BUYING a Residential Property
Knowing what you want in a Residential Property before you start can save you a lot of time. If you set yourself a clear criteria, you will find searching for a property much easier as you will be able to eliminate properties immediately that do not suit your needs. Some important questions to ask yourself when setting your criteria include:
- What can you afford: calculate the deposit and repayments you can afford. Deposit requirements will vary, but as a rule of thumb, at least ten per cent of the selling price will be required. In general, lenders usually base the amount they will loan you on the rule that monthly repayments do not exceed a quarter of gross (pre-tax) income.
- What are your location priorities: identify the areas & shortlist two or three suburbs.
Preparing to buy
Prospective purchasers need to do some homework. Once you have found a property of a number of properties that fit your property you need to view them and make a decision based on all your criteria about which one best suits your needs. Some things to remember when preparing to buy are:
- Inspect the property: inspections should be made at the advertised times or by appointment with the real estate agent. You may need to inspect the property more than once before making your final decision.
- Assess the property against your criteria: you need to look at the location and style of the property in relation to your requirements: the size of the property, access to public transport and so on should all be considered.
- Engage the experts: you may consider having a property inspected by a builder or architect to assess whether there are any defects that might affect your decision to buy. For a fee, they inspect and report on the state of the property, including the structural condition, damp and termites.
- Organise finance: confirm with your financial institution or bank the amount they are willing to lend you and calculate this with your capacity to repay, without negatively impacting on your lifestyle and other financial commitments.
You will also need to take into account a number of other costs associated with buying a property for which the buyer is liable. These may include the following:
- Legal/conveyancing fees;
- Stamp duty on the transfer of property;
- Stamp duty on the mortgage;
- Loan application fees;
Making an offer
Missing out on a property that you have your heart set on can be a very disappointing experience. Quite often this happens because the offer process is misunderstood. When making an offer to purchase a property, it is important to be aware of the following:
- The agent will submit all offers to the vendor.
- The property remains on the market while the vendor considers all offers. Just because your offer is the first one submitted, does not necessarily mean that it will be accepted.
- Your offer may include a date by which it will lapse if not accepted.
- An offer may be made subject to a finance clause, i.e. bank approval, sale of an existing property or another consideration such as a builder’s inspection.
- You can make your offer conditional on certain items (Any special conditions such as these must be written into the contract).
- An offer is not legally binding on both parties until the buyer and seller have signed a contract. A contract must contain details of the property, the price, deposit and settlement terms. Once the offer is made in writing, it is then up to the vendor whether or not to accept it or whether to give other parties the opportunity to increase their original offers. The agent is not obliged to give you another opportunity to increase your offer. The vendor is under no obligation until they accept the buyer’s offer by counter-signing the contract.
Once you have decided to purchase a Residential Property it means you have agreed to pay the advertised price for the property or you have negotiated a price with the vendor. Your agent will guide you through this process. Before the property is legally yours there are a few steps that take place:
- Exchange of contracts: this is a formal legal process that creates a binding contract for the sale of real property on agreed terms. The vendor and purchaser each sign a copy of the sale contract and then exchange these documents, after which time the contract becomes legally binding on the parties. The parties are then bound to proceed to settlement, subject to any cooling off period that may apply. A deposit is usually also paid by the purchaser to the vendor during the exchange process. Any party that unilaterally declines to proceed to settlement may forfeit deposit monies or be subject to a damages claim.
- Settlement: this is the final stage of the sale when the purchaser completes the payment of the contract price to the vendor and takes legal possession of the property.
Some handy tips before moving into your new property
- Connect the electricity, water, gas and telephone.
- Check the locks, burglar and smoke alarms in your new property as soon as possible.
- You may wish to have new locks fitted.