Property Buyers purchasing real estate from interstate often are not aware that the contract process in Queensland is different to other states. Often the process of buying a property can be daunting, especially if it is your first purchase.
Questions that are commonly asked include the following:
- What is the process of making an offer on a house?
- Can a real estate agent disclose offers to other buyers?
- What is multiple offer?
- When does a contract become unconditional?
- What is the normal settlement period in Queensland?
This article will summarise the process of making an offer on a house in Queensland. It will also provide information on various other steps involved in the contract process in Queensland.
The purpose of this article is to help property buyers understand the process in more detail and the various steps involved.
Of course buying at auction has its own set process. In this instance you are buying unconditionally on auction day.
This summary will therefore provide guidance on the contract process in Queensland when buying a property listed for sale by private treaty, which is the most common form of sale in our region.
Step 1 of the Contract Process in Queensland – Making an Offer
So, you have found the perfect property to buy? What is the next step?
Assuming that you have already inspected the property and completed your due diligence process (if not I suggest you read 9 Property Due Diligence Checks before You Buy), the next step involves making an offer on a house, or what ever property it is you are looking to buy.
For many buyers, a phone call to the Sales Agent with a verbal offer of the amount and basic terms is often how an offer is presented. However, in this instance, the details of the offer are often not clearly understood.
For this reason, we always recommend when making an offer on a house, that the offer should be put in writing because then the Real Estate Agent has an obligation to present your offer to the Seller.
The best way to do this is to ask the Real Estate Agent for a copy of the Contract of Sale.
Some Sales Agents might hand out a “Letter of Offer” Form that can be completed. Whilst this is better than a verbal offer, we still recommend that you ask for a copy of the written contract and put your offer forward in contract form.
This enables you to get the contract reviewed by a Solicitor BEFORE YOU SIGN, and it also ensures that the offer is seriously considered by the Sellers. Additionally, it enables you to clearly define any terms or conditions of the offer.
Some common conditions in real estate contracts in Queensland include the following:
- Subject to Finance
- Subject to a Building & Pest Inspection
- Subject to Body Corporate Searches
- Subject to further Due Diligence (which can be anything at the buyer’s discretion)
- Subject to a Rent Back (if the sellers have not purchased elsewhere)
There are many other conditions that buyers and sellers might need as special conditions as well, depending on the individual circumstances. You can review many other typical conditions in Queensland contracts in this Quick Guide. Remember all conditions can be negotiated throughout the contract process in Queensland too!
Here is a quick video explaining how to make your conditions more favorable to a seller:
When an offer is presented to a seller in Contract form, negotiations can occur in writing, on the contract itself.
What information needs to be included with your Offer?
The information that is necessary for a Contract to be completed accurately includes the following:
- BUYER – The Name must be the full legal name from which the property will be purchased. Make sure the spelling is accurate and include all middle names. It can be costly to change the name on a contract once a contract is complete, so this is a necessary first step. Also, if the buyer is a company or a trust, ensure it is registered and is a legal entity on the date of the contract.
- BUYER’S SOLICITOR – Details of the conveyancing firm that will be completing the conveyancing for the purchase. Don’t assume you can do this yourself. Experts are there for a reason!
- PURCHASE PRICE – The amount you will be offering to purchase the property for. This will depend on the property value, the current market conditions, the level of competition, and many other factors. Of course, this is the part that many buyers get wrong. Often buyers either overpay, or miss out because someone else was prepared to pay more. Getting expert advice from a professional Buyers Agent often saves a lot of money and stress!
- DEPOSIT – This is usually broken down into two parts. Both of these are also negotiable, but in Queensland, the total deposit can not be greater than 10% of the purchase price. The deposit funds are usually held in a Sales Agent’s trust account until settlement.
Initial Deposit – The amount payable once a contract is accepted
Balance Deposit – The amount payable once a contract becomes unconditional
- FINANCE – Whether the contract will be conditional to obtaining final finance approval and if it is then details of the number of days required for this approval must be completed
- BUILDING & PEST INSPECTION – Whether the contract will be conditional to a building and pest inspection and if it is then details of the number of days required for this purpose
- POOL SAFETY INSPECTION – If the property has a pool, then a pool safety certificate is required or a pool safety inspection can be arranged. Check with your Solicitor regarding the details outlined in the contract in this instance so you understand what is required.
- SPECIAL CONDITIONS – any other special clauses that you wish to insert (best to get legal advice about this)
- SETTLEMENT PERIOD – the number of days between acceptance of a contract and settlement. This is sometimes specified as a date, or alternatively a number of days from the Contract date. In Queensland, the most common settlement period is 30 days, although, like most other terms, this is also negotiable.
If all of these particulars are provided on a contract that is signed by the buyer and presented to a seller, it is very easy for a seller to see the entire offer, and not just consider the purchase price. Often the conditions that accompany an offer can influence a seller’s decision to accept a particular offer or not.
In some instances, there may be high competition for a property and the contract process in Queensland can often result in a Multiple Offer situation. There are specific regulations around how this works. See the video below for some hints and tips for buyers in this situation.
It is best to present your offer in Contract form so that the Seller has the opportunity to sign immediately when your offer is presented to them, which creates a legally binding contract, or alternatively, the Seller may choose to put forward a written counteroffer back to you to consider further.
This is a powerful way to enter negotiations as each party can see very clearly what the particulars are in relation to the purchase.
Once an offer is presented to a seller, there are three possible outcomes.
- The seller accepts the offer and the contract is signed and completed.
- The seller rejects the offer and the negotiations come to an end.
- The seller makes a counteroffer for the consideration of the buyer.
The counteroffer process will continue between the parties until an agreement is reached, or until negotiations come to an end. It is not until an agreement is reached between the parties that the contract is dated and a copy is sent to the solicitors acting for both parties.
Most Agents use standard form contracts in Queensland approved by the Real Estate Institute of Queensland or the Queensland Law Society.
Step 2 of the Contract Process in Queensland – Offer Accepted
Once your offer is accepted by the sellers, then the Real Estate Agent will date the contract and it then becomes legally binding.
This is the time to celebrate milestone number one!!!!
This is also the time when the initial deposit will become due and payable. You should receive instructions from the Real Estate Agent in relation to where the deposit money needs to be transferred.
What is the Cooling Off Period when you buy a Property in Queensland?
Queensland law provides a five business day cooling off period when you sign a real estate contract for the purchase of a residential property (excluding sales by auction).
This commences when the buyer receives a copy of the contract signed by both parties.
If you wish to cancel the contract during the cooling-off period, then the seller may deduct a penalty of up to 0.25% of the purchase price from the deposit paid.
What happens during the Contract process in Queensland whilst a Contract is still Conditional?
If a contract is entered into and it is conditional to finance building and pest inspections, or any other special conditions, then certain steps must be taken by the buyer straight away.
Time frames will be prescribed in the contract to meet the requirements of the conditions (often within 14 days but this can sometimes be longer or shorter because it is as negotiated between the parties).
- You will need to book a building and pest inspector (and pool inspection if relevant) to complete the inspection on your behalf. Access is coordinated with the Real Estate Agent.
- Your bank or mortgage broker will also coordinate the necessary steps to obtain final approval on finance if the contract is conditional to this. Sometimes this includes a valuation of the property, which again is coordinated with the Real Estate Agent.
Regular communication with your solicitor or conveyancer during this period is critical to ensure you are complying with your obligations under the contract.
Once you are satisfied with the outcome of any conditions under the contract, your solicitor will notify the seller’s solicitor that you are satisfied with the conditions and at this time your contract will become unconditional.
When does a Contract become Unconditional?
A Queensland residential contract becomes unconditional when the buyer gives notice through their Solicitor that they have satisfied all of the conditions prescribed in the contract.
The balance deposit outlined in the contract will become payable when your contract becomes unconditional.
During this period final searches will be conducted to make necessary arrangements for settlement. The bank will liaise directly with the conveyancer to arrange the transfer of funds and to ensure settlement can be booked on time. The applicable paperwork is also submitted to the relevant government bodies to ensure settlement can occur on a specified date.
It is always important to conduct a pre-settlement inspection on the morning that settlement is due to take place to ensure that the property is empty and in the same condition as when you initially inspected it. If there are any problems with the condition of the property it is important to discover this BEFORE settlement – not after.
Here is a short video explaining this process:
Step 3 of the Contract Process in Queensland – Settlement
The property settlement is the final stage of a property purchase.
At this time the seller receives payment of the agreed contract price, and the buyer takes legal possession of the property. Settlement is attended by representatives from the bank and the solicitors.
Keys can be collected from the Real Estate Agent once Settlement has been completed. This is because the property ownership has officially transferred at that time.
Summary
There are many stages in the contract process in Queensland and this article has outlined them in detail. Purchasing a property can be complex. Of course, some contracts may be a lot more complex with special conditions and therefore legal advice is recommended in these circumstances.