Marketing Residential Property
Representations in advertisements or made orally by agents as to the likely selling price for land can either be a single figure or a range but cannot include symbols. The lower figure must not be less than the estimate given by the agent as expressed in the sales agency agreement (which is the agreement entered into between the seller, or vendor, and the agent). The upper figure must not be more than 110% of the lower limit of the range. For example, it is acceptable to state the price as "between $420,000 and $440,000" but not to state "mid-$440,000's".
These rules are designed to prevent "underquoting", when consumers may be attracted to a property because of an apparently affordable price, and then outlay money on a building inspection for a property that then sells for a price way over the advertised selling price, or even over-commit themselves to a property that they may not be able to afford.
Penalties apply to agents who breach these rules, and agents are also prevented from demanding or receiving commission or expenses [see Land and Business (Sale and Conveyancing) Act 1994 (SA) s 24A.
Communicating an Offer
Once a purchaser has decided on a price they are willing to pay for property, the offer along with any special conditions (such as whether the contract will be subject to finance or the sale of another property or a satisfactory building inspection) needs to be communicated in writing to the vendor via the agent (or sales representative). This can be done in one of two ways:
The agent is not permitted to disclose the terms of any offer to other purchasers at any time before the sale. Copies of the offers must be kept by the agent.
Once the Offer is Accepted
If the vendor accepts the offer, depending on how the offer is communicated, a contract needs to be completed. Once signed by both vendor and purchaser, the contract is legally binding. Depending on the conditions of the contract, and the delivery of the Form 1, the purchaser has a number of rights which may bring the contract to an end. These are discussed in more detail below.
The price agreed for the sale is usually expressed on the contract in words and figures. Care should always be taken if there is any suggestion made that some amount other than the agreed purchase price should be shown on the contract - say for the purpose of obtaining a loan or to avoid stamp duty. The purchaser is bound to pay the price shown on the contract, except in the most unusual circumstances.
In South Australia rent-to-buy schemes are prohibited [see Land and Business (Sale and Conveyancing) Act 1994 (SA) s 6]. Rent-to-buy schemes are arrangements where the purchase price is paid in installments and settlement does not take place until the full price has been made. As a consequence the purchaser does not hold the title and therefore has limited rights. Should they or the vendor (who is likely to have borrowed to finance the loan to the purchaser) fall into default they risk losing possession, any possibility of ownership and will be unable to obtain any refund for money already paid. In addition, a purchaser cannot be asked to pay for a property in installments prior to the settlement date. Any sales contract which requires payment of part of the purchase price prior to settlement, other than a deposit, is void.
The purchase price cannot be paid by more than three installment payments. A payment may be requested after signing the contact and a second payment after the cooling off period and the balance of the purchase price on the day of settlement.