THE GUIDE TO SELLING YOUR HOME
Step 12 - Exchange Contracts
A contract of sale is a legal contract that involves the exchange of a property from the seller (or vendor) to the buyer (or purchaser) for an agreed upon value in money.
The contract of sale usually includes:
- Details of the property for sale and its inclusions
- A copy of the certificate of title to the property
- A zoning certificate from the local council
- A sewerage diagram
- Copies of documents relating to other registered interests over the property settlement details
The exchange of contracts is when you and the buyer each sign a copy of the contract of sale and then physically swap contracts. It is at this point that the contract becomes legally binding. This process is completed by your agent, solicitor or conveyancer. Upon exchanging contracts the buyer is required to pay a deposit.
Purchaser pays a deposit
Deposits vary depending upon which state your home is in. The deposit is usually 10% of the purchase price. However, this is open to negotiation and can sometimes be reduced.
The deposit is usually held in a trust account by the agent or solicitor for the mutual benefit of the buyer and seller. It is common for the interest earned on the deposit to be equally split between the buyer and seller.
Cooling off period
Upon exchange of contracts, the buyer usually has a cooling off period of 2 - 5 days depending upon which state your home is located in. In Western Australia and Tasmania there is no cooling off period.
The cooling off period allows the buyer to withdraw from the sale. Should the buyer withdraw from the sale during the cooling off period, you have the right to retain 0.25% of the deposit amount. In Victoria the seller is able to retain 0.2%.
Cooling off periods can also be waived, reduced or extended by negotiation. There is no cooling off period when purchasing at auction.