• Aditya Joseph (AJ)

8 Steps in Purchasing a House or Unit in NSW

Buying a house whether for a residential or investment purpose can be a daunting task, as there are many aspects to grapple with and handle. It is important as a Purchaser or as a Vendor you completely understand the process involved in order to facilitate the acquisition/sale process. To help you completely understand the process, following are the 8 steps in purchasing a home:


1. Home Loan Pre-Approval;

2. Identifying the Property;

3. Methods of Purchase;

4. Obtaining Vendor Documents;

5. Exchanging Documents;

6. Cooling-off Period;

7. Time between Exchange and Settlement; and

8. Settlement.


Below are the 8 steps provided in detail for purchasing a residential property.


1. Home Loan Pre-Approval Getting a pre-approval from the bank before going to search for property is extremely important. Firstly, this will help you in determining the budget for purchasing the property. Secondly, it will show the buyer that you are serious about buying the property. And thirdly, it will help you in reducing any delays in making an offer.               2. Identifying the Property Once you have the budget set out, you then find the property you want to buy. This can be done either by yourself or through real estate agents. Ensure that you have an idea of the location, price and size of the house you exactly want to purchase. Conduct a thorough inspection of the house to ensure that you are satisfied with the house.

3. Methods of Purchase A property is normally purchased either through a private treaty or through an auction.  

(a) Private Treaty The most common way to buy property is by private treaty or sale through a real estate agent or directly from the owner. If a property isn't going to auction, you are saved from the stress of auction day, but are then faced with the daunting question of how much should you offer. If a home price tag says $500,000, this may not be how much the vendor really wants. Many agents say that it's usually wise to make a lower offer within 5 per cent of the asking price, although this percentage can increase in a slow market. The most common tactic is a verbal offer to the seller's real estate agent.

Alternatively, a sales summary can be prepared by your solicitor and forwarded to the vendor. A sales summary contains the date of the offer, the address of the property, the offered purchase price, the deposit amount and the balance to be paid, details of your finance, any special conditions and the proposed settlement date. Once your private-treaty offer is accepted and you've accepted the sale contract, it's time to pay the 10 per cent deposit. 


(b) Auction If the home you crave is being sold via auction, it is critical that you have pre-approval finance. You also need enough of a deposit or a deposit bond. While private treaty sales allow a cooling-off period in which buyers can conduct inspections, auctions don't usually allow for a cooling off period. Your bid is binding, so make sure you really want the property before you raise your hand. Most important of all is to not exceed your maximum spending limit. Inspections on homes up for auction need to be done prior to the bidding stage. Get a copy of the conditions of sale and the vendor's statement well in advance of the auction and have your legal representative check the terms and conditions.

There are usually two types of auctions: on-site auctions and in-room auctions. To bid at either, either express interest to the auctioneer before the auction begins, or simply raise your hand, call a bid, or use any other type of gesture or signal to the auctioneer. The name which you give the auctioneer before the auction is the name which will go on the contract and it cannot be changed later. When bidding for another person, advise the auctioneer in writing beforehand.

Most properties for sale by auction have a reserve price, which is a minimum price the owners are prepared to accept for the property. The reserve price is not made public until the bidding exceeds it. Once the reserve is reached, the property will generally be sold to the highest bidder.


4. Obtaining Vendor Documents After asking the Vendor/agent for the legal documents of the property, the following documents will be provided to you:Contract for Sale;Section 149 Certificate;Sewerage Diagram;Copy of title folio from the titles office;All documents creating any easements or restrictive covenants;Copies of the folio of the Register for the Lot and Common property of the strata plan (for strata units); 

5. Exchanging Documents & Paying Deposit Exchanging contracts legally completes the process of buying a home. Up to this point, the contract is usually not binding and both you or the vendor have the right to change your minds. 

Do not exchange contracts (with or without the cooling-off period) unless you have got your loan approved in writing from the bank. After discussing the contract with your solicitor and making the proper inquiries and necessary financial arrangements, you will be ready to exchange contracts. 

At the time of the exchange you will be required to pay a deposit. While it is usual for a vendor to ask for a 10 per cent deposit, a different amount can be agreed on and recorded in the contract. The deposit should be paid into the agent’s trust account and not directly to the seller.

6. Cooling-off Period When you buy a residential property in NSW, there is a 5 business-day cooling-off period after you exchange contracts. During this period, you may get out of the contract as long as you give a written notice. The cooling-off period starts as soon as you exchange and ends at 5pm on the fifth business day after exchange.

A cooling-off period does not apply if you buy a property at auction or exchange contracts on the same day as the auction after it is passed in. If you use your cooling-off rights and withdraw from the contract during the 5 business-day period, you will have to pay the vendor 0.25% of the purchase price

7. Time between Exchange and Settlement There is normally a period of 6 weeks between exchange and settlement, and the purchaser's solicitor will have to organise various documents, inspections and enquiries in regards to the property to ensure that the property is legally alright and monetarily in the interest of the purchaser. 

In order for the purchase to proceed, the solicitor will obtain, interpret and advise the purchaser on the following documents:


(i) Building Inspection Report A building inspection checks structural soundness, including:

  • foundations;

  • the condition of all structural timber (ie. floor joists, rafters);

  • all load bearing walls and members;  

  • the outer skin of the building (may be brick, stone, timber, fibro);

  • plumbing and electrical wiring; and

  • kitchen and bathrooms (to update can be expensive). 

(ii) Pests Inspection Report There can be many issues in a house which are not visible to the untrained eye, and which specialist who deal with these kind of issues can identify and advise. Lot of properties around Australia have been around for sometime, and therefore it is essential to organise a pests inspection prior to purchase.     

(iii) Pre-Purchase Strata Inspection (for Strata Properties) A pre-purchase strata inspection report is needed to ensure that any legal or monetary issues concerning the property are factored into the purchase price or where required it can help the purchaser in deciding whether to proceed with purchasing the property.

The Strata Inspection Report will include:

  • the financial status of the scheme;

  • pending building works;

  • special levies;

  • past works history;

  • all expenses for the past two years;

  • 10-year capital works fund plan; and

  • general information on insurances, by-laws, any disputes and any other areas under investigation. 

(iv) Owners Corporation Certificate (for Strata Properties) The Owners Corporation Certificate is required since it is issued by the Owners Corporation in a format prescribed by law and therefore if any outstanding levy or expense which remains unpaid by the owner is not mentioned in the report, it will not be required to be paid by the Purchaser.  

The Owners Corporation Certificate will contain the following details:


  • the names and addresses of the strata committee members, the managing agent and strata manager (if applicable);

  • the levies to be paid by the owners;

  • any outstanding levies;

  • any outstanding levies for the owner of the lot you are interested in;

  • the proposals for funding the matters set out in the 10-year capital works plan;

  • the address where the records and financial statements can be viewed;

  • details of any by-laws made by the owners corporation within 6 months before the date of the certificate that have not been lodged at the Office of the Registrar-General as at that date; and

  • whether or not a strata renewal committee has been established in relation to the strata scheme under the Strata Schemes Development Act 2015.

(v) Strata Plan Search (for Strata Properties) This is to correctly identify the unit you have inspected and to match it with the legal title to the property you are buying. The actual plan registered at the Titles Office showing the building on the land, the lots making up the plan and the common property. 

(vi) Survey Report If the seller does not have a recent survey attached to the contract, your solicitor will need to obtain a survey report, which shows buildings and fences, the correct boundaries and any encroachments onto the land or on the neighbouring property.

(vii) Enquiries Your Solicitor will make enquires about the property to the Electricity, Water and local government authorities. This will show council and water rates, arrears and if the land is subject to a land tax charge in the hands of the seller. 

(viii) Stamp Duty This is paid on the purchase price of the property and has to be paid within 3 months of exchange, unless your eligible for any First Home Buyer Schemes in your State. There are different stamp duty rates for various thresholds, where the applicable stamp duty will be advised by your solicitor.

(ix) Insurance A lender will require the property to be insured in order to lend money, therefore soon after the exchange of contracts it is best to insure the property immediately, if it is not insured. If you are buying a home unit, a Certificate of Currency should be obtained from the insurer of the owners’ corporation to make sure the property is adequately insured. 

(x) Mortgage Documents Lender will prepare the mortgage documents, which the purchaser's solicitor will review. 

(xi) Requisitions on Title Requisitions obtain information from the seller which may not have been previously disclosed or discovered during inspection of the property.

(xii) Settlement Statement   Close to settlement, a settlement statement is sent to the seller for completion. This details the final amount owing, including the adjustments for rates and taxes as at the date of settlement. The seller will inform your solicitor how the cheques are to be drawn.

8. Settlement Settlement usually takes place about 6 weeks after contracts are exchanged (although a longer or shorter settlement period can be negotiated with the vendor). This is when you pay the rest of the sale price and become the legal owner of the property. 

On settlement day, your solicitor will meet with the vendor’s solicitor and representatives from your bank and the vendor’s bank. At settlement, each party will exchange the necessary cheques and documents for title in the property to be transferred to your name.

AJR Lawyers have an in-depth understanding and experience in handling conveyancing matters and whether you are buying or selling a property, you will be provided with stress-free legal service tailored for your circumstances at affordable cost. Please do contact us if you need any property related legal service.

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