In NSW, there are two ways to purchase property. A conditional exchange of contracts, or an unconditional exchange.
A conditional sale makes use of a ‘cooling-off period’. The cooling-off period was introduced about 15 years ago and exists to prevent gazumping. To enter into a cooling-off period, the purchaser is required to sign the contract for sale and pay a non-refundable 0.25% deposit. (0.25% of the agreed sale price). This will secure the property for 5 working days (this timeframe is negotiable and often extended to 10 working days due to banks requiring more time to finalise a loan).
While in a cooling-off period or ‘under contract’, no other buyers are eligible to have their offer accepted by the vendor. No exceptions. During this time period, the purchaser has the opportunity to conduct a pest and building inspection, and/or order a strata report and organise finance.
If by 5pm on the last day of the cooling-off period the purchaser wishes to proceed with the sale, all they have to do is provide the remainder of the deposit (usually 10%, however 5% has become more common). At this point he sale becomes “unconditional”. If the buyer chooses not to proceed with the sale, the purchaser must rescind in writing prior to 5pm on the final day of the cooling-off period, leaving behind the 0.25%.
An unconditional sale is a much more straightforward.
Simply sign the contract for sale and pay your 10% (or 5%) deposit! This is often the case when buying at/or prior to an auction.
Of course, before doing this you must be confident in the property you are purchasing, as this deposit is non-refundable. Ideally, you should have already had your finances in order and completed and pest and building inspection and/or received a strata report.
Once the sale is unconditional, the next step is to work with your bank and conveyancer towards settlement, where the full balance of the sale price is due.