What is Conveyancing?
Briefly, the term “conveyancing” includes all of the steps involved in transferring the title of real property from a seller to a buyer. This begins with negotiating the contract of sale and continues until the transfer has been appropriately registered. Depending on your settlement date, you should expect the process to take from one to three months. Six weeks is average. Most people hire a conveyancing solicitor or a conveyancer to manage the process and to minimize financial risk. Each transaction is unique and costs can vary widely, but keep in mind that, as with any professional service, you get what you pay for. Many firms offer free quotes. It would be wise to collect several estimates and to compare their relative inclusiveness. If you use a conveyancing solicitor, who can also evaluate other legal aspects of the transaction, you should expect your overall expenses to run between $1,500 and $3,000.
What steps are involved in conveyancing?
It may be helpful to think of the conveyancing process as going through six phases, although some of these may actually occur simultaneously.
- The execution of the contract of sale
- Review of searches and removal of conditions
- Obtaining financing
- Preparation of settlement figures
- Post settlement matters
The contract of sale
The vendor’s real estate agent, conveyancer or solicitor will generally prepare the contract of sale, setting forth the description of the property, price, warranties and other terms and conditions. The buyer’s solicitor should carefully review the contract and negotiate any changes before the parties sign and the buyer pays the deposit. This is known as the “exchange of contracts.” During a “cooling off” period, generally of a few business days, the buyer may withdraw from the agreement, forfeiting the deposit but incurring no legal penalty.
Searches and inspections
Most contracts are contingent on the satisfaction of certain conditions concerning pest inspections, financing, and a variety of property searches. The purchaser typically orders and reviews the pest and building inspection. In New South Wales, the property searches include a title search, zoning search, strata plan search and a historical search. The buyer’s solicitor or conveyancer would typically order and review the property searches. The buyer’s obligation is not fixed until the conditions specified in the contract are satisfied.
Financing is condition that deserves particular consideration. Many prospective home buyers seek a home loan pre-approval to assess borrowing capacity before they begin to search for a house, so this may actually be the very first step. If you are a first-time home buyer, you should explore whether you are eligible for a First Home Owner Grant scheme (“FHOG scheme”). Although conveyancers may have experience with a number of lenders in the geographic area, they may not offer financial advice to a client. Preparing to buy a home may be a valuable opportunity for long-term financial planning, particularly for the first-time buyer. Some firms, like Owen Hodge Lawyers have an affiliated mortgage brokerage, OH Mortgage Solutions Pty Ltd (OHMS) and may be able to streamline the mortgage application process. In either situation, prospective borrowers should insist on a detailed, plain-language explanation of the terms of mortgage documents before the settlement date.
Final figures may not be available until the day of settlement, but your conveyancer or conveyancing solicitor should keep you apprised of costs throughout the period of representation. Savvy clients ask for an itemized list of estimated costs before the work begins. In addition to fees for legal services, a buyer may anticipate fees for inspections, searches and building insurance. There may also be a category of fees associated with the mortgage, including mortgage insurance, establishment and registration of the mortgage and mortgage duty. Other miscellaneous costs may include photocopying, certificate fees charged by water, utility, roads and school authorities, adjustment for council and water rates, stamp duty and the Goods and Services Tax. The best surprise at settlement is no surprise at all.
This is the big event. Buyer, seller and lender exchange important legal documents and the remaining purchase price is paid. There may be additional adjustments for taxes, rental fees and fees for the release of existing mortgages, but these should have been included in your estimate. Your solicitor or conveyancer should, of course, accompany you at the settlement and be prepared to answer questions and review documents.
After settlement, relevant authorities must be notified of the change in ownership and Transfer documents lodged with the Land Titles Office. This final step is often done by the buyer’s lending institution.
Do I need to hire a conveyancer or a conveyancing solicitor?
In theory, you have three options.
- Use a solicitor
- Use a conveyancer
- Represent yourself
Using a conveyancing solicitor
Solicitors are professionally licensed and must carry professional indemnity insurance. A solicitor generally charges more than a conveyancer, but particularly for the property novice, the wider range of legal advice they can provide may well be worth an additional charge.
Keep several things in mind when choosing a solicitor. Choose a firm that specializes in conveyancing, and tells you the name of the solicitor who will be handling your case. Make sure that you can reach that individual by telephone. Ask for a quote up front, and insist on being kept in the loop about any changes or recalculations. Make sure that the firm is accredited with a wide range of lenders. Above all, make sure that your solicitor patiently and completely answers all your questions, even if you need to ask them several times and in several different ways. There is no such thing as bothering a professional to ensure that you understand what may be the largest financial transaction of your life. Owen Hodge provides free quotes, is on the “approved list” of a large number of lenders in addition to OHMS and can be reached any time at 1800 770 780.
Using a conveyancer
Conveyancers may also do the legal work associated with conveyancing. They must be licensed with NSW Fair Trading. As a condition of licensing, conveyancers, like solicitors, must carry professional liability insurance. If you decide to work with a conveyancer rather than a solicitor, always confirm that the conveyancer is licensed. Conveyancers may charge somewhat less than solicitors, but the range of services they may provide is more limited. This may ultimately affect your total cost and lengthen the time necessary to complete your transaction. As noted above, conveyancers may not advise about the mortgage process. You will have to deal directly with the bank.
This may be the least attractive of the options. You can do your own conveyancing, but you may not want to because of the financial risk involved. The process is complicated, even for the sophisticated. Mistakes can have disastrous consequences. Solicitors and conveyancers carry insurance, so that in the event they are dishonest or negligent you may be able to recover your losses. You will not have the opportunity to do the same if you do your own conveyancing work. If something goes wrong, you’re out of luck.
As you contemplate buying or selling real property, consider your options carefully. A smooth transaction in which you have been well-advised and represented can prepare you for your next step in property ownership.