The Most Common Clauses in Residential Contracts
If you’ve never purchased property before, or the process of signing a Residential Contract of Sale gives you the heebie-jeebies, then you’ve come to the right place. There are plenty of standard special conditions in contracts that protect both parties involved however, it’s important to understand that, as the buyer, you are allowed to add clauses to your offer to ensure that it meets your needs and the process from signing through to settlement goes smoothly.
Some of the most common clauses that are added to residential contracts include:
Subject to Finance
If you require more time to secure a loan, then you will need to insert a Subject to Finance clause in your offer. Making your offer Subject to Finance allows for you to withdraw the offer in the case that your loan application is not approved by your chosen lender. By including a Subject to Finance clause in your offer, your deposit will also be refunded.
Whilst a Subject to Finance clause is helpful in some cases, in the current market, most sellers are receiving multiple offers and the offers with the least conditions are being selected, so I highly recommend that you seek pre-approval of finance rather than relying on the Subject to Finance clause.
Subject to Building & Pest Inspection
Firstly, what is a building and pest inspection? During a building and pest inspection, a building specialist will thoroughly check the structure of the roof, walls, floors, fences and any adjoining buildings, looking for any cracks, faults, asbestos and movement. In most cases, it is the buyers responsibility to organise a the inspection with a certified building specialist.
Making your offer Subject to Building and Pest Inspection allows you to withdraw your offer or make a counter-offer if the report outlines considerable damage to the property in question. For example, where a building specialist finds termites or there is a potentially detrimental leak in the roof.
Due Diligence
A Due Diligence clause allows a buyer to investigate the physical and financial condition of a property and the area a property is located in within a specified timeframe. Where the results of the investigation is not satisfactory to the buyer, the offer may be withdrawn and the deposit refunded.
Contemporaneous Settlement
Where a buyer needs to sell their existing property in order to purchase a new property, Contemporaneous Settlement occurs, meaning the two transactions settle at the same time. By adding a Contemporaneous Settlement clause to your offer, you avoid having to seek a bridging loan and paying for temporary accomodation/storage. Contemporaneous Settlements can be quite complicated, so if you do intend to go down this path, make sure that you seek advice from your conveyancer first.
For more information about buying in today’s market, or for recommendations on Sunshine Coast property conveyancers and building and pest inspectors, contact me on 0419 627 767.
