Buying a home, especially for the first time, can be very confusing and the process can at times move very quickly! It is important to make sure you understand what conditions are included in your contract and what conditions you should request to be included before you sign it. Lawlab have helped many thousands of Queensland home buyers and we use this experience to help guide you through the conveyancing journey.
So, what are the most common contract conditions that we recommend are usually included in your contract before you sign it and what do they mean to you?
1. Building and pest inspections
A building and pest inspection condition is very important as it will allow you to engage building and pest inspectors to conduct inspections on the home. These inspections help in ensuring there are no major defects which, if you knew existed, may have changed your decision on whether the property is right for you or would have changed the amount you offered.
The standard residential real estate contracts in Queensland will usually include a building and pest inspection condition if the condition due date is completed in the contract (which is usually 7 or 14 days after you have entered into the contract).
When a building and pest inspection condition is included in a contract, as a buyer, you can end the contract with no penalty if you are not satisfied with the report. Alternatively, you may offer to waive the condition on the basis that the seller rectifies the items that need to be fixed or discounts the purchase price so that you can fix them yourself once you own the home. You must also act reasonably which means you can’t end the contract for very minor defects that would be expected in an established home.
2. Finance approval
A finance condition gives you the opportunity to obtain finance approval from your lender after you have entered into the contract. The standard residential real estate contracts in Queensland will usually include a finance condition if the finance details are completed in the contract including the finance approval date (which is usually 14 or 21 days after you have entered into the contract).
If you apply for finance and are unable to obtain an approval then the finance condition allows you to end the contract with no penalty. You also need to take all reasonable steps to obtain finance which means making an application to a lender and providing the information the lender requires.
Lenders may approve finance conditionally upon certain things like a satisfactory valuation of the home by the bank’s valuer. Once these conditions are satisfied you will have ‘unconditional finance approval’ and it is then you should satisfy the finance condition in the contract.
3. Due diligence
Queensland is ‘buyer beware’ when it comes to buying a home and there are limited disclosures a seller needs to make about the property. That means the buyer should make thorough due diligence investigations about the property such as checking the land title and the registered plan, local authority records in relation to alterations to the home, the likelihood of flooding and any proposed plans for infrastructure that may affect the home.
A due diligence condition gives you the opportunity to conduct these investigations (by instructing lawlab to order the relevant due diligence searches from public records) and if you’re not satisfied with any of the results then you can usually end the contract within the due diligence period (usually 14 or 21 days) with no penalty. The standard residential real estate contracts in Queensland do not include such a condition so it needs to be added as a special condition prepared by a lawyer.
4. Cooling off period
Although not technically a condition, a cooling off period allows a home buyer to pull out of a contract for any reason within five business days of receiving the signed contract. In such circumstances the seller will have the right to charge a cooling off penalty equivalent to 0.25% of the purchase price.
This cooling off period applies to most residential contracts but not if the home was sold at auction (or to a registered bidder within 2 business days of the auction) or if the buyer has waived the cooling off period.
What if these conditions are not in my contract?
Before you sign a contract to purchase a home you should consider including the above conditions so that you are protected. As the above conditions are very common, sellers will often agree to them but you still need to be aware that where there are competing offers in a hot market, sellers will usually prefer to accept an offer with fewer contract conditions. Your lawlab legal advisor can review your contract and make recommendations quickly so that you’re in the best position to consider the risks and submit the right offer.