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What is a Contract for Sale of Real Estate?
A Contract for Sale of Real Estate is a document that outlines the terms and conditions of the purchase and sale, exchange, or transfer of real estate between two parties.
This agreement should include:
- The buyer’s and seller’s personal information
- The property details
- The conditions the parties need to satisfy before possession transfers
- The deposit, price, and tax details
- The date of possession
The agreement must be in writing because verbal contracts aren’t legally binding when transferring real estate.
The buyer typically presents a Contract for Sale of Real Estate as an offer to the seller, who can then negotiate further terms before signing and accepting the deal. However, you can also use LawDepot’s less comprehensive Offer to Purchase Real Estate form if your circumstances require back-and-forth negotiations.
A Contract for Sale of Real Estate is also known as a:
- Real Estate Purchase Contract
- Real Estate Sales Contract
- Home Sale Contract
How do I write a Contract for Sale of Real Estate?
You can easily create a Contract for Sale of Real Estate by filling out LawDepot's questionnaire. Using our template will ensure you complete these necessary steps:
Step 1: State your location
States and territories have varying real estate rules and regulations. Provide your location, and LawDepot will ensure your Contract for Sale of Real Estate is customised to fit your location’s laws.
We have templates for:
- Australian Capital Territory
- New South Wales
- Northern Territory
- Queensland
- South Australia
- Tasmania
- Victoria
- Western Australia
Step 2: Provide details about the buyer and seller
Your Contract for Sale of Real Estate needs to include personal details about the buyer and seller, such as:
- Names
- Addresses
- Phone numbers
- Whether they’re an individual or an organisation
Step 3: Specify the type of property for sale
Specify whether the property is a house or a unit.
A unit is a subdivided property in a strata title scheme, such as a townhouse or an apartment. A strata title scheme is when a property is composed of the owned lot and common property co-owned by the owners of the lots. For example, you can own an apartment (i.e., a lot) and within the apartment building are common areas like laundry rooms, stairwells, and gyms that are co-owned by the lot owners.
Some states and territories require the seller to provide the buyer with certain statements if the property is under a strata title scheme or community title scheme.
Note that units in a retirement village are given special legal treatment and require different documents.
Community title schemes (applicable in the Australian Capital Territory or Queensland)
A community title scheme is when the property you own is a lot on a property, and you share ownership and responsibility of the common areas. It generally encompasses a variety of different land uses within one complex, like houses, apartments, gyms, shops, and golf courses.
Before the Contract for Sale of Real Estate is signed, the seller must give the buyer a signed statement that complies with section 67 of the Community Title Act 2001. The statement needs to be attached to the agreement and must disclose:
- That the lot is included in a community titles scheme that imposes obligations on the owner of the lot
- Information about the body corporate
- The number of annual contributions payable by the buyer
- Any common property improvements the buyer is responsible for
Step 4: Outline property details
Provide details about the property, such as its address and legal land description.
You can find your property’s legal land description on your state’s or territory’s Land Titles Office website. The legal land description of your property may also be found on your land title, in tax assessment information, and in your mortgage agreement.
Step 5: Specify any restrictions or encumbrances
In your Contract for Sale of Real Estate, be sure to state if:
- The property will be subject to a tenancy
- The property is subject to any easements or covenants
- There are any outstanding demands, orders, requisitions, or requirements relating to the property
If you’re in the Australian Capital Territory (ACT), you should include any restrictions on the property’s transfer. Also, include any breaches of covenant or unit articles to disclose if you’re in the Australian Capital Territory or South Australia (SA).
Subject to tenancy
If the property has a tenant renting the property, the seller needs to attach a copy of the Tenancy Agreement and any other notices to your Contract for Sale of Real Estate.
Easements or covenants
Easements are rights in another person’s property. For example, a city may have easements in a citizen’s property so it can maintain essential services like water, electricity or sewerage.
Covenants are limits on ways the buyer can use the property. They can include restrictions on how many houses can be built or building height limits.
Restrictions on the property transfer (applicable in ACT)
There may be restrictions on transferring the property from the seller to the buyer if it’s subject to a concessional lease or a building and development provision.
For example, if any restrictions on transfer set out in sections 251, 265, or 298 of the Planning and Development Act apply, be sure to state them in your agreement.
Breaches of covenant or unit articles (applicable in ACT and SA)
Describe any breaches of covenant or unit articles in your contract. Some examples of breaches include:
- Unapproved developments or structures
- Breach of registered restrictive covenant
- Breach of the articles of the owner's corporation
Step 6: State any included fixtures, chattels, or necessary improvements
State if the property comes with any fixtures or chattels. Be sure to also include if the seller will make any improvements to the property before transferring it to the buyer.
Fixtures are personal property items that are attached to land or a building in such a way that they can’t be removed without damaging the item. Sellers can exclude fixtures if they have sentimental value or are hard to replace.
Chattels are items of personal property that are moveable. As a general rule, sellers can take all the chattel with them but may choose to include some as part of the sale of the property. Examples of chattel include:
- Couches
- Tables
- Chairs
- Refrigerators
- Dish-washers
- Stoves
Step 7: State if the property includes rental items
Rental items are items the seller doesn’t own but leases or rents. Your contract should include a description of any rental items that are included.
Examples of rented items include:
- Hot water tanks
- Furnaces
- Air conditioners
- Water softeners
- Alarm systems
Step 8: Include details about the deposit
The deposit is the cash the buyer pays the seller as evidence of good faith to complete the purchase.
The deposit ensures that the buyer is serious about obtaining the necessary financing and fulfilling the other conditions required to purchase the property. The money is credited to the purchase price upon closing. However, the buyer may forfeit the deposit if they default or choose not to proceed with the transaction.
Your Contract for Sale of Real Estate needs to specify:
- The deposit amount
- The deadline for the buyer to give the seller the deposit
- The name and address of who will hold the deposit
Step 9: Provide details about the price and financing
The Contract for Sale of Real Estate must include the price the buyer is purchasing the property for and how they’re obtaining financing if they aren’t paying in cash.
If the buyer is receiving financing, state the type of financing they’re receiving:
- Third-party financing: Financing from a bank or private lender other than the seller.
- Seller financing: The seller lends the buyer the money to purchase the property using a Promissory Note.
- Assumption: The buyer takes over the unpaid balance of an existing mortgage or Promissory Note(s).
Depending on whether you’re an Australian resident and the price of the property, there may be three types of taxes you need to take into consideration as a buyer:
- Goods and Services Tax (GST)
- Foreign Resident Capital Gains Withholding Tax (FRCGW)
- Transfer Duty
Goods and Services Tax (GST)
Specify if there will be GST due on the property’s sale. GST is usually due only when the property is new. If there is GST, you’ll also need to decide if a margin scheme will be applied.
Making the sale GST-free is also an option for you. Selling an existing residential property is typically a GST-free input taxed supply. The sale can also qualify as GST-free if the property is established farmland that will continue to be utilised as farmland or if it’s the sale of an enterprise of going concern.
You’ll also need to determine if the contract requires the buyer to make a GST withholding payment. The tax applies to new residences, and most buyers are required to pay a withholding amount to the Australian Taxation Office (ATO) on closing.
Foreign Resident Capital Gains Withholding Tax (FRCGW)
The Foreign Resident Capital Gains Withholding Tax (FRCGW) might apply to a sale if the purchase price of the property is more than $750,000 and the seller is a foreign resident. The FRCGW will apply unless a vendor declaration has been made or a variation has been granted.
Transfer Duty
Transfer duty (also known as conveyance duty and stamp duty) is a general-purpose tax imposed on specific transactions, including the sale of a home. The buyer will usually have to pay transfer duty when acquiring a home and may be penalised if they don’t pay the tax within the required time.
The amount of transfer duty due varies depending on several factors, including:
- The type of property (e.g., established home, new home, primary residence)
- If you’re a first home buyer
- Where you live in Australia
LawDepot’s questionnaire explains how the transfer duty works based on which state or territory you select.
Step 11: Outline the requirements for closing the deal and transferring possession of the property
Before you finalise the Contract for Sale of Real Estate, you’ll need to determine:
- The last date the buyer can examine the property title for defects
- The closing date
- Whether the buyer will take possession on the closing date
- Whether the sale is subject to any conditions
Land title searches
Land titles are registered in each state or territory's land registry. A title search will reveal any issues that could affect the buyer's title to the property, such as:
- Registered mortgages
- Liens
- Easements
- Restrictions or covenants affecting the property
- Restrictions on the use of the land
Sale conditions
The seller often needs to satisfy some conditions to make the Contract for Sale of Real Estate binding and close the sale. If the conditions aren’t met by the specified date, either party may cancel the sale.
Some common conditions include:
- Satisfactory building inspection
- Satisfactory pest inspection
- Satisfactory pool inspection
- Buyer must sell their property (i.e., the buyer can cancel the contract if they can’t sell their current residence)
- Specific repairs to the property
Step 12: Include how the parties will handle disputes
Your Contract for Sale of Real Estate can include terms for resolving any disputes between the buyer and seller.
You might find it best to avoid litigation by going to a mediator and then an arbitrator. If so, include if the buyer, seller, or both parties will pay the cost in your agreement.
Your contract can also specify which party will pay the associated legal costs and lawyer fees.
Step 13: State if there will be a cooling-off period
A cooling-off period allows a buyer to withdraw from the agreement with notice to the seller. It’s generally required for every sale of a residential property.
If your agreement gives the buyer a cooling-off period, state how long it will last. The length of the cooling-off period and the consequences of backing out vary by state or territory.
Step 14: Sign the contract
Finish your Contract for Sale of Real Estate by having the buyer, seller, and any witnesses sign the agreement.
What contingencies are most common in Contracts for Sale of Real Estate?
The sale of real estate can come with many contingencies, but property inspections and mortgage financing are the two most common.
Do you need a lawyer to make an offer on a house?
Having a lawyer look over your Contract for Sale of Real Estate before making an offer is highly recommended.
Purchasing property is one of the most important financial decisions a person can make. A lawyer will ensure your contract is written correctly, answer any questions you might have, and look out for your best interests.
Lawyers are expensive, but the price could be minimal compared to the costly issues that can stem from a bad real estate contract.
How do I terminate a Contract for Sale of Real Estate?
Your Contract for Sale of Real Estate will include terms that specify that the deal will fall through if certain conditions aren’t met.
Some terms that can lead to the contract’s termination include:
- An expense is more expensive than initially agreed upon.
- The property is damaged or destroyed, and the seller can’t restore it before the closing date.
- The buyer or seller fails to comply with a notice to complete or a notice of default.
- The seller misleads the buyer about a third party’s interest (e.g., liens, assessments, or security interests) in the property that won’t be settled by the closing date.
Some agreements also include a cooling-off period that allows buyers to withdraw from the contract with notice to the seller.