What is up for negotiation in your sale contract?
Price and cooling-off periods
The two key differences between pre-contractual negotiations in a private treaty sale and an auction sale relate to price and cooling-off periods.
Price
While a private treaty sale involves negotiating around a vendor’s asking price, an auction sale involves the price being set by the competition on the day or the reserve price specified by the owners (the minimum price the property will be sold for).
Buyers need to be ready and willing to sign the contract straight away if their offer is accepted. A purchaser should have their finance approved and – subject to their solicitor reviewing the contract – should be able to exchange.
Cooling-off period
There is no cooling-off period when buying at auction, so you need to complete your contractual negotiations, have your finance ready, and conduct your building and legal checks prior to auction day. Private treaty sales generally have a cooling-off period, which begins when the contracts are exchanged and the buyer pays a deposit. Within this specified time, the buyer can change their mind, though they may have to forfeit a small part of the deposit if they do so. The length of the cooling-off period and the cancellation fees, if any, vary between the states and territories. It is common for the length of the cooling-off period to be negotiated longer or shorter, or even removed from the transaction. Waving the cooling off period can be an extremely good negotiation tool as it shows you are really serious, and that’s your best tactic, as long as you are well researched, know your prices and have your finance approved, get your solicitor to sign off without a cooling‑off period.
Shortening or waiving the cooling-off period requires a written certificate from the buyer’s solicitor indicating why the certificate is being given and that the solicitor explained to the buyer the effect of the contract, the nature of the certificate and the effect of giving the certificate to the seller.
Settlement period
Negotiating a settlement period– the time between the exchange of contracts and the exchange of title and ownership upon settlement– that suits both parties can be key to the success of a property transaction. A shorter or longer settlement may clinch the deal even over price, which is why it is helpful for both the buyer and seller to have some understanding of each other’s motivations. For example, a seller may need to time settlement with a pending property purchase or move overseas, while a buyer may need to vacate their existing accommodation on a certain date or would like to move before the arrival of a newborn. The settlement period should be long enough for all final legal checks to be undertaken.
The deposit
The deposit amount, method of payment (including cash, cheque, electronic transfer or deposit bond) and whether the deposit paid by the buyer can be used by the seller is all up for negotiation. Generally a seller will ask for a 10 per cent deposit and the buyer will look to pay the smallest amount possible. Buyers should confer with their financial advisor about the payment method and whether they should make a lump sum payment or installments.
Fixtures and other property inclusions
While certain items are considered permanent fixtures in a home and will be sold with the property (like dishwashers), other elements aren’t considered permanent (fridges, for example). It is important to review what is and isn’t classified as a fixture in the sale contract. Don’t automatically assume something is a permanent fixture.
As we make greater use of the existing space in our homes, custom-built furniture is becoming more popular. There has been an increase in the instances of built-in appliances – like fridges, sound systems and televisions – which are difficult to remove and instead should be factored into the sale. When reviewing a home for sale, you may see items that add value but are not considered permanent features. You can always make an offer that incorporates these items.
Tax and tenants
Other common elements that might form the basis of pre-contractual negotiations include whether or not land tax will be adjusted between the parties, GST issues, the terms of any special conditions in the contract, and whether the property will be sold with vacant possession or with a tenancy in place. The buyer’s solicitor will also check whether all the documents that should be included in the contract for sale and purchase of land by law have been attached.
Exiting a sale after exchange for legal reasons
There are occasions when a buyer has the right to get out of the sale contract and get their deposit back, even when contracts have been exchanged and the cooling-off period has been waived or has passed, for various legal reasons. This also includes sales by auction where exchange is immediate. A buyer’s solicitor can advise the buyer if the seller hasn’t complied with these obligations and whether the buyer might be able to pull out of the contract and have the deposit returned.