Investing in real estate is often one of the most important and expensive purchases many people will make in their lives.
Choosing a Property
When searching for a property, it is wise to have set clear criteria of what you are looking for. It is important that you are aware of:
- Affordability: It is important that you have your finance ready as all terms may vary, plus the extra costs such as tax, stamp duty and so on
- Location: Ensure you have researched the areas or communities that suit your lifestyle
- Property type: decide if you are looking for a flat, apartment, townhouse or house, as well as the size, fitting and maintenance
Finding a property
There are a number of ways to search for potential properties. These include:
- Real estate websites on the Internet
- Real estate agent offices
- Local newspapers
Preparing to buy
Once you have found the property that suits your criteria, it is important that you do some homework. Some things to remember when preparing to buy are:
- Inspect the property: it is important to inspect the property inspections before making your final decision
- Assess the property against your criteria: you need to look at the location and style of the property in relation to your requirements: the size of the property, proximity to schools, access to public transport and so on should all be considered. Once you have found a property that suits you, it is wise to check it out during the week as well as on the weekend, as a peaceful environment one day might be quite different at other times.
- Engage the experts: you may consider having a property inspected by a valuer, builder or architect to assess whether there are any defects that might affect your decision to buy. This is particularly relevant if large-scale renovation or extensions are planned. Both Archicentre and the Housing Industry Association (HIA), among others, provide an inspection service. For a fee, they inspect and report on the state of the property, including the structural condition, damp and termites.
- Organise finance: confirm with your financial institution or bank, remembering rates always change so it’s essential you check to see if you have the best one. We suggest you use Loan Market.
You will also need to take into account a number of other costs associated with buying a property for which the buyer is liable. These may include the following:
- Legal/conveyancing fees;
- Stamp duty on the transfer of property;
- Stamp duty on the mortgage;
- Loan application fees;
- Insurance; and
- Adjustments such as council rates and water fees.
Making an offer
When making an offer to purchase a property, it is important to be aware of the following:
- The agent will handle all negotiations with the vendor
- The property remains on the market while the vendor considers all offers. Just because your offer is the first one submitted, does not necessarily mean that it will be accepted.
- Your offer may include a date by which it will lapse if not accepted.
- An offer may be made subject to a finance clause, i.e. bank approval, sale of an existing property or another consideration such as a builder’s inspection.
- You can make your offer conditional on certain items (such as a dishwasher being included or excluded from the contract. Any special conditions such as these must be written into the contract).
- An offer is not legally binding on both parties until the buyer and seller have signed a contract. A contract must contain details of the property, the price, deposit and settlement terms. Once the offer is made in writing, it is then up to the vendor whether or not to accept it or whether to give other parties the opportunity to increase their original offers. The agent is not obliged to give you another opportunity to increase your offer. The vendor is under no obligation until they accept the buyer’s offer by counter-signing the contract.
Your agent will guide you through this process. Before the home is legally yours there are a few steps that take place:
- Exchange of contracts: this is a formal legal process that creates a binding contract for the sale of real property on agreed terms. The vendor and purchaser each sign a copy of the sale contract and then exchange these documents, after which time the contract becomes legally binding on the parties. The parties are then bound to proceed to settlement, subject to any cooling off period that may apply. A deposit is usually also paid by the purchaser to the vendor during the exchange process. Any party that unilaterally declines to proceed to settlement may forfeit deposit monies or be subject to a damages claim.
- Settlement: this is the final stage of the sale when the purchaser completes the payment of the contract price to the vendor and takes legal possession of the property.
Costs to be aware of
Financial preparation is one of the most important stages of buying real estate in Australia. Aside from using a home loan calculator to figure out how much you can afford to borrow, there are various other costs you will also need to factor in. So once you’ve accounted for your mortgage each month, what other expenses do you need to consider?
Gas and electricity costs are something else you need to include in your calculations. ABS data shows that back in 2012, Australian households spent an average of $99 per week on energy, with $39 of this dedicated to electricity and gas. The rest refers to fuel for vehicles.
Prices have generally been rising over recent years, and unless you’ve opted to generate your own power through solar panels or suchlike, chances are your bills are going to increase.
If you’ve bought real estate in Australia that’s part of a strata scheme, it’s likely you will be faced with some sort of fee. This is generally used for the upkeep of public areas and should be outlined in your contract.
This is something you need to look into closely before viewing any strata homes for sale. Otherwise, you could find your monthly expenses are higher than you expected.
LENDERS’ MORTGAGE INSURANCE
The main reason you’re advised to save more than 20 percent of a property’s value as a deposit is, otherwise you’ll be faced with lenders’ mortgage insurance. This is designed to protect your lender in the event you fall behind with repayments on your loan.
The amount you pay will depend on how much the property is valued at. Speak to your lender if you’re unsure whether this fee will apply to your particular purchase.