Once you've found the "right" property you might make an offer, generally one lower than the asking price. You might be asked to pay a deposit. "This won't mean that the property is yours or that it gets taken off the market," explains the NSW Office of Fair Trading (NSW OFT). "It only proves to the seller that your offer is serious. The agent must also let you know if someone else makes a later offer on the same property." It's important to understand that the seller is not obligated to sell you the property, you have no obligation to buy the property even if your offer is accepted, and the deposit will be refunded if you don't end up buying.
You may be "gazumped" — this means that even though you have a verbal agreement the property is sold to someone else for a higher price. "If you are gazumped neither the agent nor the vendor is obliged to compensate you for any money you may have spent on legal advice, inspection reports, financial applications or inquiries," says the NSW OFT.
If your offer is accepted and you are not gazumped, the next step is to exchange contracts. This is the legal part of buying a home. You and the seller will sign the contract and this is when you will need to pay a bigger deposit — usually 10 percent. Sign the contract only when your solicitor or licensed conveyancer is happy. "Following exchange, you have a financial interest in the property so it's wise to get it insured," says the NSW OFT.
In most states, except WA, there is a "cooling-off period" of up to five days where you can change your mind. You'll need to write a letter and deliver it before the period ends to cancel the contract. You will be refunded most of your deposit but a fee may be charged. In NSW it's 0.25 percent of the purchase price. Let's say you agree to buy a house for $400,000 and you pay a $40,000 deposit but change your mind. You will be refunded $40,000 less $1000 (0.25 percent x 400,000).
Settlement, when you become the legal owner of the property, occurs 30-90 days from when you sign the contract. This can be negotiated to a period that suits both you and the seller.
Things are a little different if you end up buying the property at auction. If you are the successful bidder you hand over your 10 percent deposit and exchange the contract then and there.
If the property is "passed in", meaning the reserve was not met and bidding has stopped, the highest bidder can negotiate with the seller and a sale is possible. If you buy a property at auction or exchange contracts on the same day after it is passed in, it's important to know that a cooling-off period does not apply.
