Buying a property can be daunting. Here’s an explainer on the three different ways you can buy property in NSW.
Exchanging contracts with a cooling off period (private treaty)
This is the most common way. The buyer and seller sign identical contracts and they are exchanged (often by the real estate agent, with lawyers/conveyancers completing the formal steps afterwards).
After exchange, the buyer has a cooling off period. The cooling off period in NSW is typically five to 10 business days (five days by law, however often extended to 10 days by agreement).
During the cooling off period, the buyer can withdraw for any reason, such as their loan application not being approved, concerns arising from building and pest inspections, or a change of mind.
When exchange occurs, the buyer pays a deposit equal to 0.25 per cent of the purchase price. If the buyer withdraws, the seller gets to keep the 0.25 per cent deposit.
During the cooling off period, the buyer completes tasks like finalising their loan approval, getting advice on the contract from their lawyer and conducting pest/building/strata and other inspections.
Exchanging contracts with a 66W certificate (cooling off waived)
This method is the same as the above method, but there is no cooling off period. A section 66W certificate is signed by the buyer’s lawyer and contract become unconditional immediately on exchange. Neither party can withdraw and the full 10 per cent deposit must be paid by the buyer unless another deposit amount is agreed.
Because the parties are immediately locked into the deal under this method, the buyer has to complete all of its due diligence (like a contract review with their lawyer and the inspections referred to above) before signing the contract. If the buyer is getting a loan to fund the purchase, they need formal, unconditional approval before signing the contract too.
Buying at auction
The third way to buy property is buying at auction. If you are the highest bidder at an auction you become committed as soon as the auctioneer accepts your bid as the final bid (the “fall of the hammer”). The buyer then signs the contract and pays the deposit on the spot.
Like with a 66W exchange, there is no cooling off period for an auction purchase so buyers must complete their due diligence before bidding, including negotiations about any terms of the contract.
Get in touch with our property law and conveyancing team if you’re thinking about buying or selling property and need someone to explain the process to you.
