Buying Tips

There is a lot to consider when buying a residential property, be it land, a house or a strata unit.
Set out below are some of the things we believe you need to think about.

Finance

One of the first things you should do if you are thinking about buying a property is determine how much you can afford to pay.

This will be a function of how much you have already saved, your income and how much you can and are prepared to borrow.

You should arrange to meet with your bank and talk to them about how much you can comfortably borrow. Talk to a number of banks/lenders if you wish to get an idea of the sorts of loan packages that are around. There are a lot of them, so it may take some homework to find out what suits you best.

Apart from banks, there are also mortgage brokers you can go to who will shop around and try to get the best deal for you.

Home or investment?

Purchasing a home or purchasing an investment will involve different considerations.

Home

Purchasing a home is a very emotional thing. Your home says something about who you are - your values, your tastes, your needs.

Some of the things you need to think about include:

• Do you feel comfortable in the home?
• Is it big enough for your current and medium term needs?
• Do you like the surrounding neighbourhood?
• What services are connected?
• What facilities are nearby (schools, churches, shops, hospitals, community facilities, etc)?
• What public transport is available?
• Is the garden too big, too small?
• What maintenance is required on the home (immediate and ongoing)?
• Do you need to spend any money on the house to get it the way you want it to be?
• If so, how much money?

Investment

Purchasing an investment property should be a more calculated investment decision.

Sometimes the question people ask themselves when buying an investment property is “Would I live in it?” Whilst this is an interesting and perhaps useful question to ask, it is perhaps missing the point. A more relevant question is “Would a good tenant live here?”.

Things to look for when buying a rental property include many of the items mentioned regarding buying a home. Other things to look for include:

• Appeal of the property to prospective tenants
• Likely vacancy factor
• Medium and long term outlook for rental demand in the area
• Maintenance costs
• Size
• Age? If the house was built after 17 July 1985, a percentage of the original construction cost can be written off against rental income each year.

Buying Land

Buying land and building a home is an alternative to buying an existing residence.

When looking around at blocks of land you should consider the following matters:

• Location: Is the area one in which you would be happy to live? What facilities and amenities are nearby? What about shops and transport?
• What services are available (electricity, sewer, water, phone, natural gas)?
• Have your builder and engineer inspected the site.
• Is there good access to the site?
• Are there any Council restrictions on building?
• Are there any covenants outlining what you can and cannot build on the land?
• Is the land affected by any easements or other restrictions?
• Is there a Tree Preservation Order covering the land?

Builder

If you have decided on the house you would like to build, have the builder inspect the land before you exchange contracts and make sure the house you want is suitable and can be built within your budget.

Engineer

Think about having an engineer inspect the site. The engineer should drill some holes and report to you on the nature of the soil, whether or not there is any rock present, if the site has been filled. This will have important implications for the footings used for your home, which, in turn, will affect the cost of your home.

Most people obtain a pest and building report when they purchase a house to find out the state of the building. In our experience, few people obtain an engineer’s report when they purchase a block of land and yet it is just as important. Poor foundation material can mean having to spend tens of thousands of dollars more on house footings.

Land For An Investment

If you are buying land for an investment, remember you are not going to receive any income from the land (unless it is a lot of land and you can earn income from agistment) but you will still have to pay council rates (general, water and sewer in the Wingecarribee Council area).

Making An Offer

Once you have decided on the house you want to buy, work out how much you think it is worth and what you want to pay. Don’t be afraid or embarrassed to make an offer, even if it is below the asking price. Many sellers will negotiate on their price and you will only find out by how much if you make an offer. Do not feel that you will upset the owner by offering less than the asking price. It is the agent’s job to submit your offer and if the agent has a good relationship with the owner then your offer should not offend.

Before you do start making offers, be certain that you are in a position to proceed with the purchase should your offer be accepted.

What about the contract?

The contract is prepared by the sellers solicitor. Once you have agreed with the seller on a price and any other terms, the agent will obtain your details and forward them to the seller’s solicitor who will put them into the contract. The completed contract will be sent to your solicitor. Your solicitor will then explain the contract to you.

When do I have a legally binding agreement?

If the owner of the property accepts your offer, you do not yet have a legally binding agreement.

You only have a binding agreement after exchange of contracts. Prior to exchange of contracts either you or the seller can change your mind and not proceed without penalty.

So, what you want to do as quickly as possible is exchange contracts.

What does exchange of contracts mean?

There are two copies of a contract of sale - one to be signed by the seller (vendor) and one to be signed by the buyer.

The term “exchange of contracts” refers to the physical swapping over of contracts signed by the seller and the buyer. This is usually arranged by the parties’ solicitors. A deposit is usually paid by the buyer at this time.

The Deposit

Usually you will be required to pay a 10% deposit on exchange of contracts. If you do not have the cash for a deposit you can arrange for a bank to issue a Deposit Bond on your behalf for the 10%. This is like a bank guarantee. It is easy to arrange and not expensive.

After Exchange

Once contracts have exchanged, you have a legally binding agreement.

From this point onwards, the sale is very much in the hands of the solicitors who make all the necessary arrangements for the transfer of the property.

If you are borrowing money for the purchase, your solicitor will liaise with your lender and make the necessary mortgage arrangements.

Settlement

Settlement usually occurs about 5-8 weeks after exchange. At settlement, you pay the seller the balance of the purchase price (total price less deposit paid) and thereby become the legal owner of the property.

Settlement is usually organised by the solicitors who arrange a date to suit all concerned.

Reports

It is the buyer’s responsibility to arrange for certain reports and inspections if they want them.

This should be done prior to exchange of contracts.

Building Report

This is a report on the quality and condition of the building. Make sure that the builder or consultant you engage has professional indemnity insurance.

Pest Report

This is a report on whether the property has any past or present pest activity. Once again, make sure that the consultant you engage has professional indemnity insurance.

Survey

A survey will plot the boundaries and the location of the buildings. An up to date survey is needed for a Council Building Certificate (see below).

Council Building Certificate

This is a certificate provided by Council. If Council issues a certificate for a building, the building is protected from being the subject of an order to demolish the building or to carry out work to the building because of:

• anything existing before the date of the certificate,
• deterioration due to wear and tear within 7 years after that date,
• any encroachment of the building onto Council land.

You usually need an up to date survey before Council will inspect the property.

Valuation

A valuation is usually obtained only if requested by your lender as a condition of your loan.

Strata Inspection

If you are buying a strata title property, your solicitor can arrange for an inspection of the written records of the body corporate of the development. This should reveal any important matters which have been raised regarding the condition of the buildings, etc.

Your solicitor should also inspect the accounts of the body corporate.

Costs

There is more to buying a home than just paying the purchase price. You should thoroughly investigate all the costs involved before you proceed. A checklist appears below. Be careful, as there may be other costs depending on your circumstances.

• Purchase price of the home
• Stamp duty (payable to the state government and calculated as a percentage of the purchase price)
• Solicitors fees
• Building report
• Pest report
• Survey
• Council Building Certificate
• Finance costs
• Loan establishment
• Valuation
• Mortgage insurance
• Legal fees
• Mortgage registration fees

Summary

You probably don’t buy a property every day so you cannot be expected to be an expert on everything that is involved.

Seek advice from your bank, your financial advisor, your solicitor and your family.

Also feel free to ask us. Even though we act as agent for the owner of the property, we are here to help you and guide you through the buying process.

Our number is (02) 02 4868 3344 and we are open 7 days a week.

Good Luck!

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