Making an Offer
There are two ways to make an offer on a property
- Conditional – This is where there are one or more conditions that need to be met within a specified period, for example, subject to a building inspection, house sale or gaining finance approval.
- Unconditional – This is often called a ‘cash offer’ meaning the sale is ready to proceed without conditions.
All Sale and Purchase Agreements (offers) must be in writing and drawn up by the salesperson. The offer needs to be signed by the buyer and is usually accompanied by a 10% deposit. The offer is then presented to the seller for their consideration. If the offer is acceptable, the seller will sign the document and the sale is concluded.
If the offer is not acceptable, the seller may ‘counter-sign’ it, with their own changes noted for the potential buyer’s consideration. This may happen several times until the price and conditions are satisfactory to both parties and the sale is concluded. Any changes are made on the initial offer agreement and every change needs to be initialled by all the parties involved.
Once agreement is reached, the Agreement is dated, and forwarded to the buyer’s and the seller’s lawyers. It is standard practice to also give copies of the completed agreement to both the seller and the buyer personally, so that all parties have documentation detailing the possession date and details, such as any chattels sold with the property.
GST Liability
Most farm transactions take place between sellers and buyers who will both be GST registered at the time of settlement. New rules came into place in 2011 which allow most of these farm transactions to be ‘zero rated’ or GST purposes. Lifestyle blocks and farmlets can be complicated when the seller may be registered for GST and the buyer not.
Regardless, it is prudent to seek advice from an accountant and/or lawyer on GST liability before signing a Sale and Purchase Agreement, or before considering the sale or purchase of a rural or lifestyle property.
Paying a Deposit
A deposit must be paid when the agreement has been signed by both parties and is paid to Public Trust. Deposits are usually 10% of the sale price. Once the seller’s lawyer confirms with the Real Estate agent the agreement is unconditional, the sales person will forward the deposit to the seller’s lawyer, less the commission. The conclusion of the settlement is carried out between the buyers and seller’s legal representatives. Once an agreement is unconditional, the deposit is not refundable.
Moving In
The process by which the settlement/possession date takes place is managed by the lawyers and involves the payment of the purchase price (less any deposit already paid) in exchange for which the purchaser will be electronically registered as owner on the ‘Certificate of Title’ for the property. This registration will also ensure that all previous charges (mortgages, rates and other liabilities) over the property are paid from the payment. Rates are allocated to the new owner from the date of possession.
Keys are usually handed over to the purchaser by the Real estate agent or the seller’s lawyer once the settlement has been confirmed but normally, the settlement date and the possession date are the same.