In NSW there are two ways to exchange a contract of sale. The first is with a 5 day cooling off period and the second is unconditional, with a 66W certificate that your solicitor or conveyancer signs to waive the cooling off period. If you can sign a conditional contract, you will have 5 days in which to do your due diligence – get the contract reviewed, valuation done, finance approved, building & pest inspection done, strata report, etc. But you will not always have the option of a cooling off period, such as when you are buying a property prior to auction. Under these circumstances you have to have done all that due diligence before you are ready to sign a contract.
And if you have an offer accepted but then have to wait a few days or so to get everything sorted out before you can sign a contract, well anything can happen… Remember that the property is not sold until contracts have exchanged and gazumping is quite legal in NSW.
There are many other reasons why it is not wise to make an offer before you are ready to sign a contract of sale. Here are a few recent examples we have come across.
We recently helped a young couple who were keen on a newly built home that was advertised for auction without a complete contract of sale. There are so many documents that need to be signed off, not the least the home owners warranty certificate, occupation certificate, registration of the subdivision. None of this had been done, so effectively the property should not have been offered for sale. Even if a price could be agreed, they didn’t have a contract. But before we came into the picture, our buyers had not only made one offer, but they had a couple of their friends make lower offers in order to make their “real” offer look good. Instead, the agent and vendor simply got excited about all the interest in the property and their expectations rose as a result. In the end it took 2 weeks for the contract to be finalized and it was only ready on the day before the auction. At least our buyers had not made their best offer earlier in the piece, so we could go to auction with our cards still close to our chest.
At the other end of the spectrum I remember some first home buyers looking to buy a property to renovate. We found a great little “doer-upper” and they were so keen they wanted to jump straight in with offers. Our recommendation was to wait until they had all the information on the property. Now, the results of the building and pest inspection showed more asbestos than expected, so our buyers got an expert in to quote on the removal, which came in at a whopping $40K, drastically altering the price they would be prepared to pay. Imagine trying to get the vendor’s expectations down that far if he thought he had already done a deal at a higher price.
DISCLAIMER: Good Deeds buyers tips are intended to be of a general nature. Please contact us for advice that is specific to your individual circumstances. You may also need to get advice from other professionals such as an accountant, mortgage broker, financial planner or solicitor.