Buying your first home is a big decision, therefore it is important that as a first home buyer you understand your rights, responsibilities and the legal process involved. The process of buying a home is different in every Australian State and Territory. This article covers the process in Queensland.

What is Conveyancing?

Conveyancing is the legal term used for the transaction of buying or selling a property. A lawyer plays an important part in this process because we understand the Contract and all the forms and processes involved. Buying a property is an important step and often the biggest investment a person can make.

When a buyer signs a Contract this does not mean that they then legally own the property:

There will be a process of the buyer’s lawyer dealing with the seller’s lawyer, real estate agents and banks. A conveyance usually takes between 4 to 6 weeks.

A Contract will usually contain conditions to be fulfilled by certain dates. If the buyer organises a building and pest inspection that reveals a bad result, or cannot obtain finance from their bank by a certain date then they may be entitled to terminate the Contract. This means they can walk away and are released from further obligations under the Contract and they will have their deposit returned.

A property must have a ‘clear title’ in order to be sold – meaning no restrictions that prevent a sale. A lawyer carries out searches to determine whether the seller has the right to sell the property, and aims to uncover any issues which could be a nasty surprise for a new home owner.

The conveyancing process leads up to ‘settlement or ‘completion’ – this is the day when the banks, buyer’s and seller’s lawyers exchange the money and other documents, and the keys are released.

A buyer should remember that time is of the essence of the Contract. This means that things must be done by their due dates because a seller has no obligation to grant extensions. Time limits are strict and failure to comply by a due date can have drastic consequences. Our lawyers help the transaction move smooth and swiftly.

What a Buyer Must do in the Early Stages of a Conveyance

1. Sign the Contract

We are often approached by buyers either just before or after signing a Contract for their first home. We prefer to speak to clients before they sign. That way we can explain the terms and ensure the conditions are appropriate.

The buyer is usually required to pay an initial deposit to the real estate agent on the day of signing the Contract. Buyers of residential property are also entitled to a 5 business day ‘cooling off’ period starting on the day they sign the Contract. This means that if a buyer changes their mind about the purchase then they can terminate the Contract. However the seller can charge a termination penalty of 0.25% of the purchase price. So while the percentage is small it can still amount to a significant sum.

2. Apply for Finance

Unless a buyer has enough money of their own to cover the purchase price then they will need to make a loan application. Obtaining finance by a set date is often a condition of the Contract. So after signing a Contract, a buyer must make a finance application to their bank or chosen financier as soon as possible.

3. Arrange a Building and Pest Inspection

When buying a home you want to make sure it is structurally sound and free of termites and other pests. It is often a condition that a Contract is subject to the buyer obtaining a satisfactory building and pest inspection report by a due date. A home buyer should organise these inspections as soon as possible. We recommend both are carried out.

4. Arrange Insurance for the Property

After signing the Contract a property will be at the ‘risk’ of the buyer from 5pm the next business day onwards. This means that a buyer is responsible for and must organise insurance on the property from that point. This obligation will differ between houses and units.

What we’ll do for a Buyer in the Early Stages of a Conveyance

1. Calculate the Important Dates

After the buyer and seller have signed the Contract, the real estate agent will send us the Contract. We then calculate and diarise all the critical dates in the Contract and let our client and the other solicitors know.

We will carry out a property title and plan search. This gives us a description of the property and its correct area, shows if there are any easements or restrictions, tells us who is the registered owner and if they have a mortgage on the property, as well as a range of other important information.

We’ll send the buyer:

  • A detailed letter telling them what we will be doing for them throughout the transaction.
  • A conveyancing to-do list outlining the tasks that they are responsible for.
  • A questionnaire asking for details that we need to complete the transaction. For example, we need the buyer’s date of birth for completing transfer documents and forms for the Office of State Revenue. We ask that this be completed and returned as soon as possible.

2. Carry out Searches

We will carry out a series of further searches on the property to determine whether the seller has the right to sell it and has disclosed all the information that they are required to under the Contract. There may be further issues uncovered that could affect the buyer’s decision to buy the property. We will tell the buyer the searches we believe should be carried out, and depending on the circumstances, we may also suggest some optional searches that could be relevant.

We like to discuss the searches with our clients. Each property needs to be considered before any decision on searches can be made. Age, existence of a pool, alterations and many other matters need to be considered.

Our standard searches will show some of the following information about the property:

  • When rates and water bills are paid up to.
  • If land tax is owing.
  • If a person other than the seller has a registered interest in the property.

Our optional searches can show some of the following information about the property:

  • If the property is affected by flooding.
  • If there have been any building notices issued by the local council.
  • If the property is a unit – the Body Corporate records, by-laws and levies.
  • If there are any major road or railway works nearby which could affect the property.
  • If any owner-builder work has occurred and if it’s properly insured.
  • If the seller is or has been bankrupt and how this could affect their ability to sell.

We will tell the buyer about any search results and point out any matter that looks like a problem. Some results may entitle a buyer to terminate the Contract such as the property being affected by future road works.

3. Calculate Transfer Duty / Stamp Duty

Transfer duty, also known as stamp duty, is a tax a buyer must pay on the purchase of a property to the Office of State Revenue. We will calculate then advise the buyer the amount (if any) that they are required to pay.

A first home buyer is eligible to claim a first home concession. This means that no duty is payable for a purchase $500,000 and under. A discounted rate of duty is payable for purchases over this amount up to a certain point.

In order to claim the concession, a first home buyer must live in the property and use it as their principle place of residence for the first 12 months. We will send the buyer the appropriate application form to sign and return to us.

The Steps in a Conveyance

1. Payment of the Balance Deposit

A condition of a Contract is often the buyer paying a balance deposit to be held by the real estate agent. This must be paid by the due date, and then we need to be notified.

2. Building and Pest Inspection Results

If the Contract is subject to a buyer being satisfied of building and pest inspection results, they need to notify us as soon as they receive their results. This should ideally be at least a few days before the due date.

If the buyer is happy with the results, we will notify the seller’s solicitors. If there are problems with the results, then we will contact the seller’s solicitors to try and reach a solution. Some results may entitle the buyer to terminate the Contract.

3. Finance Approval

If a Contract is subject to the buyer obtaining finance approval, they should keep us updated about how this is going. A buyer must ensure that they do everything required by their lender as quickly as possible and notify us when they receive confirmation of their approval.

Buyers will usually first receive a letter from their bank giving them conditional approval. Then a few days later they’ll receive the loan contract to sign. The buyer first needs to receive the loan contract before we tell the seller’s solicitor that finance is approved.

When a buyer receives finance approval it is very important that they sign and return to their financier an authority that gives the bank permission to deal with us as their lawyers.

4. Pre-Settlement Inspection

A buyer has the right to conduct a pre-settlement inspection of the property close to the settlement date to ensure everything is still in order.

What We do for a Buyer in the Final Stages of a Conveyance

1. Stamp the Contract

Before settlement, a Contract must be stamped for the payment of transfer/stamp duty. This means it is assessed according to the Office of State Revenue’s requirements. We lodge the applicable forms, and if there is any duty payable this is the time to pay it.

2. Prepare Funds for Settlement

Most settlements these days are done electronically so we coordinate arrangements with the seller’s solicitor, the seller’s bank and the buyer’s bank.

The price shown on the Contract is not the final sum that is paid to the seller. We will prepare a ‘settlement statement’ that adjusts the sale price to show a breakdown of the total amount payable. This calculation will usually be the sale price, minus the deposit, minus the cost of releasing a seller’s mortgage (if any) and an addition or subtraction for rates and water, and Body Corporate levies if buying a unit. This is the reason we conduct rates and water searches, so that we know when everything is paid up to.

Because rates and water/sewerage access is usually paid in advance past the settlement date by the seller, the seller needs to be compensated. Because water usage isn’t paid in advance, the buyer needs to be compensated for bills they’ll receive in the future that cover the time the seller still owned the property.

If there are unpaid bills, we arrange for these to be paid on settlement.

3. Carry Out Settlement

We will carry out the settlement, where the seller’s release of mortgage, payments and transfer documents are exchanged.

Immediately after settlement we will advise the agent to release the deposit to the seller, and the keys to the buyer. Then it’s time for the buyer to get that removalist van rolling!

What a Buyer Should do After Settlement in a Conveyance

Because buying a home is a very big change to someone’s financial position, we always recommend that a buyer updates their Will and Enduring Power of Attorney in order to protect their new asset. Our wills and estates lawyers can assist a buyer with this.

At Salerno Law a first home buyer can rest assured knowing that their property purchase will be in the hands our experienced team from the start to finish of the transaction. If you would like to talk to us about the conveyancing services we offer, contact us to speak to one of our solicitors.

By Luke McKavanagh

DISCLAIMER: This article is only meant to give you general information and should not be relied on as legal advice. Speak to one of our lawyers for more information.

Salerno Law is managed by Emma Salerno, Managing Partner and CEO, who has a wealth of experience from operating her own businesses across Australia as well as a range of in-house and commercial experience both in Australia and overseas.