Legal steps to selling a house
Whether working with a real estate agent or selling your house privately, the legal requirements of selling property in your state or territory apply to you in the same way.
Here we breakdown the legal steps to selling a house including the contracts you’ll sign and potential costs.
Legal steps to selling a house
The legal process of selling a house consists of meeting certain legal requirements designed to protect both buyers and sellers. Before settlement, most legal obligations are the seller’s and if overlooked, can result in costly fines, risk of liability and buyers legally abandoning the sale.
An expert agent along with a solicitor or conveyancer can ease you through the following steps. Selling your house privately can make legal requirements murkier to navigate so it’s advisable to seek legal advice once you’ve decided to sell.
Research state laws
Property sales legislation is state regulated, and some steps must be completed before advertising the sale, so you’ll need to research the rules where you live. For instance, if selling a house privately in NSW, you must have a contract of sale before listing (if you’re with an agent they’ll guide you through this).
States also regulate contracts, cooling off periods and selling prices. An agent can explain how the laws apply to you.
Understand duty of disclosure
Australian Consumer Law requires sellers and agents disclose information about the property that could influence buyers in their decision to purchase it. This protects sellers against the risk of liability for misleading or deceptive conduct by helping buyers make informed decisions.
Duty of disclosure is national, but states have specific rules regarding it. Your vendors statement covers certain details, but some non-sensitive facts may need to be mentioned in your advertising. A good agent can advise how and what you’re legally required to disclose. Disclosure rules also apply to agents, so it’s in their interest to help sellers avoid costly oversights.
Negotiate an agency agreement
When using an agent, the first contract you’ll sign is an agency agreement. Agency agreements are legally binding contracts giving an agent the right to sell your house. Generally, agreements are:
- Exclusive – one agent has the right to sell your property.
- Auction – an exclusive agreement for auctioned properties.
- Sole – you have one agent, but you can find a buyer yourself.
- General/open – you work with more than one agent/agency.
- Multiple listing – you sign to an agent plus their network, usually within one agency.
Agency agreements detail the type and duration of the agreement, agreed selling price, method of sale and settlement period. They also include fee and commission amounts payable to your agent, usually between 1.3% to 4% of the sale price.
Each type has pros and cons so researching your options is advisable. They’re also negotiable, so anything that doesn’t reflect your best interests can be discussed or reworked.
Engage a solicitor or conveyancer
Whether selling privately or through an agent, you’ll need a solicitor or conveyancer to prepare house sale contracts and other legal documents. It’s recommended hiring one before listing, as they can research your property for details you may not be aware of but are obligated to disclose.
Contract of sale
The contract of sale is a legally binding agreement between buyer and seller that formalises the sale. In NSW and ACT, you need a contract of sale before listing your property. As every state requires the contract to make the sale, it’s useful to organise it early so you’re prepared for offers.
The other important legal document is a vendors statement, also called Section 32. This document discloses information about the property that isn’t readily apparent during inspections, including:
- Financial details like outstanding mortgages or rates levied against the property.
- Covenants, or what an owner can or can’t do with the property.
- Easements, where others have a right to use the land, such as for sewage.
- Zoning, which can impact future developments or renovations.
Vendors statements must be provided to buyers before they sign the contract. An incomplete or incorrect statement is an offence and may incur a fine.
For settlement to proceed, any outstanding home loan must be removed from your property title. This is called “discharge of mortgage” and is arranged between lender and borrower. Mortgage discharge can be a lengthy process so it’s helpful to get the paperwork in as soon as your house is sold.
Settlement is when you exchange signed contracts with the buyer. The house is then “under contract” and is considered sold. As the seller, you’re now legally bound to the sale whereas buyers get a cooling off period of up to five days during which they can legally withdraw.
Settlement day is when the buyer takes ownership of the property. As settlement requires a lot of documentation, the combination of an experienced agent and solicitor or conveyancer can make the process quicker.
What to consider in the contract of sale when selling your house
As a general rule, the contract of sale for a house must include:
- Title documents confirming your ownership of the property.
- A current zoning certificate from your local council.
- A drainage diagram showing sewer lines.
- Documentation of easements, covenants, restrictions and rights of way.
Some states also require special documentation for pools. A contract of sale in NSW must include copies of valid pool registration, compliance and occupation certificates.
Fixtures comprise another section in house sale contracts. A fixture is something attached to a house, difficult to remove and generally included in the sale, like built-in dishwashers. In comparison, freestanding dishwashers or some window furnishings are removable so it’s necessary to state what fixtures are and aren’t included.
The contract of sale also sets the settlement date. Settlement periods are usually 30 to 90 days from exchange to settlement day but are negotiable. In NSW, the buyer’s solicitor can issue a section 66W certificate where buyer and seller agree to waive the cooling off period, making the contract immediately binding. Sellers may request one when their buyer has competition and is also keen to secure the sale. Once issued, buyers are penalised as per the original contract if they withdraw from the sale.
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