First Time Property Buyers in NSW: A Complete Guide
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The Contract for Sale
Article by Koreen Partridge and Georgia Flanigan
Buying property for the first time is exciting — but it can feel overwhelming. An experienced solicitor or licensed conveyancer can take the pressure off by explaining every step and making sure your purchase goes through smoothly. Our goal is to make buying property as straightforward as possible.
CLS Legal has been advising first-time property buyers in NSW since 2010.
This guide walks you through the key steps, your rights as a buyer, the different ways to purchase, and the terminology you will encounter along the way.
A contract for sale is a legally required document that must exist before any property in NSW can be advertised for sale. It discloses key information about the property, including the registered owner, a description of the land, and any furniture or equipment included or excluded from the sale.
You can request a copy of the contract from the real estate agent or the vendor’s solicitor at any time.
We always recommend that a solicitor review the contract before you exchange.
A pre-exchange review means you will receive advice on:
- Whether the disclosures raise any concerns
- Whether any contract clauses should be negotiated to protect your interests
- Whether you should commission additional reports — such as a building and pest inspection or a strata report — before committing
Your solicitor can also negotiate on your behalf, including on price and settlement date.
Exchanging Contracts
Once you and your solicitor are comfortable with the contract terms, you proceed to exchange. This is one of the most critical legal steps in the process.
Exchange involves you (the purchaser) and the current owner (the vendor) each signing a copy of the contract and physically swapping those copies. At exchange, you are also required to pay a deposit — generally 10% of the purchase price. Your solicitor may be able to negotiate a reduced deposit amount.
The 5-Day Cooling Off Period
In NSW, all residential purchases include a 5-day cooling off period after exchange. During those 5 days, you can choose not to proceed. If you do pull out, you forfeit only 0.25% of the purchase price. Once those 5 days expire, withdrawing from the contract means forfeiting your full 10% deposit.
There are two situations where the cooling off period does not apply:
- Section 66W certificate — Your solicitor can provide this certificate to waive the cooling off period entirely. Vendors often request this, particularly in competitive markets.
- Auction purchases — There is no cooling off period when you buy at auction.
Once the cooling off period has expired (or the section 66W certificate has been provided), the contract is binding. If you choose not to proceed, you will face financial penalties.
From Exchange to Settlement
A standard settlement period is 42 days, though this is not fixed and can be negotiated with the vendor. If the contract reads “42 days after exchange”, settlement falls on the 42nd calendar day from exchange. For example, an exchange on 28 April 2020 produces a settlement date of 9 June 2020.
Settlement is the day you pay the balance of the purchase price and receive legal title to the property.
If you are feeling uncertain about the timeline or what happens between exchange and settlement, call CLS Legal on (02) 9279 0919 — we can walk you through exactly what to expect.
What Your Solicitor Does Between Exchange and Settlement
After exchange, your solicitor or conveyancer completes the following steps:
- Establishes the PEXA workspace — the electronic settlement platform used for all NSW property transactions — in liaison with the vendor’s solicitor or conveyancer.
- Prepares the transfer of sale document.
- Advises you on stamp duty and attends to stamping your contract and transfer. If your purchase price is under $800,000 and this is your first property purchase, you may be entitled to a stamp duty concession or exemption.
- Conducts property and rating searches, including a search of the Transport for NSW database to check whether there is a proposed acquisition of the property for a road project.
- Makes title requisitions to obtain further details about the property — for example, whether the owner is aware of noise disputes in a strata building, or any neighbour disputes about trees.
- Liaises with your lender or financier, if applicable.
- Prepares settlement adjustment figures for any strata levies, council rates, and water rates. You reimburse the vendor for the portion of any rate period during which you hold the property. For example, if a standard water rates quarter is 90 days and settlement falls on day 30 of that quarter, you pay 60 days’ worth of water rates as an adjustment. The final amount you pay at settlement will therefore differ from the agreed purchase price. Your solicitor will advise on any shortfall between your loan proceeds and the adjusted settlement figure.
- Attends settlement on your behalf.
- Reports to you once settlement is complete.
Types of Ownership
When two or more people purchase a property together in NSW, you must choose how you hold the title. There are three options.
Joint Tenancy
Two or more people hold the property in equal shares. If one owner dies, their share automatically passes to the surviving owner or owners — regardless of what their will says.
Tenants in Common in Equal Shares
Two or more people hold the property in equal shares. If one owner dies, their share passes according to the terms of their will, not automatically to the other owner.
Tenants in Common in Unequal Shares
Two or more people hold the property in proportions that reflect their respective contributions. For example, if one person contributes a larger share of the purchase price, the ownership split can reflect that. As with equal tenants in common, if one owner dies, their share passes according to their will.
Choosing the right ownership structure has significant estate planning and tax implications. Your solicitor can advise which structure suits your circumstances.
Different Ways to Buy Property
You can purchase a property through several different methods:
- Private treaty — You negotiate directly with the vendor, usually through a real estate agent, and agree on a price and terms before exchange.
- Auction — You bid publicly. If you are the highest bidder and meet the reserve price, contracts exchange immediately and unconditionally — there is no cooling off period.
- Tender — You submit a written offer by a deadline. The vendor selects the preferred offer.
- Off the plan — You purchase a property before it is built, based on plans and specifications. Settlement typically occurs once construction is complete.
For further detail on each method, see the NSW Government’s A-Z Guide to Purchasing Your Home.
Key Terms Explained
Certificate of Title — The document that identifies who owns the land and records any mortgages or other encumbrances registered against it. It is usually held by a lender as security for loan repayment.
Completion / Settlement — The date on which legal ownership of the property transfers from the vendor to you.
Covenant — A condition registered on title that governs how the land or dwelling may be used. For example, a covenant may require that the dwelling have a roof of terracotta tiles, cement tiles, or Colorbond sheeting.
Easement — A registered right to cross or use part of someone else’s land for a specified purpose. For example, if the only road access to your property runs across a neighbour’s land, an easement would be registered on that neighbour’s title to give you legal access.
Encumbrances — Any claim, liability, or limitation registered against the title of a property — such as an easement or a mortgage.
Exchange — The point at which both parties sign and swap the contracts for sale, making the sale legally binding.
Land Registry Services — The NSW Government body that creates and maintains land title records.
Owners’ Corporation — All owners within a strata development. The Owners’ Corporation meets regularly to manage the administration of the building and common property.
PEXA — Australia’s online property exchange network. All NSW settlements are now conducted electronically through PEXA.
Transfer — The legal document registered with Land Registry Services to record the change of ownership. Once registered, a new certificate of title is issued in the name of the new owner or owners.
Vendor — The seller of the property.
First Time Buyers
$74 /Services
Contact
- Suite 6.05, Level 6, 12 O'Connell Street, Sydney
- info@clslegal.com.au
- (02) 9279 0919
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Why Use CLS Legal for Your First Property Purchase?
Our solicitors have over 40 years’ combined experience in residential property purchases and commercial disputes in NSW. We offer a fixed fee for property purchases that includes up to three contract reviews — so if you are unsuccessful on the first or second property we review for you, we will not charge an additional fee.
Specifically, we can help you with:
- Reviewing and negotiating the contract for sale before exchange
- Advising on stamp duty concessions and exemptions for first-time buyers
- Managing the full conveyancing process from exchange through to settlement
- Advising on ownership structure and the estate planning implications of each option
Call (02) 9279 0919 or request a consultation.
