Purchasing real estate is one of the most significant financial decisions you will make in your lifetime. Whether you are a first home buyer, a seasoned investor or someone looking to upgrade or downsize, the Contract of Sale is one of the most important documents in the entire process. Understanding its role, structure and legal implications is critical to ensuring a smooth, transparent and successful transaction.
In this blog, we will guide you through what a Contract of Sale is, what it includes, the legal requirements in Australia and key things to watch out for before signing on the dotted line.
What Is a Contract of Sale?
The Contract of Sale is a legally binding document that outlines the terms and conditions agreed upon by the buyer and the seller during a property transaction. It sets out details such as:
- The identity of the buyer and seller
- The property address and legal description
- The agreed purchase price
- Deposit amount and payment terms
- Settlement date
- Special conditions (e.g., subject to finance or building inspection)
Each state and territory in Australia has slightly different legislation governing property transactions, so it’s essential to understand the distinctions specific to your region.
When Is the Contract of Sale Prepared?
The Contract of Sale is usually prepared by the seller’s conveyancer/solicitor before a property is marketed for sale. Prospective buyers will typically receive a copy of the contract prior to making an offer, whether it’s a private sale or an auction.
Buyers should never sign a Contract of Sale without having it reviewed by a qualified legal representative or conveyancer. Once signed, the contract becomes legally binding and backing out can result in financial penalties.
Key Components of a Contract of Sale
Let’s break down the most important elements typically found in a Contract of Sale in Australia:
1. Particulars of Sale
This includes the property address, title details (like the volume and folio number) and the names and contact details of both parties.
2. Price and Deposit
The contract will state the total purchase price, the deposit amount (usually 10%, however this can vary) and when the deposit is to be paid.
3. Settlement Date
This is the date on which the property will be transferred to the buyer and the balance of the purchase price will be paid. Standard settlement periods range from 30 to 90 days, however can be negotiated.
4. Inclusions and Exclusions
Items such as fixtures (e.g., light fittings, window coverings, dishwashers) and chattels (e.g., portable items) that are included in or excluded from the sale are listed here.
Misunderstandings about inclusions or exclusions can cause major headaches, so this section should be carefully reviewed.
5. Special Conditions
These are custom clauses added to the contract to protect the buyer or seller. Examples include:
- Subject to finance approval
- Subject to building and pest inspection
- Sale conditional on the sale of another property
- Specific agreements regarding repairs or early access
Special conditions must be clearly worded and legally enforceable. Poorly drafted conditions can lead to disputes or render them ineffective.
6. Vendor Statement (Section 32) – Victoria only
In Victoria, the contract must include a Vendor’s Statement (or Section 32 Statement), which provides essential information about the property, including:
- Title details and any easements
- Rates and outgoings
- Zoning information
- Any building permits issued
Failing to include a proper Section 32 can result in the contract being invalidated.
Auction vs Private Sale Contracts
Auction Purchases
If you are buying at auction, be aware that contracts are unconditional. This means:
- There is no cooling-off period
- You must have finance pre-approved
- You are expected to pay the deposit (usually 10%) immediately after the auction
Buyers should conduct all due diligence before auction day, including reviewing the contract and arranging inspections.
Private Sales
In a private sale, you may have more flexibility to negotiate terms such as the price, deposit and settlement period. You may also be able to include special conditions, such as subject to finance or a satisfactory building and pest inspection.
Most states provide a cooling-off period, allowing the buyer to withdraw from the contract within a certain timeframe after signing (usually 2 to 5 business days), though this may come with a penalty. Make sure you check the cooling off period for your specific state.
Common Pitfalls to Avoid
- Signing Before Reviewing
Never sign a contract without a legal review. Even standard contracts may contain clauses that don’t suit your situation. - Ignoring Special Conditions
Failing to include critical special conditions (e.g., finance or inspection) could lock you into a risky or unviable deal. - Assuming Inclusions
If it is not in writing, don’t assume it is included. Ensure all fixtures, appliances and features are listed clearly in the contract. - Overlooking Settlement Dates
Make sure the proposed settlement date aligns with your plans – especially if you need to move out of or into another property. - Delays in Finance Approval
If your contract is subject to finance, make sure your lender can meet the timelines specified in the contract.
Role of a Conveyancer or Solicitor
A conveyancer or property lawyer plays a critical role in:
- Reviewing and explaining the Contract of Sale
- Ensuring the terms are fair and protect your interests
- Managing settlement and legal paperwork
Engaging a qualified professional helps you avoid common legal traps and ensures you meet all obligations as a buyer.
The Contract of Sale is the foundation of any real estate transaction in Australia. While it may appear as just paperwork, it carries major legal implications that can affect your finances, your legal rights and your future property ownership.
Before you sign, be sure to:
- Conduct thorough due diligence
- Have the contract reviewed by a legal expert
- Understand your obligations and rights under the agreement
Buying a property can be an exciting journey – and with the right guidance and knowledge, it doesn’t have to be overwhelming.
By Lynda McNeill
