thinking about buying a home?

First things first - Before you begin your search it's a good idea to shop around for your finance. It is in your interest to obtain a preliminary approval that will enable you to proceed as soon as possible once a sale has been negotiated. In some cases where more than one buyer is interested in the same property, time can be the determining factor in successfully securing the home you want.

Budget for items such as stamp duty calculated on the purchase price, stamp duty on the mortgage document, solicitor fees and charges, in many cases valuation cost and in some cases mortgage insurance. Your solicitor or conveyancer will arrange these once the property has been found. You may be eligible for first home buyers schemes: contact the Office of Fair Trading or your finance provider.

finding the right property

Be a smart consumer and do your research, look at newspapers, attend 'Open for Inspections', go to auctions and speak with real estate agents or buyers' agents. Developing a relationship with real estate agents can be helpful. They are in regular contact with buyers and vendors and have knowledge of the local market.

making an offer

If you think the price is too high you can make an offer. The agent will discuss this with the seller. You may be asked to pay an initial deposit. An initial deposit does not secure the property and is fully refundable. It's merely to show how interested you are in the property. Usually the property remains on the market until contracts are exchanged.

avoid gazumping

Gazumping occurs when the owner verbally agrees to a price and subsequently accepts another offer from a second buyer prior to committing to a contract with the first buyer. This is disappointing for buyers, particularly if they have paid money for reports and legal fees.

To avoid being gazumped, you should be ready to sign the contract as soon as is feasible – so make sure your offer is not too low and that your finances are in order. Lengthy negotiations and waiting for finance approval create the opportunity for another keen buyer to offer the vendor more or a quicker exchange of contracts.

Also ask the agent if there are any other special circumstances, apart from price, that may influence the seller to sell the property to you, such as varying the length of the settlement period.

exchange of contracts

The contract sets out the terms and conditions of the sale including the fittings such as blinds, curtains etc and any items excluded from the sale. Your solicitor or conveyancer will examine the contract carefully. There are two copies of the Contract for Sale - one for you and one for the seller. You each sign one copy before they are swapped or “exchanged” and the deposit is handed over. Only when both the seller and the buyer have signed the contract and exchanged copies do you both become bound by the contract. The contract will stipulate the deposit amount and who will hold it.

cooling off period

There is a 5-business day cooling off period unless you have bought at an auction or you have waived the right to the cooling off period. You need to obtain legal advice regarding the benefits and also the obligations in waiving the cooling off period. The cooling off period follows the exchange of contracts allowing time for searches, obtaining reports, and confirming finance. If you do not continue with the sale, you will forfeit 0.25% of the purchase price from the deposit you have paid. Discuss with your legal adviser your rights and obligations during the cooling off period. Real estate agents can only exchange contracts in a private treaty sale with a cooling off period. Real estate agents can also exchange contracts under auction conditions and there is no cooling off period.

settlement

Settlement occurs when the buyer pays the balance of the selling price. Adjustments are made for water and council rates, strata levies for units and any outstanding mortgages are paid out by the seller from the purchase price. The buyer becomes the legal owner of the property after settlement.

The period between the exchange of contracts and settlement is usually four to six weeks, although either party may ask for a longer or shorter settlement period prior to exchange. Make sure the settlement period suits your needs prior to committing to the purchase. Be prepared as last minute issues that arise may delay settlement by hours or days.

strata schemes

A strata scheme is a building or collection of buildings where individuals each own a part, such as an apartment or townhouse, but where there is common property, such as foyers, paths, external walls, floors, roof, fences, lawns and gardens.

The maintenance and repair of these common parts is usually the responsibility of the owners' corporation. There are a number of rules or by-laws relating to living in a strata scheme.

If you are interested in a property with a strata title, it is a good idea to arrange with your legal adviser to obtain an inspection of the strata books. The Office of Fair Trading have a number of publications available on strata schemes, as well as the Sales & Supply Centre at REINSW, including a video on strata living.

buying 'off the plan'

Buying off the plan means legally committing yourself to the purchase long before seeing the property completed and knowing how the market will treat it.

It is a mistake to buy off the plan at an over-inflated price with the promise of high returns in the future. It is difficult to predict the course of any investment market with 100 percent accuracy, which is why you should only pay what a unit is worth in the current market. Look at similar properties for sale in the area to see how the price compares. And always do your homework, so you have a good understanding of the market you are buying into.

Sometimes seminars are used to introduce buyers to particular projects. Exercise caution as this environment can be a little like a pressure cooker. Major investment decisions should not be rushed.

for more information

Real Estate Institute of NSW
30-32 Wentworth Avenue
Sydney NSW 2000
Ph: (02) 9264 5102

For consumer enquiries, call 1902 223 959
(Calls are charged at $1.65 GST incl. per minute. Higher from mobiles and payphones)

NSW Office of Fair Trading
Ph: 13 32 20
www.fairtrading.nsw.gov.au

Land and Property Information
Ph: (02) 9228 6726
www.lpi.nsw.gov.au