Buying by private treaty
A common way to buy a house or apartment in NSW is by private treaty. This is where a seller advertises the amount they would like to achieve for their property and then negotiates with prospective buyers. The contract for sale becomes activated once you exchange contracts with the seller. At this time, you will also have to pay the full deposit on your place (usually 10 per cent minus any holding deposit you have paid).
However, this does not always mean you are locked in.
The standard contract for sale includes a “cooling off” period during which you can change your mind. However, your solicitor can have this waived by signing a certificate and explaining the contract to you.
Buying at auction
Auctions can sometimes seem daunting; not least because there is no cooling off period. If the gavel comes down and you are the highest bidder you are usually bound to go through with the purchase, no matter how unfair the contract might be.
So long as you have your solicitor look over the contract for sale before you bid there is no reason an auction needs to be any riskier than buying by private treaty.
Before the auction, your solicitor will identify any terms that might not be in your favour and negotiate with the vendor’s solicitor to change them. They will also make sure you are buying exactly what you intended and that it is in the condition you expect.
That way if your bid is the winning one, you can be sure the contract you sign will be in your interest.
Buying an apartment or townhouse
Most apartments and townhouses in NSW are strata title, which means you are not only buying real estate, you are also buying into the rights and obligations of being a member of the owners corporation (or body corporate).
Being a member of the owners corporation means you will have a say on issues affecting the building, but it also means you will need to pay strata levies and the way you can use your property will be restricted by by-laws. By-laws are rules that try to make sure the strata scheme runs smoothly and that your building is generally a harmonious place to live. By-laws often cover issues such as parking restrictions, the keeping of pets and the use of common property.
You may also need to contribute money for communal issues, such as plumbing, roof and window repair and property maintenance, even when you are not directly affected.
Because this can affect the value of what you are buying, it is important you get a full picture of the owners corporation’s activities before you buy and that you know exactly what work is planned and whether there’s enough money to cover it. Obtaining a report on the records of the owners corporation can provide useful insights into the financial position of the owners corporation, and particular issues that have emerged in the running of the owners corporation. Your solicitor can organise such a report.
While a seller must attach some information about the owners corporation to the contract for sale, your solicitor will make sure you have everything you need to reach an informed decision before you buy.
The pros and cons of buying "off the plan"
Builders often raise capital for their development by selling units or townhouses before they are built. This can be a great way for buyers to get a reduced price and even make a capital gain before settlement.
However, it is not risk free. After all, the property market can move down as well as up, so you could end up losing money.
There is also a chance you may not end up with what you intended. For instance, a Sydney investor recently bought an apartment off the plan after the agent promised 180-degree water views. When the complex was finished, the buyer found a wall obstructed his view altogether. He argued that the contract for sale was void and asked for his deposit back. The builders refused.
The buyer took his case to the NSW Court of Appeal, which ruled in his favour. It found that he had relied on the agent’s misrepresentation when deciding to buy, so the contract was void. It ordered the builders to return the buyer’s deposit.
Changes to the law made in 2015 and 2019 make it harder for developers to rescind (get out of) off the plan contracts, but there are still considerable risks in buying something yet to be built, with finishes and inclusions yet to be added. Off the plan contracts have a 10 business day cooling off period because of the complexity of these types of contracts, giving purchasers more time to seek legal advice.
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