The process of a sales & purchase agreement

All prospective property buyers need to understand the importance of a sales and purchase agreement during property purchase.

Hiring a solicitor

The first thing that you need to do is to get a solicitor. There are two ways this occurs in property transactions. In the first case, the buyer and seller use the same solicitor. In the second case, the buyer and seller hire different solicitors.

When the buyer and seller employ the same solicitor, the process will tend to be quicker. However, both the buyer and seller will need to be careful that the solicitor is acting in the best interests of both clients.

When the buyer and seller both hire their own solicitors, the interests of both parties will be protected. However, this means that there will be a lot of back and forth in terms of communication, and this could drag out the process of the property transaction.

The process

1. Letter of Option to Purchase

This letter from the seller to buyer allows the buyer for consideration of purchase. The buyer will pay a 2% deposit of the purchase price to the seller as an earnest deposit upon signing the letter to option to purchase. This deposit will be credited to the purchase price if the option is exercised. Usually the letter is drafted by a property agent or solicitor. This letter of option to purchase allows the buyer. The buyer obtains the option and rights to buy the property within the option period for the full price.

After signing the letter of option to purchase, the sales and purchase agreement must be signed within period of 14 days. The buyer typically applies for a bank loan during this period. If, however, the loan application is rejected, this letter can be voided once the option period expires. The 2% deposit will then be returned to the buyer.

2. Signing the Sales and Purchase Agreement

Upon signing the sales and purchase agreement, the remainder of the 6% of the 8% deposit needs to be paid by the buyer to seller. Once the sales and purchase agreement is signed, no further bargaining is allowed, and both parties must follow and respect the terms as contracted upon in the sales and purchase agreement. Thus, both buyers and sellers need to agree with the terms before signing the sales and purchase agreement.

3. Completion of the Sales and Purchase Agreement

Once the sales and purchase agreement is signed, the buyer usually has a grace period of 3 months to pay the remaining 80% of the property purchase price. If the seller still has an outstanding loan on the property, this outstanding amount must be settled by the buyer on behalf of the seller within this grace period. These processes will be negotiated by the solicitor on behalf of the seller and buyer.

However, should the buyer fail to pay the seller the remaining 90% of the property purchase price within the grace period, the seller has the rights to charge the buyer a 6% interest for failing to fulfill the terms as set out in the sales and purchase agreement.

Conventionally, a real estate agent will handle transactions of property purchase and transfer for you in exchange for an agent fee. The exact amount will differ depending on your agreement with the agent, whether it is to follow the standard cost in the state, or whether it is a percentage of the sale. Some agents require payment once the sales and purchase agreement is signed. In any case, it is advisable to only pay the agent fee upon the completion of the whole sales and purchase agreement process. This can take a minimum of 3.5 months.

It is however, not a compulsory thing to have a real estate agent to handle property transactions. However, in the event that you opt to forego hiring a real estate agent, you need to have a solicitor that you can trust well and is able to protect your interests.