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What Is A Contract Of Sale And Why Do I Need One?

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What Is A Contract Of Sale And Why Do I Need One?

Selling or purchasing a property is far more complicated than having a vendor and buyer simply agree to a sale. There are a number of documents and paperwork that need to be prepared when selling or buying a property, that make the sale legitimate and allow for negotiations to be made and followed through. Included among them is a contract of sale, possibly the most important document when it comes to making a property sale.

So, what is a contract of sale?

At its most basic level, a contract of sale is a legally binding agreement between a buyer and a seller. The contract details exactly what the seller is providing to the buyer, and the price that the buyer has agreed to pay for it. The contract facilitates the transfer of ownership from the buyer to the seller, which occurs once the buyer has paid the full amount to the seller.

The contract is legally binding, meaning that once it has been signed and the cooling-off period has timed out, the sale must be followed through.

The mutual signing of the contract of sale between a buyer and a seller is referred to as an ‘exchange’, meaning the sale is now a legally binding agreement and the two parties are now committed to the sale. The buyer must provide the deposit at this time.

What is included in a contract of sale?

The contract of sale includes various information, and its specifications vary on a state-by-state basis. (understanding the contract of sale). There are several details that must be included in the contract to make it viable. There are the obvious, like the names of the seller and purchaser, the property address, the agreed price and deposit, as well as the date of the property settlement and conditions that might be associated with the settlement.

There are also some less obvious, but equally important details that must be included in the contract, such as whether the property is available as a ‘vacant possession’ or ‘subject to lease’, along with any items that might be included or excluded from the sale such as fixtures, light fittings, curtains etc.

The contract of sale must also include information about the settlement (or ‘handover’) as well as specify a cooling off period- an allotted period of time in which changes and amendments can be made to the contract of sale after it has been signed. Cooling-off periods usually range from 2-5 days depending on each state.

Why do I need a contract of sale?

Having a contract of sale is necessary because it ensures that the transaction happens smoothly and safeguards that both parties (the buyer and seller) receive exactly what was agreed to.

For the seller, this means that they will receive the full amount of money that is stated in the agreed sale price, and for the buyer, they will receive ownership of the property they have paid for exactly how it is outlined in the contract of sale. This is why it is important to have the help of someone with a legal or real estate specific background before signing the contract, and the contract should be prepared by a solicitor or conveyancer if the house is being sold without a real estate agent. (cutting out the middle man)

Look out for inconsistencies and missing information before you sign a contract of sale - and never sign anything you are not 100% comfortable with.