Whether you’re buying your first home or selling your fifth, the process can be daunting. We understand that you’ll have questions and we’re here to help you on this journey. Below are questions that you may have about buying, and if you need further assistance, feel free to contact us or drop into our office for a chat.
How much deposit do I need to buy a property?
A 10% deposit of the purchase price is required when you exchange the contracts of sale, however a deposit less than 10% is acceptable if it was agreed by the seller prior to the exchange of the contract.
What are the other costs associated with buying a property?
Other than the deposit, the additional costs you will need to factor into your budget are:
- Solicitor/conveyancer legal fees
It would be recommended to appoint a solicitor or conveyancer to assist you with the legal aspect of buying your home such as reviewing contract of sales, requesting changes to the terms and conditions of the contracts and provide legal advice.
- Buyer’s Agent fee
If you engage a buyer’s agent, you will need to factor in their fee. Buyer’s agent may charge a fixed fee or a percentage of purchase.
- Transfer duty (formerly known as stamp duty)
Transfer duty, formerly known as stamp duty is payable in NSW when you buy a property. You must pay transfer duty within three months of signing a contract for sale except for off the plan purchases. The amount of transfer duty payable depends on the purchase price. To work out the transfer duty, visit Revenue NSW transfer of land calculator.
- Strata report or building and pest reports
Whilst it is not mandatory to purchase a strata report or building and pest reports, it would provide an insight on the condition of the property which may not be transparent when you’re inspecting the property such as termites, rising damp and building defects. When buying into a strata complex, a strata report will provide details about the strata scheme such as defects, by-laws adopted, proposed special levies or upcoming expenditures and the financial records.
- Mortgage registration and transfer fee
If you’re taking out a mortgage on your property, you will need to pay the formal registration of your mortgage.
- Home loan application or establishment fee
When you take out a home loan, a set up fee or application fee is payable. The amount is dependent on the loan and the lend. Under certain circumstances, some lenders may waive this fee.
- Mortgage insurance
Although you will need 10% of the purchase price to exchange the contract of sales, most lenders would require you to pay a lenders mortgage insurance if you do not have a deposit of 20% or more. The fee is calculated on a sliding scale of the deposit you have i.e. the more deposit you have, the less insurance you’ll pay.
- Council, strata and utility rates
If the sellers had paid council, strata or utility rates in advance, normally on a quarterly basis, beyond the settlement date, then you may need to re-pay the seller a portion of the amount. Adjustments will be made prior to settlement and you will need to keep in mind this additional cost when buying a property.
I’ve seen a property I like, what are the next steps?
That’s great news! If you haven’t already done so, request a contract of sale from the selling agent and appoint a solicitor or conveyancer to review the document. Next, speak to your mortgage broker or lender to arrange your finance. Ideally, you should obtain a pre-approval finance so that you can be confident on your property search and the price range. It would also help with purchasing a property under auction conditions or be held up with delays during the cooling-off period. If the property is for sale by auction, it would be recommended that you carry out a strata report or building and pest report. If the property is for sale by private treaty, you will have 5-business days cooling off period from the exchange of contracts to carry out necessary reports.
How do I make an offer? Is it legally binding?
An offer can be presented to the selling agent verbally or in writing. It is recommended to submit offers in writing as a record of the negotiations as well as outlining the terms of the purchase such as settlement period. An offer can be accepted by the seller but it is not legally binding until contracts are exchanged between the seller and the purchaser.
What is gazumping?
Gazumping occurs when the seller accepts an offer you make to buy a property at an agreed price but is then sold to someone else, usually for a higher amount. The agent is obliged to present all offers to the seller up until the exchange of contracts. To protect yourself from being gazumped, it is best to have your finance pre-approved, contract of sale reviewed and deposit arranged so that the exchange of contracts can take place as quickly as possible. A section 66W Certificate will also be required if the property is for sale by auction but you wish to purchase prior to auction.
What is a section 66W Certificate?
A 66W Certificate is provided by the purchaser’s solicitor or conveyancer waiving the cooling off period making the contracts of sale immediately binding. A section 66W Certificate is not required for property sold at auction as the contract is binding immediately after the falls of the hammer at auction.
What is a cooling-off period?
A cooling-off period starts from the date of the contract exchange to 5pm on the fifth business day after the exchange. During this period, you may speak with your lender to finalise your finance approval, carry out inspections such as pest and building report or strata report. You may also request in writing, an extension of the cooling-off period during the period. If you decide not to proceed with the purchase within the cooling-off period, you will lose your deposit of 0.25% of the purchase price.
The property is going to auction and I’m not comfortable bidding at the auction. What should I do?
An auction can be overwhelming for some buyers, but it doesn’t have to be. Familiarise yourself with the auction process by attending auctions held by real estate agencies in the area. An auctioneer may run the auction differently to another auctioneer so it ideal to observe how an auctioneer conducts the process. Alternatively, you may appoint a family member, a friend or another agent to bid on your behalf on the auction day. If you wish to appoint someone else to bid on your behalf, you must complete and sign an Authority to Bid to the selling agent with the details of the person bidding on your behalf, prior to the auction.
How many times can I inspect the property after the contracts have been exchanged?
If you require inspections during the settlement period, you may request access to the property with the selling agent however the seller is not obligated to meet your request, however as a purchaser, you are entitled to one pre-settlement inspection. A pre-settlement inspection is usually arranged within 5 days prior to the scheduled settlement. The inspection allows you to check that the property is in the same condition as it was when the contracts were exchanged. It is recommended that prior to exchanging the contracts of sale, you should check that all fixtures and fittings are in working order as well as noting all inclusions and exclusions in the contracts.
Why should I carry out a strata report / building and pest report? When should I get these reports?
A pest and building report will highlight any significant defects and identify problems that may affect the property over time. When buying into a strata complex, a strata report will provide details about the strata scheme such as defects, by-laws adopted, proposed special levies or upcoming expenditures and the financial records. It is best to obtain these reports prior to exchanging contracts as any issues arising from the report may be used as negotiation to reduce the purchase price, and depending on the significance of the problems identified, you may decide not to proceed with the purchase of the property.
What is a buyer’s agent? Should I use a buyer’s agent?
A buyer’s agent, also known as a buyer’s advocates are licensed professionals that specialise in searching, evaluating and negotiating the purchase property on behalf of the buyer and unlike a real estate agent, a buyer’s agent acts on the best interest of the buyer. There are many reasons why buyers use a buyer’s agent. Some buyers choose to appoint a buyer’s agent to utilise their connection with real estate agents as they may have access to wider range of properties before it is advertised and at times, not even advertised. Another common reason a buyer engages a buyer’s agent is to save time and emotional distress. Buyer’s agents are also chosen to act on the buyer’s behalf at auction and negotiation process as it can help to have someone objective to represent them.
What is the standard settlement period? Can I ask for shorter or longer settlement period?
A settlement period is the period between the settlement date and the date when the contracts were exchanged. The standard settlement period is 42 days or 6 weeks however settlement period should be negotiated and agreed by both sellers and buyers prior to exchanging contracts. Once the contracts have exchanged, and changes to the settlement date will need to be agreed by both parties.