preliminary deposits as they like for the one property. However, when you pay this deposit, the agent must provide you with a receipt and tell you in writing that:

• they have no obligation to sell the property to you
• you have no obligation to buy the property
• they will refund your deposit if you don't end up entering into a contract to buy the property.

The agent must also let you know if someone else makes a later offer on the same property.

It is important to remember that the agent selling the property is not working for you, the buyer, but for the seller.

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Gazumping

Gazumping occurs when you have a verbal agreement with an agent or seller to buy a property at an agreed price; and you pay an 'expression of interest', but the property is not sold to you in the end.

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Exchanging contracts

By law, a residential property cannot be put on the market until a sale contract has been drawn up. You have the right to examine the contract at any time during the buying process, even before you make an offer.

Exchanging sale contracts is the legal part of buying a home. Before exchange, the agreement is usually just verbal and not binding. Up until you exchange contracts both you and the vendorhave the right to change your mind.

After you have discussed the contract with your solicitor or licensed conveyancer and all the proper inquiries have been made, you will be ready to exchange contracts. There will be two copies of the sale contract: one for you and one for the vendor. You each sign one copy before they are swapped or 'exchanged'. This can be done by hand or post and is usually arranged by your solicitor, conveyancer or the agent. If the agent is handling the exchange, you must expressly authorise them to do so.

At the time of the exchange you will be required to pay a deposit, usually 10% of the purchase price. Following exchange, you have a financial interest in the property so it's wise to get it insured.

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Cooling-off period

When you buy a property in NSW there is a five business-day cooling-off period after you exchange contracts. During this period you have the option to get out of the contract as long as you give written notice. The cooling-off period starts as soon as you exchange and ends at 5pm on the fifth business day.

A cooling-off period does not apply if you buy a property at auction or exchange contracts on the same day as the auction after it is passed in.

You can waive the cooling-off period by giving the seller a '66W certificate'. This is a certificate that complies with Section 66W of the Conveyancing Act 1919. The certificate needs to be signed by your solicitor or conveyancer.

View the following on the Parliamentary Counsel's Office web site:

• Section 66W and Section 66W certificate
• Conveyancing Act 1919

If you use your cooling-off rights and withdraw from the contract during the five business-day period, you will have to pay the seller 0.25% of the purchase price. This works out to be $250 for every $100,000.

Sometimes, there are more buyers looking for homes than there are properties on the market. This is called a sellers' market. In this case, you may want to organise a quick contract exchange. This way you can reduce the possibility of someone beating your offer and get your building and pest inspections done during the cooling-off period. You will still be able to back out if there is a problem.  However, it is important to have the contract checked by your solicitor or conveyancer before you sign it.

It is possible to waive, reduce or extend the cooling-off period with the consent of the seller. If your solicitor or conveyancer has examined certificates from the appropriate authorities, a pest and building inspection has been done and your finance has been approved, then deciding to waive the cooling-off period could make your offer more attractive to the seller.

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Settlement

Settlement usually takes place about six weeks after contracts are exchanged. This is when you become the legal owner of the property. The balance of the purchase price and other adjustments are paid on this date.

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Buying at auction

Buying at auction can be a nerve-racking experience so it’s a good idea to familiarise yourself with the process first. Go to our page on auctions for more information. Once you know what's involved, attend an auction or two as a spectator before you make your first bid.

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