First Home Buyers Buying a house exchange and completion

Buying A House: Exchange and Completion

Once you have settled on the price, the next phase of the house-buying process kicks in — exchange, settlement and completion. This is where you close the deal. It is the process wherein the house is signed, sealed and delivered and usually takes six weeks or 42 days.

  • At a glance, it involves the following steps:
  • Appointment of a solicitor, conveyancer or legal representative
  • Exchange of contracts
  • Payment of a deposit
  • Cooling off period
  • A valuation and finalising of finance
  • Completion of all inspection reports — this can also be done before exchanging contracts but must be finalised before settlement and usually before the end of the cooling off period
  • Completion of conveyancing
  • Pre-settlement inspection
  • Settlement
  • Insurance
  • Registration

Appointing a legal representative

Unless you intend representing yourself and doing your own conveyancing, you will need to employ a legal representative. Your representative will check that the contract is in your best interest and contains nothing detrimental. They will also negotiate terms for you and conduct the conveyancing to ensure that the title is free of encumbrances.

Real estate agents are legally obliged to have a complete contract for the sale of any residential property available at all times. You are entitled to examine this and forward it to your legal representative for advice. It must include zoning certificates and a full title search showing any easements or restrictions that affect the use of the property, a sewer diagram as well as existing mortgages over the property.

Exchanging contracts

Exchanging contracts clinches the deal for the buyer, on the proviso all contract conditions are met and there are no undisclosed faults with the property. The buyer is usually given a five-day cooling off period, although this varies from state to state. The contract may be modified after negotiation from the original held by the agent.

  • The final contract and attached documents should set out:
  • Price
  • Settlement date
  • Inclusions (chattels such as ovens, dishwashers, curtains and other moveable goods that were to have been negotiated with the purchase)
  • Zoning restrictions
  • Caveats
  • Easements — such as RTA and utility plans
  • Sewer and drainage diagram; and
  • Any special conditions, such as the purchase being subject to finance approval, or termite and building inspections, that you have negotiated. All sorts of special conditions can be written into the contract in your favour, such as early or late settlement, etc. So consider carefully the things you might like to include

The contracts are drawn in duplicate and the seller signs one copy and the buyer signs another. They are then "exchanged" so that each party holds a copy signed by the other party.


Should you choose to take advantage of the cooling off period and exit the deal, you may have to forfeit 0.25 percent of the sale price to the vendor.

Payment of deposit

The deposit can vary but is usually about 10 percent of the sale price. This must be paid on exchange of contracts. It is usually paid to the real estate agent who holds it in trust until settlement is completed. It cannot be released without consent by both parties, and the interest that accumulates is shared between the vendor and buyer.

The balance (90 percent) of the sale price is paid at settlement. If the deposit is not forthcoming or the cheque bounces, the vendor can withdraw from the contract. Should the property suffer substantial damage such as a fire or flood, or if the title is found to be defective, or similar problems, the buyer usually has a right to rescind and reclaim the deposit within a certain period.

Should you rescind without good cause, you usually will lose the deposit and may be liable to compensate the vendor for losses over and above this amount

Cooling off period

The cooling off period allows you to purchase a property quickly and then complete inspections afterward. You cannot be gazumped during this period. It is not available for properties bought at auction and starts after the exchange of contracts. The cooling off period varies from state to state — some don't have a cooling off period — so check with your solicitor/conveyancer for this information.


For those of you taking out a mortgage, you will need to contact your financier to gain final approval in writing. Your financier will then organise a valuation and should liaise with your legal representative to ensure the balance of the deposit is available the day before settlement.

For those paying cash, you will need to ensure your representative has the bank cheque the day before settlement. You should be advised by your conveyancer who to write the cheque to a couple of days before it is due.


If the sale is subject to pest, building and engineering inspections these must be completed as soon as possible, preferably within the cooling off period.

Conveyancing and legal representation

Conveyancing ensures there are no encumbrances over the title deeds. In other words, it ensures that when you buy the property, you will be the rightful owner. This includes ensuring that any mortgage held over the property is discharged before you take possession.

Your representative must also ensure that your ownership rights are not restricted by caveats on the title, easements, or local government rules, as these can significantly affect the value of your property.

  • Overall, your legal representative's obligations are as follows:
  • To ensure that the sale contract is in your best interests and that the sale is subject to the satisfactory completion of all necessary conveyancing, inspections and finance
  • To fully explain the implications of the Sale Contract
  • To make thorough inquiries of local council, water and motor authorities and other government bodies to ensure there are no easements over the property
  • To conduct title searches to ensure that the land titles are clean: for example, that they are owned by who they say they are owned by and will carry no debt upon transfer
  • To ensure any unacceptable caveats are withdrawn by settlement
  • To ensure all rates and taxes are paid when the property is transferred to you
  • To prepare documentation such as the Transfer of Land, Notice of Sale and Requisitions

Make sure you budget for these legal expenses as well as payments for rate, planning and other certificates, and title searches and registration fees on the transfer of land and mortgage with the state government.

Pre-settlement inspection

You are entitled to a final inspection of the property before you take possession and this is best conducted a day before the settlement to allow time to sort out any problems. This allows you to confirm that the inclusions are still there and that nothing has been damaged or changed, beyond normal wear and tear, since you agreed to buy the property. If you have good reason to suspect something may go missing you may have to organise another inspection just prior to settlement.


Settlement is when you pay the balance of the purchase price, take possession of the property and the keys and title deeds are handed over. This is completion. Your solicitor/conveyancer will arrange the date, time and location — this is usually decided by the vendor, and will inform the lender.

The balance of the deposit will need to be drawn and given to your conveyancer the day before settlement.
If you pay cash, you get to keep the title deeds, if not they go to the financier who will return them to you when the home loan is repaid.

Your solicitor will then order the real estate agent to release the deposit to the vendor.


Financial institutions will require insurance, and a cover note must be obtained immediately after settlement, if not beforehand.


Your lender should lodge the title documents on your behalf, together with the mortgage, for registration at the Land Titles Office. If you are paying cash, your representative will attend to it.

Stamp duty

Stamp duty is usually payable within three months of settlement.

Questions you should ask your solicitor

  • What questions should I ask the real estate agent?
  • What are the legal and associated costs?
  • What is the cooling off period?
  • Can you fully explain the implications of the contract? E-mail your representative with any questions you need clarifying, or issues you wish to confirm in writing
  • Can I negotiate a short or long settlement?
  • How long do I have to complete the inspection reports?
  • Are there any problems with the title, such as caveats. Can they be withdrawn?
  • How much will resolution of these problems cost?
  • Are there any easements over the property?
  • Are there any unusual mortgages/contracts over the property?
  • Do the property/pest/building inspectors carry professional indemnity?
  • Let them know if you wish to make any special stipulations in the contract.


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