Buying a property involves much more than an everyday transaction. Not only does it entail significant financial decisions, but also important legal aspects.
Buyers should strive to accumulate the highest possible deposit before deciding to buy property to minimise the amount they need to borrow. This will also minimise the amount of interest that will eventually be paid. Most lenders will generally require an owner occupier borrower to provide a deposit, but some lenders may be prepared to lend on a smaller deposit depending on the borrower’s financial commitments and the amount of security they can offer (for example, equity in an existing property).
Some lenders may require the borrower to carry mortgage insurance, depending on the amount the borrower requests. Mortgage insurance protects a lender against any loss should a borrower default on their loan and the buyer typically bears the cost of mortgage insurance for the lender.
Property buyers should take into account the potential for interest rates to rise once their loan is established and ensure that they allow a buffer to enable them to make higher repayments should this occur.
COSTS OF BUYING
Those looking at buying a house can expect to incur fees and charges over and above the purchase price of the house; these costs will vary dependant on the purchase price and the financier. Typical additional costs may include loan establishment fees and other bank charges, legal fees, stamp duty, transfer duties and insurance premiums.
TALK TO A PROFESSIONAL
It is advisable that buyers talk to their financier or mortgage broker before they start the task of property hunting so they know what boundaries or limitations they may have.
2. Where to Start?
When looking at houses to buy or any other property for that matter, make sure you do your research! The fact that you have read this far is a good start…
From the myriad of factors that determine a property’s price potential, location (specifically proximity to community services, and availability of facilities and infrastructure) seems to hold firm as the perennial key to future capital growth.
Schools, shopping centres, public transport, parks and, increasingly, cafes and restaurants, are all desirable aspects of suburban living and favourable attributes to potential property buyers.
Also, if children have been attending a particular school for years, then the parents’ choice of buying a house is often influenced by how close a suburb is to the school.
The aesthetic characteristics of a suburb or street also rank high on most homebuyers’ list of desirable features.
WANT MORE INFORMATION?
Some helpful resources for more information include:
An agent will often provide a buyer with a brochure or some form of marketing material when they show a buyer through a property. This is a great way for a buyer to remember a property and also for them to be able to take any notes while inspecting the property.
Taking notes will make it easier for a buyer to compare properties through details such as the date the property was inspected, the address, the listed price or price range, and any key features of the property that caught interest.
DON’T FORGET TO ASK THE AGENT…
It is important for a buyer to ask the agent about the terms of sale for each particular property and if the seller has any special conditions that may form part of the offer
Some things to consider and look for when inspecting a property are:
Inside the Property
- Check for signs of rising damp, such as rotting carpet or mould on the walls and ceiling;
- Check the walls and ceilings for warps, cracks and any obvious damage;
- Test all light switches; and
- Test the water pressure in hot and cold taps and check to see that water drains well – slow flowing water may indicate blocked drains.
Outside the Property
- When attending an open house, a buyer will often be asked by the agent to provide their contact details. Agents are required under the National Privacy Act to have available for perusal acopy of their privacy disclosure, outlining how they collect, use andstore any personal information that is obtained through such registers.Inspect fences for stability and any obvious faults;
- Large trees around the house may have large rootsystems that can cause structural problems;
- Check that the land’s water run-off is adequate anddrains away from the dwelling;
- Water staining on the eaves may indicate damaged orblocked gutters;
- Look at the roof for any broken tiles or capping; and
- If the property has a pool, check the legality of itsfencing via the Pool Safety Council. Pools in a Community Titles Scheme (body corporate) are the responsibility of the body corporate.
Most agents will ask a potential buyer if they would like to be contacted at a later date if similar properties become available. If a buyer does not wish to be contacted for anything other than the attendance at the open house, they can clearly outline this to the agent at the time of the inspection.
4. Clarify Inclusions
A buyer should always ask the agent to clarify any inclusions or exclusions that may be part of the contract of sale. Unfortunately, a buyer sometimes moves into their new property only to find features that originally ‘sold’ them the property are now gone.
In general terms, fixtures are defined as anything on the property that is ‘screwed in’, ‘glued in’, ‘nailed in’, ‘bolted in’, or ‘plumbed in’ to the structures of the property.Once a buyer has found the property they want to purchase, the price they would like to offer needs to be carefully considered.
ARE THE FIXTURES INCLUDED?
Typical fixtures include:
- Hot water systems
- Fixed carpets
- Clothes lines
- Television antennae
- In-ground plants and trees
- Ceiling fans
- Mail boxes
- Built in air-conditioning or heating systems
CLARIFY INCLUSIONS OF CHATTELS!
Freestanding movable items are called chattels and they can be included, however they must be noted in the contract of sale. Pool and spa equipment, potted plants and washing machines are good examples of chattels and should be disclosed separately on the contract of sale.
Items such as gas bottles, sprinkler systems, dishwashers and light fittings often cause debate and are grouped in a grey zone that should always be clarified before entering into negotiations.
5. First Offer
Once a buyer has found the property they want to purchase, the price they would like to offer needs to be carefully considered.
WAIT! BEFORE YOU OFFER A PRICE…
Real estate agents have an obligation to submit all offers to a seller under the Property Agents and Motor Dealers Act 2000 providing they comply with the sellers instructions (for example, a seller may instruct an agent they do not want any offers under a certain dollar value submitted to them).
Buyers should take into consideration that sellers will examine all the terms and conditions of the offer, not only the offered price, before deciding to accept the offer, make a counter offer or reject an offer. Conditions (or lack of conditions) can make certain offers more attractive.
THE MIND OF THE SELLER
Some sellers may consider accepting a lower price if the offer is unconditional or has minimal conditions rather than take the risk on a higher priced offer with more conditions that may not proceed to settlement.
Once a buyer has decided what they would like to submit by way of offer, an agent will encourage them to put the offer in writing. This recommendation is for the benefit of the buyer as it shows the seller that the buyer is serious and also alleviates discrepancies that can occur with verbal negotiations.
An agent will present a buyer with a number of documents and is obliged to go through these documents to avoid any confusion. If a buyer still has queries at this stage, they are encouraged to seek independent legal advice.
PRIMARY DOCUMENTS BUYERS ARE PRESENTED
- PAMD Form 30c – Warning Statement;
- Contract of Sale; and
- PAMD Form 27c – Disclosure Statement to Buyer.
It is at this point in time that a buyer needs to consider whether they will waive or shorten the cooling-off period provided under the PAMD Form 30c – Warning Statement.
WHAT IS THE PAMD FORM 30c – WARNING STATEMENT?
The PAMD Form 30c – Warning Statement is a document that is designed to:
- Inform the buyer of whether a cooling-off period applies;
- Advise the buyer of their rights under the contract, including when the cooling-off period starts and ends;
- Advise the buyer to seek independent legal advice and an independent valuation before signing the contract;
- Inform the buyer a cost may be charged by the seller in the event that the buyer terminates the contract during the cooling-off period (this termination penalty is 0.25 per cent of the purchase price); and
- Provide special warnings with regards to house and land packages.
Residential contracts that are entered into without a Warning Statement attached to the front will be of no effect.
Buyers are encouraged to employ the services of a registered building inspector and registered pest inspector should they include these conditions as part of the contract of sale.
When deciding to buy a house or other property and submitting an offer, a buyer may be informed by the agent that multiple offers exist for one particular property. Multiple offers occur generally in a ‘sellers market’ where competition for residential property is greatest and there are more buyers than there are properties for sale. However, it can occur in any market and especially for properties within the more affordable price range.
An agent has an obligation to let a buyer know if their offer is part of a multiple offer situation and will encourage a buyer to put their best possible offer forward (taking into consideration that the offered purchase price is only one of the terms of the offer).
PAY A DEPOSIT
A buyer will be encouraged to pay a deposit when signing the offer. If the deposit is greater than 10 per cent of the price, the contract becomes an ‘Instalment Contract’. Whilst paying a deposit is not something that is legally required, by doing so buyers show the seller that they are making a serious offer and showing their goodwill. Deposits can be paid by way of cash, cheque or electronic transfer of funds. They can also be paid using deposit bonds or bank guarantees. Buyers should seek advice from their financier as to any associated costs with deposit bonds or bank guarantees before paying a deposit in this form.
If a buyer terminates the contract under the cooling-off period or another legitimate way, the deposit is refundable (excluding the termination penalty of the cooling-off if the seller elects to charge it).
It is important for a buyer to ensure building and pest inspections (if applicable) are carried out within the time frame set out in the condition. With regards to finance, if an independent valuation is required as part of the finance process, buyers should ensure their financer has this arranged within the time frame of the condition.
If a buyer feels that any conditions may not be finalised by the applicable end date, they should seek legal advice from their solicitor as soon as possible. Commonly, a solicitor may suggest a buyer requests from the seller an extension to the condition date. It is the seller’s discretion to grant, or not grant, the request.
WHAT IS CONVEYANCING?
Conveyancing is the legal transfer of a property’s title from the seller to the buyer. It is important that buyers research who they wish to use for conveyancing when they have a contract of sale.
USE A SOLICITOR
Using a solicitor often saves time on paperwork such as title searches and stamp duty, and can often provide peace of mind when making what may be the largest single financial transaction of one’s life.
Conveyancing will incur costs such as searches of the:
- Titles Office,
- Certificate of Rates,
- Transfer duty
- Registration fees
- Standard professional services costs
Local government searches have become vital in the conveyancing process to determine how an area will develop in the next five to 10 years. They ensure major changes like new freeways and major road upgrades are not planned for a property’s backyard.
Searches for zoning and titles will determine whether the property has any restrictions such as adverse planning, demolition orders, outstanding taxes or encumbrances on the title (for example, easements or caveats).
Most of these searches are standard in the conveyancing process but are often overlooked when buyers elect to do the conveyancing themselves.
For details of qualified solicitors contact the Queensland Law Society.
Once a contract has become unconditional it is time to start packing! It is important for a buyer to keep in touch with their solicitor through this time with regards to any issues that may arise approaching the settlement date.
Buyers are encouraged to arrange a pre-settlement inspection with the agent to ensure that everything is per the contract conditions, noting any included chattels or excluded fittings. Pre-settlement inspections should be conducted once the property has been vacated by the seller or its occupants.
Commonly, the solicitor will attend the actual settlement on the buyer’s behalf and both the seller’s and buyer’s solicitors will notify the agent once settlement has occurred. Only after an agent has received notification from both parties, can keys be released to the new property owner.
Your quest of buying a house, unit, townhouse or any other property is now complete – enjoy!