Q and A for Vendors

Do I have to disclose every fault I know of with the property? Why?

Answer: No, but you do have to disclose certain issues, for example, illegal building works, such as an unapproved granny flat or second kitchen (as this may give the purchaser a right to rescind), whether a significant event has taken place in relation to the property (i.e. a death, or other misfortune), renovations that have been undertaken and any associated Home Building Act insurance (as this warranty obligation flows with the property, rather than the prior owner), disputes with your neighbours (often these come to the fore at the auction, or in demands made on the purchaser after exchange), non-compliant/not approved building work (which can be disclosed and negated in the contract, rather than allowing a purchaser to subsequently rescind). It is always better to disclose as fully as possible to your lawyer, who will advise you on the best way to deal with each particular issue to ensure that the purchaser’s right to rescind any contract is limited in every possible extent.

Can I exclude things from the sale?

Answer: Yes, there is a provision on the front page of the contract to exclude items from the sale, such as chandeliers, pot plants, drapes, dishwasher, storage units, barbecue, etc. All items not excluded can be taken to be included in the sale if they are fixtures. Any item that is movable, is to be removed from the property on completion as part of the vendors obligations to provide vacant possession to the purchaser. You may be able to negotiate the separate sale of excluded items, if the purchaser desires them to be included, such as custom cabinetry, carpet/rug, pot plants, etc.

What if I don’t get any offers from all the people coming through the open houses?

Answer: This is often a concern of vendors, particularly when the property has been on the market for a long time and purchasers are holding their cards close to their chest. It may be an indication that the property has competition from other properties with cheaper prices, or it may be that purchasers can’t see value in the estimated price, or they see a perceived problem with the property, or the market may be uncertain. It is better to discuss these matters with your agent, who should have been able to provide feedback from any parties investigating the property during open houses or online enquiries.

What renovations do I need to disclose?

Answer: Renovations made in the last six years, particularly renovations relating to bathroom (waterproofing areas) and kitchens, as typically these have home building act warranty coverage (for works in excess of $20,000), which the purchaser would typically like to benefit from if defects become apparent.

What if I didn’t get any Home Building Insurance from my builder/tradesman

Answer: It is not uncommon for tradespeople not to disclose the requirement that any works above $20,000 are required to be insured under the age be CF scheme run by the New South Wales government. Typically, the cost of insurance is more than $1200 and most builders feel it is not justified when they are required to repair any defects in any event. It is also not uncommon to find out that the same builders are not licensed to perform those type of residential works. Always check a tradesman’s licence [ https://www.onegov.nsw.gov.au/new/ ] prior to their engagement and demand HBCF insurance is arranged [ https://www.icare.nsw.gov.au/builders-and-homeowners/builders-and-distributors/what-we-do ] prior to commencement of any works (if over $20,000).

What does a lawyer do to protect my interests?

Answer: A lawyer will be able to draft special conditions to customise any particular issue with the property to protect you from purchaser’s rescinding contracts. Obviously, if a rescission happens, it negates all of the funds that you spent on advertising and marketing and by the time the rescission becomes evident, the second and third placed purchasers may have already bought somewhere else, so that effectively you will have to restart the marketing campaign all over again. Lawyers are also typically more fully aware of the legal and Court consequences of when things go wrong in conveyancing and can usually negotiate much better outcomes in a timely manner, as a result of that knowledge. Lawyers can also provide other services to protect your interests associated with a conveyance, that conveyances may not be able to, such as will drafting, family law advice and binding financial agreements, as well as debt recovery services, together with consequential matters pertaining to development applications, complying developments, subdivisions, easements, rights-of-way, and strata by-laws, which most conveyances irregularly deal with. Lawyers are bound by the legal profession uniform laws, together with the trustee act and other ethical duties, that conveyancers are simply not a party to. Lawyers also carry professional indemnity insurance, to give you peace of mind that if a mistake does happen, your interests are covered.

Do I have to attend the Auction Sale?

Answer: No, you can appoint an attorney to act on your behalf and sign documents on your behalf. Alternately, as a result of COVID19, many auctions have been held online and contracts exchanged by electronic signature, so you can be virtually anywhere in the world when the auction occurs using this type of electronic platform. If you are likely to be away when an auction is scheduled, please let us know and we may arrange for such an electronic signing and exchange process to occur, alternately we can appoint someone else to sign documents on your behalf, if that feels more secure for you.

Do I have to sell at Auction?

Answer: No. The agent/auctioneer will require a ‘reserve price’ from you, which is the lowest price you will accept to exchange contracts. If the bidding never reaches this reserve price, the property is “passed in” and the agent will then try and negotiate with bidding parties to reach an acceptable price compromise with you, although you do not have to agree. Any exchange of contracts that does take place after the auction but on the auction day, has the advantage of still being subject to auction conditions and therefore no cooling off period will apply. If there are no registered bidders on the day, or the agent is aware that only one party is interested in the property, they may call off the auction, or postpone it, or alternately work very hard to arrange an exchange of contracts prior to the auction with that other potential lone bidder. You are always in charge of the sale of your own property and you may have different views to what the agent may be recommending.

Should I accept a 5% deposit?

Answer: Yes and No. Most purchasers no longer have resources to have a full 10% deposit for property in Australia at their fingertips (because of the high values), typically financial resources may be tied up with longer term financial investments which are not readily convertible to cash for a fund transfer. Normally a 5% deposit means that the vendor is entitled to the entirety of any interest earned on the deposit (rather than sharing equally with the purchaser) and a special condition in the contract means that if the purchaser pulls out of the contract, the vendor or maintains the right to sue for the balance of the 10% deposit. It is for each vendor or to determine whether they wish to accept a 10% deposit (normal) or a 5% deposit. There is a slightly higher risk of default with the 5% deposit as firstly it is less money to lose, secondly there is a real cost consequence to Vendors of trying to recover the balance of the 5% deposit and thirdly funding may be more problematic for purchasers if it involves more than 80 – 90% of the property value.

Why won’t the purchaser release the deposit so I can buy something else?

Answer: Most purchasers have been advised not to release their deposit, as it is their money until the conveyance settles. This is because it is possible that the deposit may be more than the equity in the property (ie. the mortgage is for a greater percentage than 90% of the value of the property – typically interstate ‘investment’ properties) and if they were to rescind the contract, it is much harder to get back their deposit from a third party, than the Depositholder in relation to their own contract The reality is that very few contracts can be legally rescinded by purchasers if they are drafted correctly. In other words, once contracts have been exchanged, in all likelihood the purchase will complete when due. As a result, the deposit becomes exclusively yours as part of your purchase price on settlement. So to persuade the purchaser to release the deposit you can (i) provide a copy of the mortgage balance statement to “prove” your equity in the property and (ii) provide a condition that you will not further release the deposit from any purchase contract you enter into.

Can I change the settlement date?

Answer: Yes, by agreement with the purchaser for changes greater than 14 days, otherwise, you can simply extend the time for settlement using your 14 day notice to complete period of grace. If you wish to shorten the settlement timeframe, you would require the consent of the purchaser, who would typically require the consent of their incoming mortgagee, and this may become more problematic owing to the bank’s service delivery timeframes.

What if the Purchaser won’t settle on the scheduled time?

Answer: Unfortunately, this often happens and can be a result of a delay in an international transfer, the bank losing a certificate of title, the bank not being ready to settle on time, the purchaser not complying with bank requirements in a timely manner, etc etc and may result in extending the settlement by a few days .Forcing the purchaser to pay money on a particular date at a particular time is not what the contract is about. Those requirements are to make time of the essence and this is normally done by way of Notice. Primarily vendors can issue a Notice to Complete, making time of the essence and allowing the purchaser a further 14 days to settle the contract (with default interest on the balance of the purchase price accruing), failing which you can terminate the contract and retain the deposit. However, most people would want the purchaser to complete the contract instead of terminating it and in this case it would be more prudent to issue a Notice to Perform, allowing the purchaser a further 14 days to complete the contract (with default interest on the balance of the purchase price accruing). You can always issue a Notice to Complete at any subsequent time.

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