Buying property in Australia can be complex, with contract signing processes differing across states. The most notable variations involve how contracts are executed, the use of finance clauses, and the risk of gazumping. Here’s a breakdown of how the process works across states, highlighting where buyers may need to take extra steps to protect themselves.
QLD, NT, VIC, SA, and TAS
In Queensland (QLD), Northern Territory (NT), Victoria (VIC), South Australia (SA), and Tasmania (TAS), the contract signing process is straightforward and relatively risk-free:
Contract Signing: The contract is fully executed from the outset, with both the buyer and vendor signing at the same time, making it legally binding from the start (eliminating the risk of Gazumping; explained below).
Finance Clause: In these states, it’s standard practice to include a finance clause to protect the buyer’s deposit if they are unable to secure finance. This clause typically provides the buyer with 7-21 days to obtain formal finance approval. If finance is not approved within this period, the buyer may cancel the contract without losing their deposit.
NSW and ACT
The contract signing process in New South Wales (NSW) and the Australian Capital Territory (ACT) differs significantly. Here, buyers may be exposed to gazumping and need to consider additional protections.
Gazumping in NSW and ACT
In NSW and ACT, the buyer often signs the contract first, but the vendor does not counter-sign until the buyer’s finance is formally approved. This delay in vendor counter-signing creates an opportunity for gazumping—if another buyer offers a higher price after the initial buyer has signed but before the vendor’s counter-signature, the vendor may choose the new offer, leaving the original buyer out of the purchase.
Mitigating Gazumping Risk: To minimise this risk, some buyers request a fully executed contract with a finance clause from the outset, meaning both parties would sign before finance is formally approved. However, this practice is rare in NSW and ACT. Most transactions follow the standard approach, where finance approval is obtained first, then the vendor signs, making a finance clause generally unnecessary, as the buyer’s deposit is not at risk until the contract is fully executed.
Finance Clause in NSW and ACT
While it’s possible to include a finance clause if both the buyer and vendor agree to fully execute the contract from the outset, it’s uncommon in NSW and ACT. The standard process of obtaining finance approval before finalising the contract reduces the need for a finance clause, as the buyer’s deposit isn’t at risk until both parties have formally signed.
Key Takeaways
QLD, NT, VIC, SA, TAS: Contracts are fully executed by both buyer and vendor from the outset, preventing gazumping. A finance clause protects the buyer’s deposit if finance isn’t secured.
NSW & ACT: Buyer signs first; vendor only counter-signs after finance approval, introducing gazumping risk. While rare, a fully executed contract with a finance clause can be requested to mitigate this risk, though it’s typically unnecessary if you're not worried about being gazumped!
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General Advice Warning
This information is general and not intended as legal advice. Buyers should consult a qualified legal professional to understand their options and ensure their interests are protected.
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