Thinking of Selling and Buying What’s a Section 27? OMPHNEWS

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Thinking of Selling and Buying What’s a Section 27? OMPHNEWS

A section 27 is known as a “Early Release of Deposit Authority” It is referred to as a Section 27 because it is implemented under Section 27 of the  Sale of Land Act.

When you purchase a property either at auction or private sale through a licenced real estate agent; the purchaser will generally pay 10% of the purchase price in the form of a deposit.  The deposit is a sign of your genuine commitment to purchase the home and acts as your security of the purchase.

The deposit is held by the licenced real estate agent, a lawyer or conveyancer who has a trust account. When the property is settled the purchaser pays the vendor the balance of the sale price in return for the title of the property. This is generally conducted by the conveyancer, licenced real estate agent and or lawyer.

So where to does the Section 27 come in?

Let’s use a hypothetical as a reference:

I was successful at the auction and bought the home Saturday June 1st for $1,000,000. That day the contract was signed with the selling agent. I hand over 10% of the purchase price $100,000. This is held in a trust account.  The settlement date was agreed at 60 days from the day I signed the contract. Settlement date is July 30th (60 days from signing the contract)  $900,000 is deposited into the vendors account and I take possession of the property.  (all the legal stuff has been done prior).

Between June 1st and July 30th the vendor has under; Section 27 of the Sale of Land Act, the option to request from me, the purchaser, an Early Release of Deposit Authority.

In basic terms this means that the vendor is requesting access to the deposit paid prior to the agreed settlement date.  In most cases this is considered a “safe” thing to do, however I as the purchaser should always seek advice from my conveyancer or lawyer before agreeing to sign the Early Release of Deposit Authority request.

When both parties; the vendor and the purchaser, have signed the Early Release of Deposit Authority, the licenced real estate agent, conveyancer or lawyer who is holding the deposit in their trust account will release the funds to the vendor.

Why would the vendor want to request a Section 27?

A vendor will request the Section 27 of the Sale of Land Act, because they are purchasing a new home and require the funds for their deposit.

The practice of requesting a Section 27 has become normal in real estate transactions and it is a rare situation where it would not be granted.  As with all real estate transactions you should seek advice from a professional before entering into the agreement.

Does this help me when I’m thinking of selling?

Absolutely. When you think of selling you think of buying. This will mean you’ll also need a deposit to secure your new abode. Being able to access the sale deposit of your home gives you confidence to buy another without too much financial strain. There is no guarantee that the purchaser will sign the authority, you should discuss the option prior to agreeing to sell your home.

If you’re thinking of selling the option to utilise the Section 27 of the Sale of Land Act; use the deposit paid on your home to help you pay the deposit on your purchase can take a great deal of stress out of the buying/selling process.

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