How to buy a house
Below are our suggestions that will make the buying process much easier for you.
At a minimum, you will need a 10% deposit plus enough funds to cover legal fees, a building inspection and stamp duty. If you buy a property with a deposit of less than 20% of the purchase price, most lenders will require you to take out mortgage insurance as well.
Take into consideration the additional costs of buying some Common Expenses include
- Stamp duty
- Fees and charges related to obtaining a mortgage
- Search costs
- Registration fee
- Conveyancing fee
- Moving costs
- Taxes and rates over the period for which you will own the property
Determine Borrowing Power
It is best if you have pre-approval on your home loan before you start negotiating a price on a property. Pre-approval provides an excellent guide to how much you can afford to spend, so you know how high you can go with your offers. This gives you a better chance of securing the property you want. Most lenders offer home loan pre-approval which usually lasts three months. Where finance is required, all purchases are subject to formal approval of finance.
Other elements to consider are:
- Interest rates (would a fixed or variable loan work best for you?)
- Consider speaking to a mortgage broker or other finance professional
Now that you know your budget, it’s time to determine how much ‘home’ it’s likely to buy you and in which suburbs you can afford to live in.
Once you have settled on an area, you should tell a few real estate agents what you are looking for. Remember, real estate agents are employed by the vendor, so make sure you do your own research as well.
Research the Market
The best location is different for every homebuyer, depending on their needs. Start with the locations you would like to live in and where it’s convenient for you to travel to your work and to visit family and friends.
The real estate section in newspapers, local papers and real estate agents are all useful sources of pricing information.
Websites like domain.com.au, realestate.com.au and agent sites like juliesrealty.com.au will show you what is on the market.
Australian Property Monitors and CoreLogic RP Data are excellent online providers of property data and information.
Talking to real estate agents and visiting open houses, will also help you conduct your research
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 your interest.
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
- 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. 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.
Generally, fixtures are included, 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.
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
Freestanding movable items are called chattels and they can also be included in the sale, however, they must be noted in the contract of sale.
Items such as gas bottles, pool and spa equipment, dishwashers, large potted plants and curtains and blinds are good examples of chattels that should always be clarified before entering into negotiations and should be included or excluded separately on the contract of sale.
Decide on a Price to Offer
There is a number of different inspections to be made depending on the type of property, including:
- Building inspections
- Pest inspections
- Electrical inspections
- Strata inspections and
- A land/property survey
These inspections are likely to cost anywhere between $200 and $600 each. Don’t baulk at the cost as it’s vital that you find out about any hidden defects like rising damp, shifting foundations, faulty wiring and plumbing – Even at $600 these inspections could save you a small fortune.
If any defects or issues are found you can then factor in the cost of repairs to the purchase price or decide to drop the deal altogether.
Make an Offer
Firstly, ensure you have done all the necessary research, completed all your inspections and have a price in mind that you would like to purchase the home for. Make a decision on your absolute upper limit that you would pay to purchase the property – usually, this is close to what your market research suggests the dwelling is worth and takes into consideration all aspects of the property repairs needed etc.
This upper limit isn’t necessarily where you start with your first offer. Most people will start a little lower than their limit as it is not unusual for the seller to attempt to negotiate your price upwards.
Remember, however, that it isn’t necessarily the best approach to make an insultingly low ball offer even in a slow or buyer’s market where you have more bargaining power, as you don’t want to offend the vendor and make further negotiation difficult.
If the market is hot or a seller’s market and there is a lot of competition it may be prudent in some scenarios to put down your best offer initially.
If the property gets multiple offers, and another buyer offers more, the seller may choose to just take their offer, which sees an emphasis on you to ensure you make a good offer upfront. This is where market research can be particularly useful in figuring out the best strategy and price to consider.
All offers should be presented by completing the contract of sale provided to you by the seller’s agent by inserting your offer in writing to the vendor, to show you are serious about purchasing the property.
The contract sets out:
- The price you are offering for the property
- Details of when you will pay your deposit
- The time and date of settlement.
- The contract only becomes binding when you and the seller have both signed it.
A cooling-off period of 5 days applies to contracts for residential property. You are free to change your mind during this time. This does not apply if you buy at auction.
Paying the deposit
Once the contract becomes binding, you will need to pay the deposit. Follow the conditions set out in the contract.
You might be asked to pay a partial deposit when you make the offer. This does not guarantee the property will be yours. The seller can still choose to reject your offer. If they do, you will get your deposit back.
Your contract might be subject to:
- Whether you get finance
- A building and pest inspection
- If you can sell your existing property.
You must check to make sure these conditions or any others you may require are in the contract when you sign it. Otherwise, they won’t be legally binding. This is your responsibility.
If you’re not sure about anything, ask your solicitor to check it before you sign.
A contract of sale must have a warning statement in it. This statement must appear directly above the place where you sign the contract.
The warning statement must say:
The contract may be subject to a 5 business day statutory cooling-off period. A termination penalty of 0.25% of the purchase price applies if the buyer terminates the contract during the statutory cooling-off period. It is recommended the buyer obtain an independent property valuation and independent legal advice about the contract and his or her cooling-off rights, before signing.
The contract is signed and accepted by all parties:
Home and contents insurance
Make sure you find out when you become responsible for the insurance of your new home. Talk to your agent or solicitor.
In most cases, you will become responsible for the property from 5 pm the next business day after the contract date—this is before settlement day.
You must decide for yourself whether to take out home insurance. However, not having home insurance is very risky. Home insurance will cover you for loss or damages to the building and its fixtures. You should also consider taking out contents insurance.
If you have a mortgage, your lender can insist that you take out home insurance.
If you buy into a community titles scheme, you still need to take out insurance for your own property and contents. The body corporate will usually have to take out insurance for any common property.
Conveyancing – Using a Solicitor
The buyer’s solicitor investigates title, searches various departments and may conduct a survey of the property any objections to the title are delivered. Property transfer documents are delivered to solicitors attends for stamping of the contract, adjustment of outgoings are worked out – Rates, Body Corporate levies etc.
You should inspect the property 2–3 days before settlement. Make sure it’s still in the same condition as when you signed the contract. In particular, check anything like repairs or inclusions you specifically included in your contract.
Ensure you check with your solicitor if all other conditions of the contract have been met before settlement day.
Settlement – Completion of the Contract in accordance with the term and conditions of the signed contract
If the search results are satisfactory, the buyer pays balance of purchase money and the seller hands over duplicate certificate of title (if there is one), the keys to the property and all documents necessary for registration of transfer, with the buyer becoming the legal owner upon registration notification of the change of ownership is given to the relevant government departments
Move in and enjoy…….