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The answer is that buying a home is often the biggest financial decision we’ll ever make (especially in Sydney, where property prices can be astronomical).

So making an offer and entering into a contract for sale without knowing your legal rights can have profound long-term consequences on your finances and your overall quality of life.

This checklist answers common questions about the process for buying a home in NSW and how our solicitors will guide you through each step, including:

  • buying at auction
  • buying a strata title property
  • how the conveyancing process works.

Buying by private treaty

The most common way to buy a house or apartment in NSW is by private treaty. This is where a seller advertises the amount they’d 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’ll also have to pay the full deposit on your place (usually 10% minus any holding deposit you’ve paid). However, this doesn’t always mean you’re locked in.

The standard contract for sale includes a ‘cooling off’ period during which you can change your mind. However, our solicitors 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’s no cooling off period. If the gavel comes down and you’re the highest bidder you’re usually bound to go through with the purchase, no matter how unfair the contract might be.

So long as you have our solicitors look over the contract for sale before you bid there’s no reason an auction needs to be any riskier than buying by private treaty (so long, of course, as you stick to your budget and don’t get too caught up in the moment!).

Before the auction, our solicitors will identify any terms that might not be in your favour and negotiate with the vendor’s solicitor to change them. They’ll also make sure you’re buying exactly what you intended to and that it’s 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 interests.

Buying an apartment or townhouse

Most apartments and townhouses in NSW are strata title which means when you’re not only buying real estate, you’re 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’ll have a say on issues affecting the building but it also means you’ll need to pay strata levies and the way you can use your property will be restricted by by-laws. You may also need to contribute money for communal issues, such as plumbing, roof and window repair and property maintenance, even when you’re not directly affected.

Because this can affect the value of what you’re buying, it’s important you get a full picture of the body corporate’s activities before you buy and that you know exactly what work is planned and whether there’s enough money to cover it.

While a seller must attach some information about the body corporate to the contract for sale, your solicitor will make sure you have everything you need to reach an informed decision before you buy.

The contract for sale

When you buy a property in NSW your rights depend, in large part, on what’s in the contract for sale. And because no two properties are the same, no two contracts will be the same either. However, there are some things a contract for sale must do, including properly identifying the property as well as the terms on which it’s being sold. It should also attach a number of documents, the most common of which are:

  • a zoning certificate
  • a drainage diagram showing any sewer lines
  • a copy of the property certificate
  • a copy of the plan for the land
  • copies of any documents showing easements (the right of someone else to cross or use the land), rights of way, restrictions, covenants, etc.

Sellers of strata properties (generally units or townhouses) should also have attached:

  • a copy of the property certificate and strata plan, and
  • a copy of by-laws concerning the use of common property.

Buying on your terms

Many of the terms in any contract for sale will be ‘standard’ ones, which means that they’ve been in use for a long time and are fair to both seller and buyer.

However, a seller doesn’t have to include these terms and instead may choose to include something in the contract which favours themselves at a buyer’s expense. That’s why the first thing our solicitors will do is make sure that the contract for sale isn’t just legal, but that it also isn’t unfair to you.

Where a clause isn’t in your interests, our solicitors will negotiate with the seller’s solicitor to get it changed. This includes working out a time to ‘settle’ the sale, which is when you’ll pay the balance owing and take ownership of the property.

Making an offer

Buying a property is often the biggest financial decision that a person will make, and making an offer is a significant step in that process.

Be prepared before submitting an offer to the agent or vendor (seller) by understanding the sales process and what follows.

Having your finance pre-approved before making an offer will help speed things up.

Offers can be made verbally or in in writing. Putting offers forward in writing (eg. email) may help you keep track of negotiations and confirm why an offer wasn’t accepted.

Before you make an offer on a property, or invest further in preparing to buy it, research prices for similar properties. Be wary if the agent’s pricing information indicates underquoting.

Underquoting is when an agent falsely advertises a property or tells you that it will sell for an amount that is less than their actual estimated selling price in the agency agreement they have with the seller. This is an offence for which agents may lose their fees and commissions and be fined up to $22,000.

Under the new laws that start from 1 January 2016, when an agent provides an estimated selling price, it must be reasonable and based on factors likely to influence the price. Examples include location, architectural design, future use of the property (eg. zoning, rights of way), market demand, comparable sales, seasonal and economic factors.

To make sure agents follow their responsibility to not falsely generate interest in a property through unrealistic price information, Fair Trading has issued agents with Underquoting guidelines for residential property.

If the final sale price is higher than the initial advertised price, this does not mean underquoting has taken place. This price may vary considerably from what could be reasonably predicted and may result from intense competitive pressure between buyers.

Avoid relying too heavily on an advertised sale price. Treat the information as a guide and research the property and recent comparable sales in the area. Ask about the seller’s expectations. If the agent provides you with a price estimate, you should ask the agent to explain the reasons for that estimate.

Paying an expression of interest

Once you have made an offer, you may be asked to pay an initial deposit as an expression of interest. This won’t mean that the property is yours or that it gets taken off the market. It only proves to the seller that your offer is serious. The seller or agent can take as many preliminary deposits as they like for the one property. However, when you pay this deposit, the agent must provide you with a receipt and tell you in writing that:

  • they have no obligation to sell the property to you
  • you have no obligation to buy the property
  • they will refund your deposit if you don’t end up entering into a contract to buy the property.

The agent must also tell you if someone makes a later offer on the same property, as soon they become aware of it.

Remember that the agent selling the property is not working for you, but for the seller (or owner) of the property.

There are other considerations when making an offer on a property that hasn’t been constructed yet.

What is exchange?

A contract to sell a property becomes binding when the buyer and seller each sign a copy of the contract for sale and exchange them. At exchange, the buyer also usually hands over a deposit (often 10%).

At an auction, exchange happens immediately after the winning bid is accepted. For private treaty sales, exchange usually means that you will deliver your signed contract to the seller’s agent and pick up the seller’s signed copy. Sometimes a seller will be happy to exchange contracts by mail, in which case the seller’s signed contract will be delivered to our solicitors.

Signing the contract isn’t always final

Sometimes you’ll be able to get out of the contract for sale and get your deposit back, even when you’ve signed the contract for sale (and that includes when you’ve bought a property at auction).

For instance, sellers must always comply with the ‘vendor disclosure requirements and warranties’. These rules force anyone selling a property to let prospective buyers know certain information about the property they’re selling in the contract for sale. This includes making promises about the property and attaching certificates that reveal such things as any rights of way, drainage and zoning.

Our solicitors will be able to tell you whether the seller hasn’t complied with these and whether you’ll be able to recover your money and pull out of the contract.

The first home owners grant

If you’re buying your first home, you may be entitled to a little help from the government.

Stamp duty and other tax

In NSW the sale of property is taxed. This tax takes the form of stamp duty, which is calculated based on the price of the property. You will need to pay stamp duty at settlement. However, your obligation to pay is sometimes waived if you’re a first home buyer or if you’re buying a newly constructed home.

If a property isn’t purely residential in its nature, the sale may incur GST. Investment properties can also be subject to Land Tax. It’s important our solicitors will go through the contract for sale to make sure the cost of these taxes it isn’t unfairly passed onto you as the buyer.

What exactly are you buying?

Technically, owning a property means having ‘title’ to it. From a practical point of view this means once you’ve bought your name will appear on the Certificate of Title (sometimes known as the title deed). Because most land in NSW operates under Torrens Title our solicitors will then have to register this certificate at the Lands Title Office so that everyone knows you’re now the owner.

Generally, when you buy a house or apartment in NSW you get one of the following:

  • Freehold which gives you ownership over the land and the buildings on that land
  • Leasehold which means you have ownership of the land and the buildings on it for a certain period of time (often 99 years)
  • Strata title which usually applies to apartments or town houses and gives you the rights to the airspace in your unit
  • Company title another, less common way of apartment ownership. You buy ‘shares’ in a company and this, in turn, entitles you to the use of an apartment, and
  • Community title which often works in combination with strata title on large developments gives you rights – along with other owners – to common land.

What happens at settlement?

When you sign the contract you’ll usually agree to a settlement day. Most commonly this will be six weeks after the date of exchange.

At settlement you’ll need to pay the seller everything you owe them to ‘settle’ the purchase of your home. This amount will take into account any utility bill and tax calculations that our solicitors make.

If you can’t settle by the date stipulated in the contract for sale, you’re likely to be charged interest. In some circumstances, the seller may even be able to cancel the sale and keep your deposit.

You should let our solicitors know as soon as possible if it looks like you can’t make the settlement date so that they can attempt to come to an arrangement with the seller’s solicitor.

Call the experienced team at GMH Legal to assist you in your matter. A free consultation with GMH Legal is an opportunity to gain deep insights into your legal situation and all of your options.

Why Choose GMH Legal?

  • Over 60 years of combined legal experience
  • Outstanding track record with a winning approach
  • First appointment is always free
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