Brought to you by REIQ
Are you looking to buy a house? Perhaps you are looking to buy a unit or townhouse? Whatever property you are buying, if this is your first time doing so; make sure you are equipped with the knowledge and skill set to make the right decisions. After all, buying a house or any other property isn't something you can undo so easily.
Buying a property involves much more than an everyday transaction. Not only does it entail significant financial decisions, but also important legal aspects.
Following is a fundamental guide to the 8 steps involved in buying a property.
- Determine Borrowing Power
- Research the Market
- Inspecting a Property
- Clarify Inclusions
- Decide on a Price to Offer
- Make an Offer
- Conveyancing
- Settlement
The REIQ strongly recommends the use of a qualified conveyancer before undertaking the purchase of any property.
1. DETERMINE BORROWING POWER
Ideally, you should save the highest possible deposit before deciding to buy property to minimise the amount you need to borrow. This will also minimise the amount of interest that will eventually be paid, and means you may avoid extra charges such as mortgage insurance. Other elements to consider are:
- Interest rates (would a fixed or variable loan work best for you?)
- Additional costs of buying (such as bank fees, stamp duty and legal fees etc)
Consider speaking to a mortgage broker or other finance professional.
2. RESEARCH THE MARKET
When buying a home, it’s important to consider its future value. There are a number of factors influencing a property’s price potential, but location stands out as the key to future capital growth. Elements to consider are the safety of the neighbourhood, and whether it is close to:
- Schools
- Medical services
- Shops or
- Reliable public transport
3. INSPECTING A PROPERTY
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...
Remember to ask the agent if there are any special conditions the vendor wants to place on the sale, such as an extended settlement due to their next residence not being available.
Inspection Checklist
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 a copy of their privacy disclosure, outlining how they collect, use and store 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 root systems that can cause structural problems;
- Check that the land’s water run-off is adequate and drains away from the dwelling;
- Water staining on the eaves may indicate damaged or blocked gutters;
- Look at the roof for any broken tiles or capping; and
- If the property has a pool, check the legality of its fencing 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
Make sure you know what comes with the Property.
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.
Are the Fixtures Included?
Typical fixtures include:
- Stoves
- 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 the Inclusion 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. DECIDING ON YOUR OFFER
Deciding the price and conditions of your offer is a critical step that requires careful thought. Make an informed decision by researching how much the property last sold for and when, plus recent sale prices of comparable properties in the area (using a service such as Corelogic RP Data, for example). Getting an independent valuation by a professional valuer should also be considered (please note, real estate agents are not registered valuers). Keep in mind that sellers may consider conditions (or lack of) as well as price.
6. MAKING AN OFFER
Putting your offer in writing shows the seller that you are serious, and avoids confusion that can occur with verbal negotiations. The real estate 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.
The REIQ Contract of Sale (approved by the Queensland Law Society ) has provision in the schedule for the contract to be subject to finance, a building inspection and/or a pest inspection if these are required. However, parties may also agree to vary the standard conditions in the contract.
Visit the research section: Multiple Offers for more information on what happens with multiple offers on a property.
Or if you’re buying at auction, visit the research section: Tips for Buying at Auction to learn more about this process.
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 ‘Installment 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.
Conditions
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.
7. CONVEYANCING
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
The REIQ recommends the use of a qualified solicitor (for details of qualified solicitors contact the Queensland Law Society) for any property matter, including conveyancing.
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 Costs
Conveyancing will incur costs such as searches of the:
- Titles Office,
- Certificate of Rates,
- Zoning
- Transfer duty
- Registration fees
- Standard professional services costs
Council and property searches can identify any planning issues or problems, and highlight what the area might look like in 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.
8. SETTLEMENT
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!
