What is a Contract of Sale? Understanding Your Property Purchase Agreement

When you buy property in Victoria, the Contract of Sale is the document you actually sign. It is the legally binding agreement between the buyer and the seller that governs the entire transaction — from the purchase price to the settlement date and everything in between.

This guide explains what a Contract of Sale contains, what each section means, and what to watch out for before you put pen to paper.

Contract of Sale vs Section 32

These two documents are always provided together, but they serve different purposes:

• The Section 32 (Vendor's Statement) is the vendor's disclosure document. It tells you about the property — who owns it, what is on the title, any planning restrictions, rates, and known issues.
• The Contract of Saleis the agreement itself. It sets out the terms of the deal — how much you are paying, when settlement occurs, and the conditions that apply.

Both need to be reviewed carefully. Issues in the Section 32 can give you grounds to rescind the contract, while the terms in the contract determine your rights and obligations as a buyer.

The standard form

In Victoria, most residential property contracts use the standard form jointly published by the Law Institute of Victoria (LIV) and the Real Estate Institute of Victoria (REIV). This standard form contains a set of general conditions that are well understood by solicitors, conveyancers, and the courts.

Using the standard form gives both parties a level of certainty. The general conditions cover common scenarios — what happens if settlement is delayed, what happens if the property is damaged before settlement, and how disputes are resolved.

Key sections of the Contract of Sale

Parties

The contract identifies the buyer (purchaser) and the seller (vendor) by their full legal names. If you are buying with a partner, both names will be listed. If you are buying through a trust or company, the trustee or company details are required.

Make sure the names are correct and match exactly. An error here can cause issues at settlement or with your lender.

Property description

This section describes the property being sold, including the lot and plan numbers, the street address, and the municipality. It should match the title search in the Section 32 exactly.

Purchase price and deposit

The contract states the agreed purchase price and the deposit amount. In Victoria, the deposit is typically 10% of the purchase price, but this is negotiable. Many buyers negotiate a 5% deposit, particularly first home buyers.

The deposit is usually held in a trust account by the real estate agent or the vendor's solicitor until settlement. There are rules about when the vendor can access the deposit — in most cases, they cannot use it until settlement.

Settlement date

The settlement date is when ownership of the property transfers from the vendor to you. In Victoria, the settlement period is typically 30 to 90 days from the date the contract is signed. The most common period is 60 days.

During the settlement period, you will finalise your finance, your solicitor or conveyancer will conduct searches and prepare for settlement, and the vendor will prepare to hand over the property.

Special conditions

This is the section that requires the most attention. Special conditions are additional terms added to the standard contract. They can be inserted by either party and can change the deal significantly.

Common special conditions include:

• Subject to finance: The contract is conditional on you obtaining formal loan approval by a specified date. If your finance falls through, you can withdraw without penalty. This is one of the most important conditions for buyers.
• Subject to building inspection: The contract is conditional on a satisfactory building and pest inspection. If the report reveals serious issues, you can negotiate or withdraw.
• Early deposit release:The vendor may request access to the deposit before settlement. This is risky for buyers — if the deal falls through after the deposit is released, getting it back can be difficult.
• Vendor's right to nominate: Some contracts allow the vendor to nominate a different entity to complete the sale. This is common in off-the-plan sales.

Always read the special conditions line by line. If you do not understand a condition, ask your solicitor to explain it before you sign.

What happens after you sign?

Once the contract is signed by both parties, the following sequence typically occurs:

1. Cooling-off period: For private sales, you have 3 business days to change your mind (with a 0.2% penalty). There is no cooling-off at auction. See our first home buyer guide for more on cooling-off rights.
2. Satisfy conditions: If the contract is subject to finance or a building inspection, these need to be completed by the dates specified. If a condition is not satisfied, the contract may be terminated.
3. Preparation for settlement: Your solicitor or conveyancer will conduct title searches, prepare transfer documents, calculate adjustments for rates and levies, and liaise with your lender.
4. Pre-settlement inspection: You are usually entitled to inspect the property before settlement to ensure it is in the same condition as when you signed the contract.
5. Settlement: On settlement day, the balance of the purchase price is paid, the title is transferred into your name, and you receive the keys.

Review your contract before signing

The Contract of Sale is a binding legal agreement. Once the cooling-off period expires (or if you buy at auction), you are committed. Taking the time to review both the contract and the Section 32 before you sign is one of the most important steps in the buying process.

Pre Contract Review provides an instant analysis of your Section 32 and Contract of Sale, highlighting potential issues and helping you understand what you are signing. It is a quick, affordable first step before you engage a solicitor.