In NSW, there are two ways to purchase a residential property: a conditional exchange of contracts, and an unconditional exchange of contracts.
1) Conditional
A conditional sale makes use of a cooling-off period, which was introduced to prevent gazumping. To enter into a cooling-off period, the purchaser signs the contract for sale and pays a non-refundable 0.25% deposit. This secures the property for five business days (the timeframe is negotiable and is often extended to ten business days, as banks can need more time to finalise loan approval).
While the property is in a cooling-off period, or “under contract”, no other buyer can have their offer accepted by the vendor. During this time, the purchaser has the opportunity to conduct a pest and building inspection, order a strata report if applicable, and finalise finance.
If the purchaser wishes to proceed, all they need to do is pay the remainder of the deposit (usually 10%, though 5% has become more common) by 5pm on the last day of the cooling-off period. At that point the sale becomes unconditional and the sold sticker goes up!
If the purchaser chooses not to proceed, they must rescind in writing before 5pm on the final day of the cooling-off period, forfeiting the 0.25% deposit.
2) Unconditional
An unconditional sale is much more straightforward. The purchaser simply signs the contract for sale and pays the 10% (or 5%) deposit. This is typically how it works when buying at, or prior to, auction.
Before doing this, you must be confident in the property you are purchasing, as the deposit is non-refundable. Ideally, you should already have your finances in order and have completed a pest and building inspection or received a strata report.
Once the sale is unconditional, the next step is to work with your bank and conveyancer towards settlement, at which point the full balance of the sale price is due.