Ep 29. What’s a 66W and why may you want one?
Always wondered what a 66W certificate is? In this episode, Michelle explains what they are, and whether you need one.
Here’s what you’ll learn from today’s episode:
What is a 66W certificate?
When is it a good idea to think about using a 66W certificate?
The reasons you don’t need a 66W certificate
Who can assist you with your 66W certificate
Speakers in today’s episode:
Michelle May - Michelle May Buyers Agents
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Please note that any views or opinions presented in this podcast are solely those of the speakers, and do not necessarily represent those of any business. These views and opinions are general in nature, and do not take account of your personal objectives, financial situation and needs. Please consider whether it applies in your circumstances and seek professional advice wherever appropriate.
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VIEW TRANSCRIPT
Hi, and welcome to the Buy Your Side podcast, the property podcast to help you buy better. My name is Michelle May and I am the principal of Michelle May Buyers Agents here in Sydney. Today let's talk about 66W certificates. You may have heard the term floating around, but what the hell are they and why would you want one?
So let's dive right in. Buying or selling a property in New South Wales is typically done one of two ways. It's either done through private treaty in which you get a five day cooling off period or via auction, where there is no cooling off period. Now this cooling off period is particularly important for buyers because when you buy at auction, there is no cooling off period and so you are locked in immediately. If you change your mind, you will actually lose your deposit. Now, as we know, property prices in Australia are very, very high and losing 10% of the fully paid price is a lot of money to lose. This is still effective even if you have negotiated a smaller deposit, say 5% through your lawyers, through your solicitors, the vendor can still pursue you for the full 10%.
There have been instances where the buyers have been successful in not paying that full 10%, but let's go on, you know, the general knowledge that you would be due that full 10%. So it is very important to do all your due diligence before going to auction, ie, making sure you have your pre approval, making sure you've done your building and past your strata, your contract review, etcetera, et cetera.
So that is auction buying. But if you are buying through private treaty, which is actually the most common way to buy here in Australia, you are legally entitled to a cooling off period. In which time you can do your due diligence. So you can get the contract reviewed, you can get your building and pest done. When you review the Strata, you can also finalize your finance arrangements. I wouldn't recommend having done no financing prior to making an offer at any point in time, but obviously you can finalize them in that period of time. So that's a five day business day period of time in which to do so. Now, when you exchange contracts, you do a conditional exchange of contracts with this five day cooling off, your deposit is also much smaller. It is actually typically 0.25% of the purchase price. Now, if you back out of purchasing the property in this cooling off period, you do walk away from that amount of money as well. But obviously it's a lot less than that 5% to 10% when you buy at auction. So smaller deposits there and ultimately less risk in that period of time.
However, there is another way to purchase in a private treaty. And that is if you decide that if you have done all your due diligence and you are extremely comfortable with everything, that's, you know, in the contract, the building a pest report or the strata report, you've got a pre-approval in place and you've done every other research you know, you've looked at DA checks et cetera, cetera, the things that I always harp on about then you may choose to add a 66 w certificate to the contract of sale that you then give to the vendor or the agent who is dealing with the exchange. The 66W certificate is a legally binding certificate that is issued by your solicitor, who will have to walk you through the risks of adding this to the contract, which waves that cooling off period and it becomes an unconditional exchange immediately on signing and exchanging of those contracts. So it is effectively the same way as buying the property at auction. Your solicitor will talk you through the risks and the benefits. And I would like to talk to you about why you would or wouldn't do this.
So, let me run you through the reasons why I think in some cases it may be beneficial for you to do this when you are buying private treaty and that's becoming more and more common as the market is cooling off, you know, because there was not that many buyers, or not as many buyers around as previous, previously were around. And so vendors and agents are not confident that they will be able to get enough traction on the property within the four week auction period. So they decide to sell the house through private treaty. If you find yourself in a situation that you really like this property, and you have done your due diligence, but there are other buyers on the horizon and you want to lock a property in, then I would advise you to consider adding a 66 w to your contract. Because as I said before, it is no different than buying the property at auction. And it means that both yourself, but also the vendor is locked in. And that way you can move forward with confidence. But only if you have done all your research and ensure that this is absolutely the right way to go, that you're confident that the bank will lend you this money on this particular property.
So again, like we spoke in last episodes, make sure that you check with your broker, that, you know, this property is actually a viable option for you and your personal circumstance. Then talk to your solicitor and say, Hey I've done all the research, we're comfortable with the contract. How do you feel about adding a 66W to the contract? And they may give you some further reasons why or why not to do this.
One of the things to consider if you're buying in private treaty is if you haven't done or you do, just never get pressured into adding a 66W okay? It is not a requirement in a private treaty to do so. You have that five day time period. So if you need it, make sure you use it. You can actually request to have it extended as well, but the vendor or an agent may not agree to do so, particularly if there's other people lurking around who have interest in this property.
Another thing I should add is that if you are interested in a property that has been scheduled to go to auction, so it's an auction campaign, expect that if you are wanting to make an offer prior to auction, that you will, in a high percentage of the cases, if not all, will be required to add that 66 w to that contract, even though it then becomes a private treaty situation, because you're not putting your hand up at auction, because the property is due to go to auction the agent wants to lock you in, and that is very normal because if you put the shoe on the other foot and you think about it from the vendor's perspective and the agent's perspective, why would they take the property off the market for five full days. So essentially a full week of the campaign for you to decide whether you're gonna go forward or not. The 0.25% penalty that you do pay or leave behind if you walk away is likely not enough to make up for the damage that would do to a proper auction campaign. So make sure that you understand what kind of situation this property is for sale in. So if it's going to auction and you want to make an offer prior, you will most likely be required to add that 66 w to your contract. But in this market, if it is an auction campaign, consider if it's really worth it, consider whether this is a really hot property still because in this market, there are still. very many hot properties. And by that, I mean, you know, multiple registered bidders, not just 3 or 4, but say 8 or 10, and the competition will be there. If that's the case, maybe see if it's worth trying to put an offer in prior and therefore make sure you do all that due diligence before you, you start talking money with the agents and see what the situation is. But in many cases, the buyer interest has really dropped off. So it may be better to go to auction, right? It may be better for you to put your hand up at auction and beat the other buyers to it in that case, you'll be buying unconditionally anyway. So make sure you always do your due diligence now that you know what a 66W is, it means you have more power. It means you have more options. You know what you're doing. I hope that was helpful. Talk to your solicitor about this as well. Your conveyancer will be able to fill you in more, whether this is the right way to go for you. Make sure you always do your due diligence.
I hope this was helpful anyway, to help you further on your property purchasing journey. But listen, if you have enjoyed this episode, can you leave me a review please people? I would really, really appreciate it. Hit a like button, you know, share it with all your mates who are trying to purchase and are having a hard time. I really would like to help you get on that property ladder a bit quicker, a bit smarter and share with me how this has helped you and what you have ended up buying. I'd love to hear your success story. So hit me up at hello@buyyourside.com.au. I'd love to hear from you. Ask me your questions so I can help you with those as well. Thanks for listening. And until next time.