The Conveyancing Process When Buying a House [a Step-by-step Guide]

If you’re a first-time home buyer or property investor, you might not have come across the term ‘conveyancing’ before.

First Home BuyersLikewise, terms such as unconditional, settlement and ‘cooling-off’ period are also terms you may not be overly familiar with.

And even if you’re a seasoned property investor, you would have employed a conveyancer or solicitor to assist your sale or purchase, in which case you still might not be completely clear of exactly what the conveyancing process entails.

You’re not alone.

So to help, in this article, we’ll outline the meaning of conveyancing, including what conveyancing is, what a conveyancer does and why you need one, and also a detailed explanation of the steps involved in the conveyancing process so you’re prepared when the time comes around to use one.

 

What is conveyancing in real estate?

Let’s start with the basics.

The definition or meaning of conveyancing and conveyancing services is the part of the law involved with preparing documents for the conveyance of property.

In other words, it’s the legal process of transferring ownership of a property from the current owner (vendor or seller) to a new owner (purchaser or buyer).

Generally, a conveyancing transaction consists of three main stages:

  1. Pre-contract
  2. Pre-completion
  3. Post-completion

These three steps include any work needed when buying or selling a property, subdividing land, updating a title or registering or changing an easement.

This can include assisting the transfer of ownership, including home loans and any other conveyancing activity.

It’s interesting to note that conveyancers don’t necessarily have to be solicitors, but they can undertake the same type of work.

However, I’d like to point out that while conveyancers specialise in a title transfer, I prefer working with a solicitor who specialises in property conveyancing.

You might ask why?

Generally, conveyancers have detailed knowledge in one area of the law, being property law.

On the other hand, solicitors have specific knowledge about property law but also broader knowledge of the law in general.

This difference in knowledge and experience is what commonly creates a price difference between conveyancers and solicitors, but when or if something goes wrong, and unfortunately occasionally it happens, in general, it is better to have a legal firm and solicitor working on your side.

What does a conveyancer do?

Now that we know what conveyancing is, we can look at what a conveyancer actually does.

First Investment Property Home HouseA conveyancer is the person who oversees, and manages, the actual transaction of the sale of a property from a seller to a buyer and manages the preparation of any legal documents needed for the transaction.

A conveyancer also has to ensure the documents comply with legal regulations in your state or territory.

The role and timing of the conveyancer’s work does differ from state to state but generally speaking, it involves preparing or reviewing a sales contract, home loan and other related documents needed when someone is buying or selling a home, land or investment property.

It might sound straightforward enough but there is a significant amount of work involved.

For someone who doesn’t know the process and how to tackle conveyancing steps effectively, it could take weeks to find, lodge and understand each individual legal document.

So what do conveyancers check? And how does it differ for the buyer or seller?

Obviously, every property transaction has a buyer and a seller, and they both need a conveyancer or solicitor to represent them in the conveyance process, and this should not be the same person so that there is no conflict-of-interest.

For a buyer, a conveyancer will do the following:

  • Research the property and its certificate of title – check for easements, type of title and any other information which is needed
  • Put the deposit money in a trust account
  • Prepare and lodge legal documents, such as a contract or sale, vendor disclosure and memorandum of transfer
  • Calculate any adjustments of rates and taxes, stamp duties and other financial obligations
  • Settle the property – a conveyancer will act on a buyer’s behalf, advise when the property is settled and contact your bank or financial institution when final payments are being made
  • Represent your interest with a vendor or their agent

For a seller, a conveyancer will do the following:

  • Complete legal documents
  • Confirm the seller is the legitimate owner
  • Review the contract of sale and vendor disclosure statement to look for any unusual clauses or raise any red flags
  • Check the property meets council standards
  • Give any advice on conditions which could protect you during the process
  • Arrange any finances if necessary
  • Arrange payments of deposits and stamp duties
  • finding out if any government authority has a vested interest in the land or if any planned development could affect the property
  • finding out any information that may not have been previously disclosed such as a fence dispute or illegal building work
  • Represent you and your interest in dealings with the buyer, such as asking questions, finding out information, requesting extensions etc.

Do I need a conveyancer before making an offer?

So we’ve ironed out what conveyancing is, what a conveyancer does and what a conveyancer checks.

But do you know when you should engage with one?

Here are nine examples of when you may need to engage a conveyancer’s services:

  • Buying and selling property
  • Leasing
  • Subdivision of land
  • Buying an apartment or house off the plan
  • Updating a Title due to Divorce or death (or Will)
  • Registering, changing or removing an Easement
  • Checking a Company Title
  • Tenants in common apartments
  • Land tax & Stamp Duty advice

So, do you need one before making an offer, or can you bring them in once the process has started?

People Shaking Hands In A Real Estate TransactionIn short, whether you are the seller or the purchaser of a property you will need the services of a conveyancer, so it’s always best to engage with one sooner rather than later.

While I’ve heard of buyers and sellers who attempt to undertake conveyance duties themselves, it is inadvisable to do so, in fact, it makes no sense to do so given the complexities and regulation surrounding real estate transactions.

Conveyancers are professionals in their field, can provide arm’s length legal advice on the property transaction, and can also efficiently prevent a buyer from buying a ‘dud’ property.

For sellers, a conveyancer can help prepare the offer and sales contract as well as organise any other legally required documentation.

They can also assist in determining the most advantageous settlement date long before negotiations with any prospective buyer begins.

For buyers, a conveyancer often only becomes involved in the transaction when a contract of a sale has been signed.

So in my opinion, their legal expertise should be utilised beforehand to verify any issues around boundaries, planning restrictions or any legal issues which can drastically alter a property’s potential.

Can you change conveyancer before settlement?

On the odd occasion, some buyers or sellers will look at changing conveyancer mid-way through a sale or before settlement.

Perhaps they decide they’ve chosen the wrong conveyancer?

Maybe they’re unhappy with their conveyancer, the service they’ve received or the speed at which the work is being done.

First Home BuyerOr maybe they have even been charged for work not done, have missed the cooling-off-period or essential searches haven’t been done.

It’s hard to believe but, unfortunately, some conveyancers cut corners, fail to give the right advice, miss doing important searches, are late transferring funds and even make mistakes with the Title.

In which case, of course, their client would want to look to change conveyancer before settlement.

And it’s certainly possible to do.

Depending on what stage of the process you are in, it could be a simple move or something a bit more tricky.

Generally, the earlier in the transaction the simpler a change can be.

First, you should try to resolve any issues by voicing or elevating any concerns.

If that doesn’t resolve the issue, then before proceeding you need to work out the following:

1. Is there a penalty for switching to a new conveyancer?

So long as contracts haven’t been exchanged, there should be no penalty unless set out in your contract. There could however be penalties associated with delayed completion.

2. Do I need to pay for work already completed?

Your contract will state whether or not the conveyancer is working under a ‘no completion, no fee’ arrangement or whether you are liable for work already done.

3. How can paperwork and funds be transferred?

Depending on whether you need to pay for work already completed will dictate how willing and quickly a conveyancer will transfer paperwork and funds to a new conveyancer.

How to pick a conveyancer

In order to avoid going down the troubled route of changing a conveyancer mid-way through the process of buying or selling a house, it is recommended you do your research and ask questions to make sure you’re picking the best person for the job.

Here are a few examples of questions to ask:

  1. How long have you been practicing?
  2. What are your qualifications?
  3. Do you have property experience?
  4. Do you hold current professional indemnity insurance?
  5. Have you ever had any malpractice suits?
  6. Are you up to date with developments and technology in order to deliver the best service?
  7. What are your fees and what do they include?
  8. Are there any extra outgoings I might be charged?
  9. What are the Government fees?
  10. Can I speak with any of your clients for a testimonial about your work? (these testimonials will reveal a lot about who you intend to engage for your conveyancing).

A step-by-step process for the conveyancing process

Bad NegotiateThe conveyancing settlement process when buying a house involves a number of steps, which usually have strict time frames attached to them.

A conveyancer will manage the entire process on your behalf, which often involves reminders of when things need to be done so the sale is not jeopardised.

While the exact practices and procedures will differ depending on which state or territory you’re in, the general process remains the same.

Here is a step-by-step conveyancing breakdown:

Step one: The Contract of Sale is arranged

A contract of sale between the seller and buyer is drawn up.

While occasionally this document is prepared by the selling agent, usually the vendor’s solicitor prepares the contract of sale. Especially if the sale occurs by auction.

Real Estate Agent Showing His Client Where To Sign A Contract OfThis is the primary legal document for the transaction of the property and sets out all rights and obligations of both parties.

It includes every applicable detail about the transaction, including the price, information about the transfer of ownership, names of the buyer and seller, details of the property itself, any conditions for the transaction and terms of payment and loan details.

You can always negotiate the contract terms negotiated if needed.

A contract of sale should only be signed and exchanged (each party and their legal representatives get a copy) once it has been reviewed by the buyer’s conveyancer.

Step two: The exchange occurs

When the contract is signed by both parties (the buyer and the seller) it becomes a legal and binding document.

Invest In Real Estate Concept.Prior to this, a holding deposit is often paid.

But don’t be confused – this is different from the larger, say 10%, deposit which probably took you months or even years to save up.

This holding deposit is a small amount that you give the selling agent to show that you are serious about purchasing the property.

This holding deposit is fully refundable if the contract does not exchange and is just a way of the buyer showing the seller they are serious about proceeding.

Of course, this alone does secure the property for them, if the price and the terms and conditions are agreed upon both parties sign the contract of sale and at this point, the transaction is considered exchanged.

Assuming there are no problems or need for changes the buyer and seller (or their representatives) will proceed to contract settlement at which point final checks are done and the contracts of sale are signed by all parties.

Step three: A Deposit is paid

Once the contract of sale is signed and exchanged the buyer is required to pay a deposit (usually 10% of the purchase price) as a sign of good faith of their interest in the property, and this is held on trust by the real estate agent, solicitor or conveyancer.

The amount of deposit can vary and is generally stipulated by the seller or their agent.

These ‘holding deposits’ are generally non-refundable but this varies by state.

Step four: A ‘cooling-off’ period is implemented

At this point, a ‘cooling-off’ period commences.

Property Inspection2The cooling-off period for property transactions is the name given to a period of time after signing a contract of sale that enables you to “get out” of the contract.

If you decide to cancel the purchase within this set timeframe, you may still be legally required to pay a small termination fee to the seller.

The cooling-off period is the perfect opportunity to consolidate your buying decision.

This is when you might choose to enlist the services of a building and pest inspector and make sure that you’ve secured the adequate pre-purchase loan approval.

While a cooling-off period often applies to the sale of the property but this is not always the case. For example, there is no cooling-off period for properties purchased at an auction.

You may also choose to waive your right to a cooling-off period.

It’s important to understand that cooling-off periods differ greatly from state to state, so buyers should do their own research into which rules apply to them.

Step five: Title transfer is signed

The buyer’s conveyancer will then prepare a transfer of property, or land, the document which is then signed by the buyer.

Step six: Stamp duty is paid

stamp duty is paidThis is a “one-off” tax on certain transactions imposed by state and territory governments.

It can vary depending on the state or territory and may be called stamp duty, transfer duty or general duty.

When buying a property, the most common types of stamp duty are on transfers of land and on home loans.

Certain concessions and exemptions may be available for some buyers depending on the type of transaction.

Step seven: Transfer documents are stamped

Once the buyer’s conveyancer prepares the transfer document, has the buyer sign it and pay any stamp duty for the registration, they must then send the transfer documents to the seller or the seller’s representative for them to sign and stamp before settlement.

The buyer’s conveyancer must arrange for the transfer document to be stamped prior to settlement so the buyer can lodge it for registration immediately after settlement in order to organise the home loan promptly.

This is often a prerequisite of a lender for the transfer and so the home loan can be registered promptly.

Step eight: Insurance is taken out by the buyer

Insure PropertyThe seller is responsible for damage to the property until settlement or completion of the sale, and it is often recommended a buyer insure the property from then onwards because once the property title is transferred, the buyer is then responsible for any damage.

Also, many lenders require buyers to provide evidence of comprehensive building insurance as a condition of settlement on the home loan taken out to purchase the property.

Step nine: The buyer sends ‘requisitions on title’ (formal questions about the property)

The period of time between the purchase of the property and settlement varies by state and territory and typically ranges between 30-90 days.

At this point, in some states, the buyer’s conveyancer can send a list of formal questions to the seller (known as ‘requisitions on title’) in order to get any information which the seller might not have previously disclosed or had discovered.

But, in Queensland and Victoria the ‘requisitions on title’ has been replaced by warranties in the contract.

Step ten: A final search for defects is made

Building InspectionWhile the ‘requisitions on title’ may dig up any neighbourly disputes or issues, the buyer’s conveyancer will also often do additional searches to make sure there aren’t any general defects in the title, that the land isn’t contaminated and whether there has been any unapproved construction on the property.

Note: If any of these questions or searches give an unsatisfactory result which may affect the property and is not disclosed in the sale of contract, the buyer may be able to withdraw the

contract, ask for a price reduction or even sue for damages.

Step eleven: The seller will calculate final home loan payments

If the seller has a home loan on the property, their conveyancer will contact their financial institution in order to get a pay-out figure, attend a settlement to hand over a discharge of the home loan, and often also a certificate of title deed.

Step twelve: Settlement adjustments will be calculated

Paying BondThe next step is for the buyer’s conveyancer to calculate adjustments up until the date of settlement which is then agreed by the seller’s representative.

The buyer must pay an additional amount to the seller to cover payments already made for the time they will own the property.

This includes payments such as council rates, water rates, strata body corporate contributions, land tax and rent if the property is tenanted.

These adjustments are then included as part of the final settlement calculation and paid at that time.

Step thirteen: Final settlement

Finally we get to the point of final settlement which is when the buyer pays the agreed settlement bill to the seller.

In the past settlement meant physical attendance by both parties conveyancer’s and financial institutions.

This was where title documents were exchanged.

Buyers AgentNowadays more conveyances are completed electronically rather than in person.

This occurs through PEXA (Property Exchange Australia) is Australia’s online property exchange network and helps lawyers, conveyancers and other professionals lodge transfer documents with Land Registries and complete financial settlements digitally.

Electronic conveyancing reduces the number of manual processes and the paperwork required with traditional conveyancing transactions.

E-conveyancing allows conveyancers, lawyers and financial institutions to lodge important documents and arrange financial settlements digitally, ensuring a faster and more convenient conveyancing process.

How much does a conveyancer cost?

So now we understand what the conveyancing process entails, you’ll want to hear about how much it’ll cost you.

Fees generally vary between conveyancers, and solicitors, as there is no official charge and in addition to the service fee, you will usually also be charged for ‘disbursements’.

Disbursements are outgoings and expenses incurred by your conveyancer and can include a title search, certificate fees, photocopying and paperwork registration costs.

Outside of these other costs associated with your conveyance (the exchange of title) could include:

  • Building and pest inspections
  • Survey report
  • Establishment of mortgage
  • Homebuilding insurance
  • Valuation fees
  • Mortgage insurance
  • Stamp duty and mortgage duty
  • Levies, if the property is in a strata or community scheme
  • Council and water rates.

Legal practitioners and conveyancers must disclose their costs to clients, including the client’s right to negotiate a costs agreement, receive bills and be advised of changes.

In total, the average cost of conveyancing can roughly be between $900-$2,200.

Key takeaways on conveyancing and conveyancers

What is important to take away from this article is not only how the process works, but exactly what a conveyancer does – it’s not a simple process and requires a lot of know-how to make sure you tick all the boxes.

As a result, it really makes no sense to even consider undertaking the process yourself.

And again, I stress that while conveyancers which specialise in title transfer I prefer to work with a solicitor who specialises in property conveyancing because if something untoward happens, you have a legal firm and solicitor working on your side.

*The information provided in this article is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs.

Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on

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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit Metropole.com.au


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