Steps in the buying process include the contract, deposit, conveyancing and settlement.
While monetary gifts from family or friends are a great way to quickly save your deposit, most lenders will want you to show 6 months’ regular savings history before they’ll approve your loan application.
As a general rule, you’ll need a deposit of at least 5% of the property value. Other costs to consider are legal fees, stamp duty on the property, and if you are borrowing more than 80% of the value of your home you’ll be liable for a one off lender’s Mortgage Insurance fee.
A deposit of 10% should be considered the minimum for a first home buyer. Obviously, the more you put down the better.
To discover your borrowing potential Access One can find out for you with our Mortgage Comparison Report.
If you are buying at an auction, you are required to pay a deposit (usually 10% of the purchase price) immediately. If you are buying privately, you are usually required to pay a holding deposit (can be anywhere between $2,000 and 10% of the purchase price).
For a private treaty sale, paying a holding deposit does not mean that the agent or seller holds the property exclusively for you. They may show the property to other people who are interested and even exchange contracts with someone else if they can get a better deal. If this happens or you change your mind, the holding deposit is refundable.
The Contract of Sale, prepared by the agent or by the vendor’s (the current owner of the property) solicitor, outlines your offer, the date of settlement, and any conditions that must be met before the sale goes ahead. Discuss the Contract of Sale with your solicitor before you sign it. There are two kinds of offers - unconditional and conditional.
This is an outright offer to buy the property. You should be 100% sure that this is the property you want, and that you have access to the money to buy the property. Once the vendor has accepted your offer, you are legally obliged to go through with the sale.
A conditional offer is also a binding contract, provided that all your conditions are satisfied. You can only back out now if one or more of your conditions are not met. Conditions may include:
• Subject to valuation - the sale will only go ahead if the valuation is acceptable to both you and your bank.
• Subject to finance - the sale will only go ahead if your bank approves your finance. Look for at least 14 days for finance approval.
• Subject to acceptable title search- the sale will only go ahead if there are no ownership, access or other claims recorded on the property title. Your solicitor will do this for you.
• Subject to an acceptable builder’s or engineer’s report the sale will only go ahead if you are satisfied that the house or land it is on are sound.
You may wish to set other conditions eg subject to certain repairs being carried out. Talk to your solicitor about anything you are unhappy or unsure about. Don’t sign your Contract of Sale until you are happy with the conditions.
In choosing a price, consider recent selling prices for comparable homes in the same area, how long the house has been on the market, how hot or slow the market is, and whether the home needs any major repairs.
We can provide all the property reports you need to assess the purchase price. The vendor may accept your offer straight away or may negotiate on the price or other aspects of the sale.
The real estate agent will act as the ‘go-between’ until you and the vendor reach a happy medium. If you cannot agree on a price, you can withdraw your offer. Remember that if there are any changes to the Contract of Sale, you should let your solicitor know before you sign.
Once both you and the vendor have signed the agreement, it is legally binding and this is what is referred to as ‘exchange of contracts’. You will normally be expected to pay all or part (10%) of your deposit directly to the real estate agent on signing the agreement. It will be placed in a trust account until all conditions have been met.
After the exchange of contracts in a private treaty sale there may be a cooling off period during which time you may be able to change your mind and withdraw from the contract to buy the property.
You should check with your solicitor/conveyancer about whether a cooling off period applies to your contract before exchange of contracts takes place. Generally speaking, there is no cooling off period for contracts exchanged following a successful auction bid.
Purchasers of residential property have the added safety net of consumer protection laws, under the Trade Practices Act and the various Fair Trading Acts.
For example, if a vendor used false advertising to promote a property, the purchaser could seek a court order to cancel the contract and get their deposit back, or they could claim damages.
You’ll need to arrange for Home/Buildings insurance upon exchange of contracts and contents insurance from the time you move in.
If you’re purchasing a home unit you’ll need to obtain a Certificate of Currency from the body corporate insurer to make sure the property is adequately covered. (Your solicitor/conveyancer may obtain this for you.)
This is when the buyer pays the balance of the purchase price and takes ownership of the property.
Final settlement varies between States and Territories but normally takes place up to six weeks after the exchange of contracts. The title deeds (if any) will be handed over to your lender, or to you if you purchased the property without borrowing.
Finally, the keys are handed over to you.
