#16: One Signature. Thousands at Risk? - Your Guide to understanding a Victorian Contract of Sale

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[00:00:35] Hello Melbourne! I am Lisa Parker and together with Cate we are bringing you a dose of our property market in detail. I'm Kate Bakos, Lisa and I are both buyer's agents who work on opposite sides of the Melbourne market and we've clocked up over 40 years between us in the property industry. Join us each fortnight to hear some exciting stories from our coalface, market trends and some juicy auction updates. This collaboration has been a long time coming, we hope you enjoy.

[00:01:07] Hello Melbourne and welcome to today's episode of the Melbourne Property Hour. Today, Kate and I are going to unpack something that's super important when it comes to buying a property and that is the vendor statement and the contract of sale.

[00:01:20] That's something that we all sign when we're purchasing a property and what we're going to do is just dive into the anatomy of that document, what's included, what you should be looking out for and all of the important details that it contains so that you can feel more confident and understanding exactly what it is because it's a pretty lengthy document. Yeah. And I know some people sit there and attempt to read the whole thing and don't understand a lot of the bits and pieces. So let's unpack it today, Cate. Yeah. Let's do it.

[00:01:49] Well, before we unpack it, I want to talk about something that a lot of people misunderstand. What's the difference between a Section 32, a vendor statement and a contract of sale? When we buy a property, we're given a large document typically in one document which will contain the vendor statement as well as the contract of sale. Now, they're two different documents that are usually combined together and sometimes we only receive the vendor statement.

[00:02:18] And it used to be referred to as Section 32, but these days it's referred to as the vendor statement. And we have the contract of sale and the contract of sale is the parts that we sign that has the particulars of the sale. And we'll go into detail about what that is. And sometimes that document can be something that's created by the vendor's solicitor and it may be unique to that particular law firm or conveyancing office.

[00:02:48] So, it might be a templated contract of sale that is an REIV contract or a law institute contract. So, when we see a law institute contract or an REIV contract, typically all of the conditions and the special conditions within that contract of sale are identical. So, when we see that document as professionals, we know what to expect in that document.

[00:03:14] Whereas, when we receive a contract of sale that's been written by the solicitor or conveyancer, there can be some really interesting conditions that make up the contract. And that's probably where we're going to do the most negotiating and refining of those conditions. Now, the second part of the document that we receive before signing a contract is what we refer to as the vendor statement.

[00:03:39] And that makes up the bulk of the, and perhaps, Kate, what we might do is just talk about the types of things that are contained within that document. Yes, of course. I always refer to each of them. The contract of sale with the particulars, that's where the details of the deal sits. And then the vendor statement is where the details of the property sits.

[00:04:03] And within that vendor statement, also known as a section 32, you'll have rates notices. You'll have the title plan. You'll have, gosh, I've got to scratch my head here. There's lots. All of the outgoings associated with that property. If there have been works done to the property, you'll have permits in there and you'll have certificates. So, a good quality vendor statement should be quite thick.

[00:04:29] And to your point, it should be thicker than the first half, which is the contract part. Every now and then, they use the term skinny. It usually means that information is lacking. And sometimes, you know, a conveyance of not so much a solicitor might provide the absolute bare minimum or it might be insufficient. And when a contract is legally insufficient, there is a risk there to the vendor that it could be deemed a defective contract.

[00:04:55] So, it's in everyone's interest to disclose everything and to make sure that all of the documentation that's mandated is actually present in there. Some of the other information that you'll find in that document is things like planning information. So, when you skim through it, first of all, it will usually show the title, the folio numbers, the landlot numbers. And then you go through and you look on the map and it shows you where the lot that you're purchasing is located within the street.

[00:05:24] And then as you go through that document a little bit more, it starts to go into more detail about any overlays. So, then as we look past the map, we start seeing all of the planning controls that pertain to the particular lot and also the surrounding homes. And so, we've spoken about this on the podcast before where we've spoken about SBOs, which is special building overlays, bushfire zones, areas that are impacted by water and flooding.

[00:05:54] All of that is located within that part of the document. And it's a particularly important part of the document for you to fully understand exactly what it is that you're purchasing. And when Kate and I refer to due diligence, this is really part of that due diligence. It's not the whole picture, but it's a small part of the due diligence because it's revealing things about the property that you can't know about the property by going and inspecting it.

[00:06:22] You need to take additional steps like having your contract reviewed. And this is where that part of the detail about what you're purchasing is being revealed. Look, there can be all kinds of things in the vendor statement. If it's a strata property, there'll be details sometimes about the history of the subdivision, particularly if there's been a change from, let's say, company share to a strata conversion.

[00:06:46] Or it might just be a typical owners' corporation scenario where we've got the minutes from the past meeting. We've got the owners' corporation certificate, which has to be a certain number of months old. It can't be older. And that tells you all about the outgoings. But you've also got things like land tax and the taxable value for the purposes of foreign ownership, windfall gains tax. There is quite a bit there that's been added in recent years.

[00:07:15] And I think you touched on it before. When conversions or works, significant works have been done to a property, they don't actually have to be all that significant these days. They can just be over $10,000. And we need to either have owner-builder details in there, including warranty insurance or perhaps certificates, you know, if waterproofing or plumbing or electrical works have been conducted.

[00:07:40] And one thing that we can't forget about is if the property is subject to a lease, we need details of the lease in there so that we can see when it was originally signed, what the rental amount is now, and a real understanding of whether that property can be purchased with vacant possession or whether it needs to be subject to a lease. It's a lot in there and it's an important document.

[00:08:03] I think the important thing for people to understand is that when we see this document, it can be, I think, quite overwhelming if you haven't seen one before. It's always a good idea to have a look at one and become familiar with it before you actually are in a situation where you're about to sign one. And, you know, I think there's things that you should pay attention to and they're the things that Kate and I have just spoken about.

[00:08:26] But I don't think people need to really go into reading every single page because that's what your legal representative is there to do. We're going to talk about that a little bit in more detail. But certainly having a look at those things that Kate and I have just mentioned so that you've got an understanding of the property would be a really good idea.

[00:08:45] Now, there's one thing about the Section 32 is important for people to understand and that is that it's not necessarily going to tell somebody what the condition of the property is. It's not – there are certain disclosures that a vendor must make about the property but it doesn't mean that they're going to disclose, for example, like some vendors are really good and they'll disclose specifically that an item is not working.

[00:09:13] For example, an air conditioning unit is not working. However, a buyer shouldn't expect that to happen in all cases because everybody's a little bit different. Sometimes the vendor's not living in the property so they're not aware of what is and what isn't working. Where we tend to get that level of information is when we've got a really outstanding sales agent on the case who actually goes through when they're signing up the property

[00:09:40] and asking the vendor all of the questions, one of their questions is what is and what isn't working so that they can make sure they're passing on accurate information to buyers. But it's always a situation where buyers should investigate those things themselves, turn on the appliances and see if they're working, et cetera, and not rely on that to be included in the statement. Now, Kate, there was a pretty big change that happened with this documentation a couple of years ago. Do you want to touch on that a little bit?

[00:10:10] Yeah, our state legislation changed and these days material facts need to be disclosed. So anything that could materially change the buyer's willingness to proceed with a sale and some of those things have financial implications and some of them just have happiness or health implications, one of which is whether there's been any kind of death at the property, that needs to be disclosed. So the vendor is legally bound to disclose what they know.

[00:10:40] Yeah. And it's a little bit different to New South Wales and material facts for us include things like whether there's been any illicit drug production at the property, if there's any asbestos that they're aware of, and if there's been a homicide or any kind of not so nice situation. But in New South Wales, it's even more so. Yeah.

[00:11:06] And things that are not as nefarious, like, you know, if there's been a previous termite damage, for example, that's been known to the vendor, they might disclose that. If there's cladding issues in the event of an apartment building, that will typically be disclosed in the documentation. And, you know, there's the smaller things like if the property is previously flooded, things like that can be disclosed as well.

[00:11:31] It's not always like the really big kind of, you know, illicit drug activity and things like that. It can be a wide range of things. I would caution, however, not to rely on the fact that all of these things haven't occurred if they're not being disclosed. I think it's still important for buyers to make their own investigations and ask their own questions and not assume that because it hasn't been disclosed, it doesn't mean that it hasn't occurred.

[00:12:00] Because I think conveyances have got this document they run through asking a vendor all these questions. But sometimes people forget or they don't think something's important and they'll say no to a question that they probably should have said yes to. And where more information was needed and so a buyer really should make their own inquiry and not assume. Yeah, agreed.

[00:12:22] I want to chat about looking a little bit deeper into a Section 32 because I've seen things that have changed buyers' decisions to proceed that weren't entirely obvious. And, you know, it doesn't mean that it's been deliberately buried in there, but sometimes the things that are showstoppers for us kind of are buried in there. And one of the obvious ones that I can think of is going through strata minutes, AGM minutes.

[00:12:50] Because if a special levy hasn't been raised, if the residents, you know, the Owners Corporation Committee haven't made that firm decision to proceed with an expensive fix yet, maybe they're still getting quotes or maybe they've decided to kick the can down the road and review it in a year's time. There might be evidence of that discussion in the minutes.

[00:13:12] And that can definitely highlight a potential high-cost item that might be beyond a buyer's financial scope. So, for example, it might be that there's significant movement cracking in the building and an engineer might be required to put together a report. And if there's underpinning required for a three-storey brick building or two-storey brick building, that can be really expensive. I've seen situations where it's $30,000 per resident.

[00:13:40] So, things like that can change your decision overnight. Other things might be planning activity. You know, if there's been a recent planning change and the zone that you find yourself in is subject to an 11-storey building being built next door, you might not want to live there. Yeah, there are a lot of things that we might uncover during that review process that may change our mind. Things like easements as well, the placement of an easement.

[00:14:07] You know, sometimes we look at properties, particularly in estates that might be about 20 years of age or 30 years of age. And you've got this big, beautiful block of land. And the house, for some reason, is strangely situated on the left side of the block. And there's all this unused land to the right of the property.

[00:14:29] And straight away, my mind goes to is that an easement running in a really undesirable location down the side of the property rather than the back of the property, which would prevent, for example, if my client was thinking, oh, we'll just build a double garage because this doesn't have a double garage. Chances are it doesn't have a double garage because they weren't permitted to have a double garage because of the easement. And I know that that's one that has brought a lot of people unstuck where they haven't reviewed the documentation correctly.

[00:14:58] And then they've thought in their mind that they were going to pursue these plans and turn the home into what they really wanted and then discovered that they couldn't. Yeah, that old chestnut, the big corner block with the parkland next door. Yeah, cooling off is, I think, an important part of a contract for people to understand. And there are some times where cooling off applies and sometimes when cooling off doesn't apply. And that's a distinction that people should really become aware of.

[00:15:27] Now, typically, a buyer will have three clear days to cool off. And three clear days means that they need to be business days. And so, if you've signed a contract on a Thursday, for example, the weekends aren't included in that calculation of three days. And if Monday happens to be a public holiday, that day also isn't included. But there's a time when this won't apply.

[00:15:56] Kate, do you want to speak to that? Yeah, Lisa's absolutely right about the auction period of cooling off. So, three days either side of a public auction. But in the wake of the most recent kind of rush of investor clients, we were both dealing with self-managed super fund borrowers up until the deadline. And a lot of people said to me in passing, oh, well, I've got a cooling off and I had to stop them right there. You don't have a cooling off if you're a corporate body.

[00:16:25] Now, a corporate body means that you're signing it as a director of corporation. And that is how a lot of self-managed super fund purchases have been signing. You know, they have their blah, blah, blah. Self-managed super fund trust as trustee for the blah, blah, blah. And the same goes for anyone who's signing in a company name that's not self-managed super fund as well. Another one is where the property is used primarily for industrial or commercial purposes.

[00:16:52] Also, if the property is more than 20 hectares in size and used primarily for farming. Another one which, oh gosh, I think I've had it strike once or twice in my entire career is where someone has previously exited a contract, whether they've exited for other reasons or they've cooled off because they've changed their mind. And then they've had a switch of mind again and they've wanted to re-enter the contract with that vendor. If you re-enter a contract, there's no cooling off.

[00:17:19] Now, the last one is if you're an estate agent or a corporate body. So, you and I, we don't get cooling off. And the reason for that is we're trained to know what decisions we're making.

[00:17:32] Now, I see this happening a lot, particularly with interstate buyer advocates who don't necessarily understand our legislation properly and they're used to transacting perhaps in New South Wales or other locations where they assume that they've got a period of time after the contract of sale where they can perform their due diligence.

[00:17:53] And that's a common, I'm going to air quote trick, that people use to try to appear as though they've got an unconditional contract. They won't ask for any additional special conditions. For example, performing a building and pest inspection or having a valuation done on the property or having a due diligence period.

[00:18:17] And so, what they do is they enter a contract with the view to use their cooling off period as their opportunity to get those items done. Now, nothing annoys a real estate agent more than that because it is dishonest. You're not being honest about your intentions to perform those checks.

[00:18:40] And at the end of the day, you actually have a, it's a really big risk to try to take this path. I mean, I think people think they're pretty clever and smart trying to think about doing it this way. But at the end of the day, you can really get caught out. And I've seen this happen many times because the vendor can refuse entry for any of those checks to take place.

[00:19:02] So, if you think you're entering a contract of sale with the view to get your due diligence or building your pest reports or valuations conducted within those three business days and then just call off, then I think people are going to be sorely mistaken when the vendor or the agent turns around and says, no, sorry, there's no access to the property and they don't let you in. And they're within their rights to do that. Yeah, 100%. And you know what?

[00:19:27] Nothing leaves a more sour taste in your mouth as the buyer's agent who's been the underbidder on a competitive bidding situation where some clever interstate buyer's agent has put together what looks like an unconditional offer. But it is a bit of a victory scenario when the agent rings back and says, no, vendor blocked from having access because they didn't like their dishonesty. Kate will take your offer and we'll let you have your buyers and your building inspection done. Yeah.

[00:19:57] And that's the reason why they do it. They want to have a stronger offer but they're being deceptive about it. Yeah. And it doesn't fly. We've spoken before about how smart Victorian real estate agents are and they're up on all of these tricks and they don't like it. They're a bit of a different beast and they don't play that way. So, that tends to backfire. Wow.

[00:20:19] Now, Kate, what happens in the event that a buyer legitimately has had a change of heart and they're within the three-day cooling off period, they haven't had any other special conditions like a building and pest or anything like that. It's just a simple matter of change of heart. Yeah. How do they go about using their cooling off period and how does the cooling off period apply? You know, are there any penalties? What happens? Yeah.

[00:20:48] The penalty is 0.2% of the purchase price or $100, whichever is greater. So, these days it's 0.2%. The agents will always try or most agents will always try to get at least 0.2% as the initial deposit at the moment that they execute the contract. And the reason they do that is firstly you need to have a consideration. So, the transaction takes place and it's legitimised because there's money in the agent's trust account and the deal has been done.

[00:21:16] Money might sometimes go into a legal rep's trust account but it's invariably almost always the agent's. So, that 0.2%, if you change your mind or if you do some due diligence behind the scenes and you want to get out of the contract within the three business days, you then have to advise the agent and or the legal rep in writing before the due date and let them know that you're calling off, you're choosing to exit the contract.

[00:21:44] And your 0.2% will go to the vendor. Yeah. Another reason why somebody might decide to call off is because they did intend to use the calling off period to conduct some due diligence that didn't involve getting access to the property. So, for example, it might be talking with their town planner to see what's possible on a block of land or they might want to make inquiries through local council, which can often take more than a day. You know, you don't ring council, they ring you straight back.

[00:22:12] Sometimes it's a bit of a delay in them returning back to you with the information. So, that can be another reason why somebody might execute their calling off. As buyer agents, we very rarely have clients that call off because all of the due diligence has been done, conducted before we enter a contract of sale.

[00:22:32] And often because of the process that clients walk through with us when they become a client, their desires and needs and what's important to them have already been very clearly ascertained right at the beginning of our search process. And so, we tend not to have last minute wobbles in regards to calling off. I think we've only ever executed in the last 20 odd years.

[00:22:58] I think we've only ever executed a calling off probably on two or three occasions. Yeah. Yeah. Likewise. It's not something that you want to make a habit of because you do want to be so thorough that the agents who deal with you know that all of that groundwork has been done. And also, from a psychological point of view, clients on the same page, they're not being dragged along, kicking and screaming or having doubts about something. So, I pride myself on that.

[00:23:26] And I don't want to be the agent that calls a selling agent saying, I'm so sorry, it was all too rushed and the clients had a wig out. Yeah. It would not be a good look for a buyer's advocate. That's for sure. Something that may be expected from a buyer's off the street without representation. But generally speaking, when a sales agent is working with a buyer's agent, they expect that level of professionalism that you've just described.

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[00:24:17] Now, one thing I want to talk about, Kate, is the contract of sale. Now, in the contract of sale, it's where we find the general conditions and also the special conditions. Now, the general conditions are prescribed and that means that they are the same general conditions across the board. But what may alter those general conditions is a special condition.

[00:24:45] A special condition will override a general condition. And so, the special conditions are really important to pay attention to and it is the aspect of a contract of sale that is most likely to be changed either by the vendor or the purchaser when you're looking at the documentation. So, we can enter special conditions ourselves.

[00:25:09] We can ask to have special conditions that the vendor solicitor has included to be retracted from the contract of sale. And all of those things can be negotiated. When the market is really robust and there's a lot of activity and things are selling pretty fast, you're less likely to have special conditions agreed to by the vendor. So, what we see is more and more contracts of sale without any alterations.

[00:25:39] Whereas, when we flip to what we call a buyer's market, vendors become more amenable to changes to the special conditions. Now, the special conditions can make or break an offer and it does – the special conditions does form part of your offer. So, when you're communicating to the agent what your offer is, if there's any alterations that you would like made to the special conditions, that's the time that you need to communicate them.

[00:26:06] Not when you're about to sign the contract because they do form part of your offer. There's the monetary side of things but then there's also the settlement period and then there's also the conditions and any changes need to be communicated up front so that the vendor can consider your offer in its fullness. Now, Kate, I've been in situations where we've been able to win properties over other offers because the vendor didn't like their special conditions. Have you been in that situation yourself?

[00:26:37] Yeah, plenty of times and I much prefer to have my favourite special conditions included in a contract so that firstly, the client's got a bit more protection and secondly, there's less argument at settlement time. If something's broken or not working, it's not a he said, she said, I can just point to the contract and say it doesn't matter whether it wasn't working at the time of sale. Your vendors agreed that all appliances will be in good working order.

[00:27:01] So, yeah, I've seen situations where buyers get too hung up on something and sometimes it's their advocates and I'll just say to my buyer, let's be smart about this. The special condition states that if you move the settlement time, it's a $200 penalty. Let's just roll with that. We're not going to move the time and if we have to, then it's $200.

[00:27:23] So, having a perspective, you know, there are some special conditions that I think hugely disfavour the buyer and really disadvantage them and their rights. And then there are others that I think are not really big issues and some of them are moot points. There's one, for example, that states if you nominate. Now, in Victoria, we're allowed to say Kate Bacos and or nominee is purchasing this property.

[00:27:46] And then when Lisa decides she wants to be the purchaser, I nominate to Lisa as long as it's done in an appropriate time frame. And I think it's within one week of settlement, then Lisa can purchase the property on the contract that I signed. Now, sometimes there'll be a special condition stating that it's a $500 fee for a nomination. Well, if you're not nominating, it doesn't matter.

[00:28:09] So, I guess the point there is not to get hung up on special conditions that aren't really relevant to your own circumstances or are unlikely and just to really focus. Or really cheap. Yeah. Like a really low penalty. Who's going to fight about $200 when you're spending a million? Yeah. And just focus on the ones that are the most important.

[00:28:32] So, Lisa, I want to chat about a couple of very commonly used special conditions that a lot of contract of sales actually provision for. So, you can essentially tick the box and use their wording. One of them is building and pest inspection and the other one is finance. So, I'm going to throw over to you building and pest and what the buyers need to be very aware of when they're using the statutory wording that's provided in a typical contract. Yeah. Yeah.

[00:29:00] This one's an interesting one and it's something that I actually have a real bugbear with because it used to be the special condition around the building and pest used to be written in a pretty fair way. And sometimes it still is if there hasn't been an alteration to the contract where the general condition provides for the purchaser to opt out of the purchase if a major building defect is found. Now, a major building defect could be classified as a number of things.

[00:29:29] Interestingly, there's no real guidebook that states what technically constitutes a structural defect or a major building defect. And sometimes it can come down to how the building and pest person labels it. It's their interpretation. And so, one building and pest inspector would label one thing a major defect and another one wouldn't.

[00:29:52] And so, that's an interesting sort of scenario to navigate with the wording in the building and pest reports and how it relates to the contract of sale. And so, this was a fairly good one because if you found things in the property that were a major defect and it could be as simple as cracking tiles in the shower which in and of itself is not a major expense. But it allowed for a purchaser to change their mind.

[00:30:22] What I've seen, however, in the last sort of 18 months or more is conveyances and real estate agents actually altering the contract by putting a special condition that overrides the general condition that states that it has to be a major structural building defect.

[00:30:43] And that's a whole different ballgame because it's very uncommon to have a structural defect come up in a property. Usually, we get a lot of major defects but we don't get structural defects. And so, what that means for a purchaser is that they could get a building and pest report that comes back with around about $25,000, $30,000 worth of defects.

[00:31:08] And they can't get out of the contractor sale unless their building and pest report specifically says structural defect. And so, this is one that I think people really need to look out for. And where possible, we have our own special condition that we use that makes this a lot more fairer for purchases.

[00:31:29] And this is one thing that I'd really like to see changed, I think, in the standard contracts of sales because I think it's unfair and heavily weighted towards protecting the vendor and giving the purchaser no rights at all. And one thing that has been a little bit of a bugbear for me around this is when we've had these influx of interstate buyer advocates purchasing in Melbourne,

[00:31:56] they've intentionally offered high with the view to renegotiate because that's something that typically happens in New South Wales. That is a part of their normal and expected process. However, it isn't normal or expected in Victoria. It doesn't mean to say that it doesn't happen. It's just not expected to happen on every transaction. And so, their strategy to beat everybody else was to put in a very high number and they'd say to their client,

[00:32:22] don't worry, we'll renegotiate it after the building and pest reports come back. And so, that's what they were doing. And this is one of the reasons why estate agents and their conveyances have started overriding the general condition with this special condition that makes it impossible for people to renegotiate or opt out of the contract. And so, that's been a real bugbear for me because it's altered the way we transact and then real estate agents are looking at us,

[00:32:51] expecting us to be okay with their special conditions. And I'm not okay with their special conditions. I think it's grossly unfair. Yes. Yes. And if I'm forced, if I'm absolutely backed into a corner where I cannot renegotiate that, even by striking out the word structural, you know, I'm okay with major defect being in there, but I'm not okay with it being marginalised down to only being structural because to your point, that's very rare.

[00:33:17] So, what I try to do if I really have no power to change that condition is make sure I can get that building and pest inspection done in the cooling off period. Yeah. Yeah. And some agents are pretty savvy and intentionally won't allow a building and pest to occur within those three days because they know that that's another route for us if we need it. So. I'm just transparent with them. I just say I'm really uncomfortable with this condition.

[00:33:44] And I'll say if I can't get the building pest done in the three days, we're not moving forward with this. So, have a chat to your vendor. Let them know my position. And it's not about cooling off because there's a leaky tap. No one is going to do that. It's about having the right to walk away from the contract if there's 50 minor defects that add up to an eye-watering amount of money to fix. Yeah, which can happen.

[00:34:07] And that's the most typical scenario for the agents who know us quite well and they know that we're honest and above board and that we're reliable. They will often, like I've been in situations, and I'm sure you have as well, where they've said to me, Lisa, for anybody else I wouldn't do it, but for you I will because I know you've never screwed me over. And I think that's one of the advantages for consumers when they do have somebody like us representing them.

[00:34:31] We do have those relationships that afford our clients some level of favour, if you will, or advantage that they wouldn't ordinarily get on their own if they were a buyer off the street without the representation of somebody that the agent knows and trusts. Yeah, absolutely. Now, Kate, you mentioned earlier about the finance condition and that one's been something that's evolved over the years as well. Do you want to speak a little bit about that and what that looks like today? Yes.

[00:35:01] A good finance clause, a robust one, states how much is being borrowed. It can sometimes be a percentage of the purchase price or a flat-out number. What the lender is, whether it's a major bank, a specific entity, and how long you need to obtain that unconditional finance approval. So these days brokers will ask for 21 days, which is horrifying, but it is what it is. Sometimes I've seen it happen in 7, 14 was always a common one.

[00:35:28] So when you undertake to use a finance clause, if you don't get your finance, there's an expectation that you've got to demonstrate that you tried to get financed. So you went through the process that you were organised, you got all of your documentation to the broker or the bank, and that your loan was rejected. And some contracts call for a bank rejection letter, not just an email from the mortgage broker.

[00:35:55] So you've got to be really mindful of that because I've seen situations where someone who didn't bother to move quickly enough decided to opt out because they hadn't got their finance approved, but they hadn't demonstrated that they'd tried to get finance. So they were actually forced to proceed with the contract. We're going to wrap up in a minute, Kate, but one thing whilst we're on this topic that I want to express is that I really feel that the contract of sale situation needs an overhaul.

[00:36:23] Because I don't think buyers are fairly represented and, you know, things like, you know, a vendor can hand over the property in any state they want to, unless you've got provisions for that in the contract of sale by way of special condition. You know, they could leave all of their personal belongings at the property.

[00:36:44] All they're required to do is give you a key to the front door and it can be expensive to get all new keys for every single key lock in a home or to have everything newly key locked. Removing of rubbish can be very expensive. Getting a proper clean can be very expensive and all of those things add up.

[00:37:03] And I think that those things should be provided for in the contract of sale so that it is more fair between both parties because at the moment, I think all of risk lies with the purchaser and hardly anything lays with the vendor. Yeah, I would argue that as well.

[00:37:21] I think that what the general conditions did seek to provision for is an equally weighted amount of risk on either side of the transaction and conditions that allow people to exit, you know, for fair and reasonable reasons. But you're right, it's definitely more often, I think, the addition of special conditions and the striking of general conditions.

[00:37:44] So in other words, special provisions that override, you know, for example, general condition 24.4 to 24.6. That used to be the purchaser's right to be able to withhold funds at settlement if there was an issue that was unresolved and unfair. You know, the two could fight it out and there's $5,000 each that's left in their trust accounts. Respectively, you know, these are the types of conditions that we often see crossed out now.

[00:38:12] So, you know, a buyer can be left a little bit powerless if they're not switched on and making sure that things aren't damaged or not working when they do their final inspection. Last question to wrap us up for today, Kate. A lot of people ask us this question, whether or not they should use a conveyancer or a solicitor. Do you want to speak about the difference between the two and we can have a little bit of a chat about what our preferences are?

[00:38:37] It's an interesting one because some people assume that a solicitor is better because they've gone to university for longer. I actually disagree. It depends on the firm and the person themselves and what their specialisation is because I've seen conveyances that run rings around solicitors. And I've met solicitors that are absolutely incredible. In fact, you know, I know one that contributed a lot of his knowledge to the contract of sale that we have in place today. You know, some of these people are incredible.

[00:39:06] I think it comes down to how specialised a solicitor is in property and how diverse their business is and how accessible they are. And sometimes you need them to be very specialised in commercial as well, commercial arrangements, commercial contracts. You know, for example, if I was purchasing a commercial property in a self-managed super fund entity,

[00:39:29] I might well go to a solicitor who specialises in that kind of transaction and that type of property. But the solicitors that are really hard to catch because they're in family court, that's not necessarily a great move on a purchaser's part if there are people in the office who aren't trained and able to carry the file in their absence. And you often find that property lawyers employ a lot of conveyances in their firm anyway. So I'm actually agnostic.

[00:39:58] I think it's about the person, their experience and their focus and specialisation. Well, there'll be no surprises here, Kate, to know that I 100% agree and share the same view. I've come across some absolutely fantastic conveyances who have been absolute legends in regards to their contract reviews and what they've picked up and, you know, just how savvy they've been.

[00:40:23] I haven't had any bad experiences with solicitors, but we do tend to use property-specific solicitors who, you know, property is their core focus. I've had plenty of bad experiences with very average conveyances. And I think that stems from people, you know, just choosing a conveyancer because, you know, they use them on the last purchase or because it's, you know, their friend of a friend or, you know, things like that and they don't really know how to choose a good conveyancer. And I can't blame them.

[00:40:53] I don't think if I didn't do what I did for work, I don't think I'd know how to choose a good conveyancer. I think it's a lived experience. We can only spot them because we do this all day, every day. And we can, we know what we're looking to hear from a conveyancer about. And sometimes we get that and sometimes we don't. I've been in situations where a client has chosen to use their own conveyancer and it's made me extremely nervous because the conveyancer was not up to scratch and I'd picked up things in the contract that they hadn't.

[00:41:22] And so, I've actually had my own solicitor review the contract for me as a freebie and as a, you know, as a favour because I was just really, really nervous that their conveyancer had missed things and they had missed things and we were able to intercept that and provision for it with our negotiations and get around it. But had the purchaser been acting on their own, they wouldn't have even known that they needed to get a second opinion on that contract.

[00:41:51] So, I think good representation, no matter which way you go, is extremely important. And when clients work with a buyer's advocate, they will typically, a buyer's advocate will typically have a team of their own preferred specialist that the buyers can use if they choose to. And so, they get that advantage of having somebody that's already vetted and have proven themselves to be of a standard that we want to be working with when we're purchasing such a large investment.

[00:42:22] So true. And on that note, we have hit our time limiter. It's been great to run through this. I don't, it looked like a dry topic, but when you delve into what can go wrong and what people don't understand, I think it's fascinating. So, we'll catch you on the next episode. Thanks for today, Kate, and we'll see you next time. See you next week. Thank you for joining us on today's episode of the Melbourne Property Hour.

[00:42:49] We hope you've enjoyed the show and we look forward to you joining us next time.