A Step-by-Step Guide to Buying Residential Property in NSW

Introduction

Buying a home is a major milestone and a key financial decision. The process can be exciting but daunting, particularly when you are required to navigate the legal requirements prescribed when purchasing property in NSW.

From a legal standpoint, ensuring your legal rights are protected and that the transition proceeds smoothly is critical. The purchase of residential property in NSW is governed by the Conveyancing Act 1919 (NSW) and other related legislation. Engaging a solicitor early in the process is essential to help you avoid common pitfalls, ensure legal compliance and protect your rights throughout the transaction. 

This article provides a step by step guide to purchasing residential property in NSW.

View our article on selling residential property.

Review the contract of sale

Before making an offer on a property, you should request a copy of the contract of sale prepared and have it reviewed by your solicitor. 

In reviewing the contract, your solicitor will:

1. Explain the terms and conditions;
2. Advise you of any risks, special conditions or issues relating to the property including issues regarding zoning, easements or covenants;
3. Recommend amendments to the contract; and
4. Make further enquiries with the vendor’s representative regarding the property.

Your solicitor will attend to liaising with the vendor’s representative during this period.

Conduct due diligence

Before signing contracts to purchase a property, it is essential that you undertake due diligence including obtaining:

1. Building and pest inspection reports. It is important to obtain your own reports and not rely on any reports provided by the vendor or their representative;
2. Strata reports (if applicable); and
3. Finance approval from your lender.

Depending on the nature of a transaction, you may choose to conduct this due diligence during the cooling off period. We will explore this further below.

Make an offer and negotiate terms

Once the contract has been reviewed by your solicitor and you have conducted your due diligence, you may make an offer through the agent.

Your solicitor can assist in negotiating:

1. The purchase price;
2. Inclusions;
3. Proposed changes to the contract; and
4. Length of the settlement period.

It must be noted that an offer is not legally binding in NSW until contracts are exchanged.

Exchange

Once both parties are ready to proceed, contracts are exchanged. This occurs when each party signs an identical copy of the contract, and the contracts are dated. This may be done either electronically or in hard copy format. 

After contracts are signed, a cooling off period may be applicable. The standard cooling off period in NSW is 5 business days. However, the vendor may require you to waive this period by signing a section 66W certificate or it may not be applicable such as where the property is purchased at auction.

At the commencement of the cooling off period, you will be required to pay 0.25% of the deposit to the real estate agent. Should you choose to withdraw from the contract during the cooling off period, you will only forfeit the 0.25% deposit and will not be bound by the contract.

Depending on the nature of a transaction, you may choose to conduct your due diligence during the cooling off period. It may be necessary to enter into the contract and conduct due diligence enquiries during the cooling off period in cases where there are several offers made over the property.

Once contracts are exchanged, and the cooling off period lapses (if any), the remainder of the deposit will be payable and the contract will immediately become binding on both parties.

Pre-settlement

The standard settlement period in NSW is 42 days, although this can be negotiated between the parties. 

During the time between exchange and settlement:

1. Your lender (if any) will prepare for settlement; 
2. Your solicitor will liaise with the vendor’s representative to satisfy any pre-settlement conditions;
3. Your solicitor will attend to having the contract stamped and transfer duty assessed;
4. You may arrange for a final inspection of the property shortly before settlement to ensure it remains in substantially the same condition as at the date you signed the contract; and
5. Adjustments will be made for council rates, water usage and strata levies (if applicable).

Prior to settlement, your solicitor will advise you of the amount payable on settlement taking into account any amounts that are to be adjusted, what amount is to be paid by your lender (if applicable) and whether there is any shortfall you are to cover.

Settlement

On the day of settlement, legal ownership will be transferred to you.

In NSW, this process will occur electronically via PEXA (the Property Exchange Australia platform). Your solicitor will act on your behalf in PEXA.

In completing the transaction, your solicitor will:

1. Coordinate with your bank and the vendor’s solicitor;
2. Confirm all documents are in order;
3. Ensure funds are paid to the correct parties; and
4. Register the transfer of title with the NSW Land Registry Services.

Once settlement is complete, you become the legal owner of the property, the agent may hand over the keys to you and your obligations under the contract of sale end.

Post-settlement

Following settlement, your solicitor will:

1. Notify you that settlement has occurred; 
2. Provide a settlement report to you including a breakdown of disbursements and adjustments; and 
3. Notify the relevant authorities (water, council and Revenue NSW) of your change of ownership. This is done automatically through PEXA.

After settlement, you should also attend to obtaining the requisite insurance over the property.

Conclusion

There are several steps involved in buying property in NSW, and there are several legal steps that must be followed to ensure compliance and avoid costly delays. By engaging a solicitor early in the process, you can avoid delays to settlement, ensure your compliance with all legal requirements, protect your interests and ensure that the transaction occurs smoothly.

Every property purchase is unique and there is no one-size-fits-all approach. As such you should always obtain tailored legal advice for your circumstances.