How to protect yourself when buying a house

Buying a house is a pretty big deal, especially if it’s your first home! You’ve spent years saving and months looking for the right house so make sure you are protected when signing a Sale and Purchase Agreement to buy that house!

A Sale and Purchase Agreement (Agreement) is a legally binding document, you cannot simply change your mind and get out of it, also if you find out that there is something wrong with the house after you sign the Agreement you are still bound by it unless you have the right conditions in the Agreement.

It is important to have your lawyer review the Agreement before you sign it.

Sometime you may feel it is necessary to move fast to beat the competition and want to make an offer now and don’t have time to take the Agreement to your lawyer. In this case you can have the real estate agent insert a Purchaser’s Solicitor’s Approval Clause into the Agreement. The clause should allow your lawyer 5 working days to review the Agreement and determine whether or not they approve it. The lawyer should be able to take commercial factors into account. This gives your lawyer the chance to suggest amendments or additional clauses to protect you, the Purchaser. It also means you can cancel the Agreement if your lawyer does not approve it. Just bear in mind that your lawyer can’t give you advice about the purchase price.

There are a number of clauses which you can include in the Agreement, here are the basic ones which should be included in every Agreement:

Finance Clause – This makes the Agreement conditional upon you obtaining the required finance to complete the purchase, if you are unable to obtain finance you can cancel the Agreement. Even if you have pre-approval from your bank it is a good idea to include a finance clause as sometimes the pre-approval will be subject to the bank approving the property. 

Building Report Clause – You can get a builder to check the property and prepare a report as to its condition. This will allow you to identify any issues with the property. If the building report does identify issues with the property you can raise these with the Vendor and suggest to the Vendor that they are corrected. If they refuse you can either cancel the Agreement or waive the condition and accept the property as it is.

LIM Report Clause – LIM stands for Land Information Memorandum, the LIM Report contains information held by Council on the property. This can help you and your lawyer identify issues with the property such as whether the dwelling and any alterations have consents and a Code of Compliance Certificate (CCC). If there is no CCC you can ask the Vendor to rectify this (at their cost). If they refuse you can cancel the Agreement or waive the condition and accept the property as it is.       

An Agreement with these conditions gives you more protection. Without these conditions if there are problems getting your finance or with the property you will still be bound by the Agreement and have to complete the purchase.

Talking with your lawyer early is important as they can help to reduce your risk when buying a house and help the transaction to run as smooth as possible for everyone.