11 steps to buying a home
Taking the leap into the property market can be a confusing process so here are 11 steps to buying a home.
1. Use a Buyer Agent
Buyer Agents are licenced, independent agents who understand the complexities and processes of buying property and can make your process less stressful by providing objective information, advice and support.
2. Do Your Market Research
Knowing market conditions and the median house price of an area will help purchasers be more informed when inspecting properties. They will have a better idea of what is a reasonable asking price for a property in a certain area and this may assist in negotiating the final purchase price.
Consumers also have the opportunity to purchase sales data specific to a particular property, street or suburb via the website www.myrpdata.com. These reports are a useful tool when buying or selling a property.
Consumers can also scan newspapers or visit websites such as www.realestate.com.au for a guide to house prices and market conditions and properties for sale in a particular location. By analysing one suburb or region, they can get a good understanding of the price bracket within that area.
3. Calculate Buying and Other Government Charges
When considering buying a property and securing your finances, you must take into account Government and other charges such as stamp duty and registration fees which are applicable to most property purchases.
In South Australia, buyers must pay conveyance stamp duty and Land Titles Office fees based on the purchase price of the new home. Stamp duty on mortgages was abolished on 1 July 2009.
First home buyers may be entitled to the First Home Owner Grant (FHOG). Eligibility requirements can be viewed at www.revenuesa.sa.gov.au in the stamp duty section. First home buyers who qualify for the FHOG may also be eligible to receive a First Home Bonus Grant (FHBG). Eligibility criteria for the FHBG can also be viewed at the Revenue SA website.
For further information on the Government fees and charges, click on the following links:
Revenue SA (stamp duty) – www.revenuesa.sa.gov.au
Land Services Group (registration fees) – www.landservices.sa.gov.au
For your information, REISA continues to lobby the State Government to reduce these fees.
There are a number of other costs associated with buying a property that you must take into account when setting your budget and organising finance. These may include legal/conveyancing fees, loan application fees, insurance cover and pro-rata adjustments for services, such as council and water rates.
4. Determine Your Capacity to Buy
It is highly recommended that home buyers organise their finances before making an offer on a property or bidding at auction. This will ensure that as a purchaser, you can make an offer or bid with confidence.
Your financial institution or mortgage broker will be able to advise on the amount they are prepared to lend you and then calculate the regular repayments. When considering the loan offer, you should be confident that you can comfortably make the regular repayments.
Bear in mind that variable interest rates can move up and down, so you need to have a bit of flexibility to accommodate any changes. Remember to also plan for future commitments or a change in circumstances.
A deposit needs to be paid when buying a property, so it is important to make sure that you have your finance in place to cover this cost before making an offer or bid. A deposit is generally 10% of the purchase price.
If you are a first home buyer, your bank or lending institution will inform you of any concessions and benefits you may be eligible for such as the First Home Owner Grant (FHOG). You may also be eligible for the First Home Bonus Grant. For further information regarding these concessions and eligibility criteria, visit the Revenue SA website – www.revenuesa.sa.gov.au
There are a number of other costs associated with buying a property that you must take into account when setting your budget and organising finance. These include legal/conveyancing fees, stamp duty, loan application fees, insurance cover and pro-rata adjustments for services, such as council and water rates.
5. Sale Contract Inclusions and Exclusions
In general, items that are fixed to the property or into the grounds of the property, such as pergolas, built-in barbecues, built-in playground equipment, lighting fixtures and blinds, are normally included in the sale of a property. They will remain on the property after the sale and form part of the overall purchase price.
Personal effects of the owner and free-standing items, such as ornamental statues (provided they are not fixed in concrete), pot plants, tables and chairs, rugs and furniture are generally excluded from the sale and the vendor of the home will remove these items before settlement.
A vendor may choose to take particular items e.g. curtains that match furniture. These items must be clearly listed in the contract of sale so purchasers are aware of this.
Occasionally, a purchaser may request that a particular item be included in the sale e.g. a fridge or microwave that fits exactly into a custom built kitchen. A vendor may give consideration to such a request but, is not bound to agree to it.
If you have any questions regarding what items are included or excluded in the sale of a property, contact the real estate agent handling the sale of the property.
The contract of sale between the vendor and purchaser and signed by all parties, should include a record of the inclusions and exclusions to avoid any misunderstanding.
6. Offers to purchase
Congratulations! You’ve found a property that you love. It has all the features you’ve been searching for and now you are ready to make an offer to purchase.
Purchasers who have conducted their own research, by consulting with REISA members specialising in the area, researching property sales data and comparing the features and asking price of homes for sale will be in the best position to make an offer with confidence.
At auction, the nature of the auction method of sale ensures all bids are out in the open and you know exactly how much you need to pay to secure the property.
Outside of auction, the process is a little different. There are some important points to remember when you sit down to formalise your offer to purchase:
- All offers must be in writing
- The salesperson must submit all written offers to the vendor
- The property will remain on the market while the vendor considers each offer
- Offers can be conditional upon a building inspection, bank/financial institution loan approval or any other terms incorporated into the contract by the potential purchaser or vendor
- Each offer can include a date by which the offer lapses
- Both the purchaser and vendor have to sign a contract of sale document before the offer is legally binding
- Before a vendor accepts an offer, the salesperson must ensure the vendor has been presented with all written offers and has been advised of any offers communicated to the saleperson (but not recorded in writing due to time constraints).
Once the offer is in writing and presented to the vendor, it is up to the vendor whether to accept. If they do not agree to the written offer, the real estate salesperson may come back to you and ask if you wish to make a further offer. Making another offer must be carefully considered, depending on your finances and how keen you are on securing the property.
It is worth remembering that price considerations, while undoubtedly important, do not ensure your offer will be the one accepted. A purchaser who has financial arrangements in place, and is prepared to be negotiable on settlement dates to suit the vendor may well gain the edge in negotiations and your offer should take all of these considerations into account.
When you make an offer, treat it as your best and final offer. Other hopeful buyers may be vying for the same property so you may not get a second chance.
7. Set the Deposit Amount
The payment of a deposit is an act of good faith by the purchaser that they intend to be bound by the contract. It is important to note that a contract for the purchase of property is a legally binding document. A purchaser’s failure to honour the obligations under that contract will result in a breach of contract.
Generally, the deposit is 10% of the sale price, however this amount is negotiable and in the case of large property sales, is often less than 10%. Vendors have the right to set the deposit amount. Prospective purchasers should check the required deposit with the real estate salesperson before making an offer.
When this deposit is made to the real estate salesperson (on behalf of the vendor), it is then paid into the trust account of the real estate office handling the sale of the property. At settlement, the deposit becomes part of the purchase price.
For purchasers considering purchase at an auction, you must be aware that you are generally required to pay a deposit on the day of the auction if you are the successful bidder. Therefore it is important that you have discussed the required amount and method of payment with the salesperson handling the sale prior to the auction.
Alternatively, if you are entering into a private treaty contract, your deposit will be required at the completion of the ‘cooling off’ period.
8. Cooling Off period and Form 1
The cooling off period can be used by the purchasers to conduct further building or pest inspections or ensure the decision to purchase wasn’t made in haste.
The cooling-off period expires at the end of the second clear business day after:
- The contract was made if the purchaser received the Form 1 prior to making the contract, or
- The Form 1 has been served on the purchaser if the purchaser received the Form 1 after making the contract. By law, a Form 1 must be served on a purchaser.
Although a purchaser is entitled to withdraw from a contract within the cooling off period, the vendor is bound upon entering into contract with the purchaser.
Once the cooling off period has expired and provided there are no other conditions in the contract, the purchaser is bound to the contract and must pay a deposit. A settlement date will have been negotiated and the purchaser is obliged to follow through with the purchase.
If the purchaser decides to withdraw from the sale during the cooling off period, they must issue a cooling off notice in writing to the vendor or the vendor’s agent before the period expires. This must be done in person, by registered mail or by fax. ‘in person’ means physically handing the real estate salesperson or vendor the notice. Simply leaving it at the office does not constitute acceptance of the advice. Clear details of ‘how to’ cool off are outlined in the Form 1.
Cooling off rights are not available in certain circumstances, such as when purchasing property by auction, in the name of a company, by assignment or, by tender or option to purchase. If you have specific questions about the cooling off period, speak to the real estate salesperson handling the sale.
The Form One
The Form 1 must be provided to the purchaser at least 10 clear days before settlement where sale is not by auction.
In the case of auction, the contract and Form 1 are required to be available for viewing, at the agent’s office, for at least 3 working days prior to the day of auction. It must also be available at the auction for at least 30 minutes before the commencement of the auction.
It is important for purchasers to know that legally, vendors must disclose any information on the property which would negatively alter the value so that the real estate transaction is transparent and the purchaser knows exactly what they are purchasing.
These ‘disclosures’ from the vendor must then be included in the Form 1 which the real estate agent will complete when they prepare the contract for sale.
Disclosures may include information such as buildings on the property featuring asbestos, unusual easements, known building defects and advice of other parties, other than the vendor, that may have an interest in the property.
On rural properties, important information to disclose include native title claims on the land, restrictions on land use and water entitlements.
9. Building Inspections
People who are interested in purchasing a property are strongly encouraged to hire a reputable building inspector to examine the property before committing to a contract.
A pre-purchase building inspection is useful to enable purchasers to assess the structural stability and integrity of a property. An inspector should also check things such as electrical wiring, plumbing and roof spaces, which are potentially dangerous if they do not meet building standards.
Independent building inspections commissioned by a purchaser are the most effective way of ensuring complete peace of mind when transacting real estate.
Purchasers can arrange building inspections prior to making an offer or entering into a contract or, during the cooling off period. Alternatively, a purchaser may negotiate to make the contract subject to obtaining a satisfactory building inspection.
In the case of sales by auction, a building inspection should be carried out prior to the auction as the successful purchaser will normally be required to enter into a binding unconditional contract upon the fall of the auctioneer’s hammer.
The inspector should provide a written condition report which points out faults in the property and provides advice on whether they can be repaired. The fee for a professional inspection service is relatively minor compared with the cost of buying a property that requires extensive, unforeseen repairs.
The vendor has an obligation to hand over the property in the same condition as it was in when you signed the contract of sale. You are entitled to make an inspection to check the house at any reasonable time, one week before settlement, only if you stipulated in the contract that the sale was subject to a pre-settlement inspection.
10. Conveyancer’s Role
Conveyancing is the process of transferring the ownership of property from one person to another.
Licensed conveyancers are specialists in property law and are required to have specific qualifications. This ensures that they are aware of the legal responsibilities and obligations associated with the transfer of property.
The paperwork and processes involved in selling a property are extremely complex and REISA strongly recommends that you engage the services of a properly qualified, licensed conveyancer to undertake your conveyancing work following execution of a contract of sale. Your conveyancer will:
- Complete and lodge all relevant documents with the Department of Land Services
- Search the certificate of title
- Search government departments and local authorities for anything that may affect the property such as encumbrances or caveats
- Make necessary enquiries about zoning, titles and rates (council and water)
- Adjust rates and taxes
- Liaise with the purchaser’s conveyancer regarding settlement
- Ensure that all special conditions in the contract are fulfilled before settlement takes place
- Liaise with fiinancial institutions regarding funds required to proceed to settlement
- Prepare the settlement statement
- Attend settlement on your behalf.
11. From Contract to Settlement
Congratulations, you have purchased a new home! Now you can prepare for the big move. But besides packing, what else needs to be done between signing the contract and settlement?
Most contracts will specify that the purchaser is responsible for the property within this time, so you should immediately organise building insurance to cover the purchased property.
Other things to consider prior to settlement are:
- Contact your bank or financial institution to arrange the finance detailed in your contract
- Pay the deposit to the vendor’s agent’s Trust Account after the ‘cooling off’ period has expired
- Choose a conveyancer – a professional who can complete all the legal paperwork for transacting the property. Refer to ‘Role of the Conveyancer’, located under ‘Steps in the Buying Process’
- Approximately one week before settlement, you will receive a settlement statement from your conveyancer detailing the purchase price, deposit paid, rates and tax adjustments. By the last working day before settlement, you ensure you have paid the amount detailed on your settlement statement so that settlement is not delayed
- If not arranged prior, within this last week, arrange for gas, electricity and telephone utilities to be activated for your newly purchased property. At the same time you can also request final readings for the premises that you are vacating
- If required, arrange removalists
In general, settlement periods are between 4-6 weeks however it is not uncommon for either party to request a variation to this period of time.
The settlement period forms an important part of the contract of sale and needs to be mutually agreed by both parties. When setting a settlement date, both parties to the contract should be confident that they can comfortably meet the agreed date and important issues to consider are arranging finance, organising a conveyancer to complete the transaction and the practicalities of moving house.
Often vendors and purchasers seek longer settlements as they balance the sale of one property with the purchase of another. If both parties are in agreement, there should be no issues with a lengthy settlement period. On occasions a shorter settlement period is requested but, you need to be aware that a considerable amount of work needs to be undertaken prior to the financial transaction taking place. It is therefore advisable to discuss the shorter timeframe with your real estate representative to ensure sufficient time is allowed for the conveyancing process.
Changes to a settlement date after the contract has been signed can only take place by mutual agreement of both the vendor and purchaser. If you require a change to the settlement date, give as much notice as possible, but be aware that the other party is under no obligation to vary the original date.
Your conveyancer will attend settlement on your behalf and notify you once settlement has taken place, following which, you will receive the keys to your new property.