BUYING 101 The Comprehensive But Simple Guide To Buying A Home
This booklet has been prepared by Bevans Real Estate for general information only. Bevans Real Estate do not guarantee, represent or warrant that the information contained in this document is correct. Any interested party should undertake their own inquiries as to the accuracy of the information.
Š Bevans Real Estate 2014
SO YOU WANT TO BUY YOUR FIRST HOME? Buying a property and getting the best deal on it is both an art and science. For new buyers the process can be overwhelming and confusing. As well as the excitement of buying your first home comes a whole lot of questions and situations that are completely new. After encountering the same sorts of questions from buyers at our open homes we decided a comprehensive but simple guide was much needed. This guide is a collection of our best tips, tricks and advice covering the ins and outs of buying from beginning to end.
Home is a word that resonates deeply. For many people, it evokes family, childhood, some of their most vivid memories. It is a word that conjures images and emotions. If we’re lucky it is a word that brings comfort to the soul, that names a place we want to return to, that makes us feel safe, loved and nurtured. Anita Kaushal
CONTENTS
MAXIMISING YOUR PROPERTY SEARCH
MAKING THE MOST OF AN OPEN HOME
WHAT SHOULD YOU CHECK WHEN LOOKING AT A PROPERTY?
BECOME A LOCAL AREA EXPERT
SHOPPING FOR A HOME LOAN
TAKE ACTION AND SECURE YOUR DREAM HOME
MAKING AN OFFER THAT SEALS THE DEAL
THE COOLING OFF PERIOD
HOW TO WIN A BIDDING WAR
THE 3 KEY QUESTIONS TO ASK A CONVEYANCER
A BUILDING AND PEST INSPECTION IS ESSENTIAL
THE IMPORTANCE OF STRATA REPORTS
UNDERSTANDING STAMP DUTY
WHAT HAPPENS ON SETTLEMENT DAY?
THINKING LIKE AN INVESTOR
DON’T OVERCAPITALIZE
ANY MORE QUESTIONS?
MAXIMISING YOUR PROPERTY SEARCH IN A COMPETITIVE MARKET The initial excitement of house hunting can soon be dulled by lost Saturdays, dismal homes or missing out on your dream property. We are currently in a sellers market. Opens are packed and competition for properties is fierce. Getting ahead of the pack and making the most of your search is vital. Below are our recommendations. Set up email alerts
Look at print advertising
You can set up email alerts with bevans.com.au, Beyond the internet it is also important to look at realestate.com.au and domain.com.au that send an print advertising, particularly Real Estate World email straight to your inbox once a property in your magazine. search criteria has been listed. The internet can narrow your focus, but by flicking Become a real estate VIP through the pages of a magazine you see a range If you want to be on the red carpet at open homes, of properties that you might never have considered. here is how to do it;
Drive by viewings
1. Give all your contact information to real estate Driving through suburbs and streets where you agents at the opens you visit. This means all want to live is a great way to extend your search your information is entered into their database and help you spot new listings in your ideal location. correctly. 2. Engage the agent and tell them exactly what you are looking for, this puts you on their hot buyer list. 3. As soon as a property matching your criteria is uploaded to the agencies database you will get an email alert. 4. Bevans invites all our hot buyers to pre-listing opens. Private opens that are invite only and where you can preview the property before it is advertised anywhere.
What we seek is some kind of compensation for what we put up with. Haruki Murakami
MAKING THE MOST OF AN OPEN HOME Open homes are usually short affairs lasting 45 minutes at the most. To make the most of the time follow our simple guide to being prepared for opens and use the Bevans home inspections checklist to make sure it is the right property for you.
Being prepared for opens 6. Invite an entourage 1. Make a plan Find a couple of friends that are at either Have a list of all the opens you want to visit with extreme, one that will point out all the great the address, directions, open times, and contact things about a property and one that will pick up information for the agent. the not so great aspects. 2. Pack a home inspection kit 7. Make a list of needs and wants Go armed with a measuring tape, camera, Start by writing a list of the things you need in a notepad and torch (to view under floor and attic home. Think about things like location, the spaces). number of bedrooms and living areas, deck for entertaining, office space, play area for kids, 3. Take a packed lunch garaging and other practicalities. A cool bag with water, snacks, a sandwich, and some chocolate could improve your spirits if the Then write a list of the things you want in a home. house is dismal. Things like a view, architectural character, top-notch appliances, designer kitchen, swimming pool and 4. Wear comfortable shoes other ‘wish list’ items. Opt for ones that can be easily slipped off, as some homeowners have a no shoe policy. Use your ‘needs and wants’ to evaluate each of the homes you see. 5. Take toys and invent games Pack a slew of toys for the kids and make up games that will keep them occupied. First one to touch anything is a rotten egg. Eye Spy. A count of how many doors there are in the house, or spotting anything that is red.
WHAT SHOULD YOU CHECK WHEN LOOKING AT A PROPERTY? We have attached a checklist below that will guide you through the property and give you some key questions to ask. If you can’t answer any of the questions on this checklist, ask the real estate agent. If you’re really keen on a property, we recommend having a building and pest inspection carried out by a professional. This minor, upfront cost can help to uncover things that could be a nasty surprise down the track. GENERAL Questions How old is the house? Could it need rewiring? Is it insulated at all? What rooms get the most sun? What sort of heating does it have? Is the water heating electric or gas? If gas, does it use a storage tank or is it a continuous flow system? Has the house had any additions or have renovations been made over time? If so, have the permits been signed off properly by council? What is the zoning for the house? What chattels (curtains, carpets, appliances) are staying with the house?
Notes
Is there an alarm? Can it be monitored? Any cracks in the windowsills or walls that might indicate movement? Are the floors level? Do the windows and doors open and shut easily? Are there any water stains or mouldy patches on the ceilings and walls that might indicate leaks?
KITCHEN Questions
Notes
Is there enough pantry and cupboard space? Enough bench space? Is there room for your fridge/freezer? What’s the age and quality level of the appliances? Is the floor easy to clean? Where does rubbish go? When would you need to renovate?
BATHROOMS/TOILETS Questions How old are the fittings? What’s the water pressure like? Enough ventilation/extraction? When would you need to renovate? Any water damage? Cracked tiles or peeling paint? Easy-clean floor? Separate toilet or in bathroom? Separate shower and/or bath? Enough storage? Adequate mirrors and lighting?
Notes
BEDROOMS Questions
Notes
How many? Singles or doubles? Will your furniture fit? How’s the wardrobe space? Enough electrical outlets? TV point & phone jack? What sort of light fittings? Is the ceiling paint in good order? Do the walls need work (paint or wallpaper)? Would road noise, proximity to neighbours or television noise from an adjacent living room prevent you from sleeping? Listen with windows open and closed LIVING AND DINING AREAS Questions
Notes
Enough electrical outlets? Enough phone jacks? Is there a Sky dish? Where is the aerial outlet? Will your furniture fit? Good access to outdoor living areas? Is there a rumpus room or alternative living space for kids? Is the dining area separate or open plan? LAUNDRY Questions Are there fittings to connect a washing machine? Is there a proper air venting system for the dryer? What’s the tub like? Is there adequate storage for buckets and mops, cleaning stuff, pet paraphernalia etc?
Notes
OFFICE Questions
Notes
Space for your desk? Built in shelves? Enough electrical outlets? Phone jack? Any reading lights? STORAGE Questions
Notes
How large is the cupboard for linen and towels? Is there a ‘general purpose’ storage cupboard for brooms, vacuum cleaners and other miscellaneous items? Is there somewhere for sports equipment and footwear? Where would you keep bulky items like suitcases? Is there a cool, dark place to store wine? Is there a place to store surf or paddle boards or bikes?
ATTIC/ROOF SPACE Questions
Notes
Is it insulated? Any sign of leaks? What about signs of rats, mice or birds? Suitable for storage or extension? Easy to access?
GARAGE Questions How many cars will fit? What is the door opening system?
Notes
Can the garage be locked to keep your things secure? Is there a workbench for handyman projects? Is the lighting adequate? Is there storage for gardening equipment, tools, paint pots and craft materials? Is there storage for sports gear and camping equipment? Is there internal access to the house?
GARDEN Questions
Notes
How much lawn is there to mow? How much time do you have to maintain the garden? Are there large trees or hedges that will require regular pruning? Is the fence in good condition? Would it keep dogs and small children in or out? Is there a clothesline? What material has been used for the driveway? When will it need resurfacing? What are the paths like? Can you see any evidence of flooding or drainage problems on the property (boggy patches)? If there are retaining walls, are they in good order?
Your home should tell the story of who you are, and be a collection of your loves brought together under one roof. Nate Berkus
An expert is someone who has succeeded in making decisions and judgements simpler through knowing what to pay attention to and what to ignore. Edward de Bono
BECOME A LOCAL AREA EXPERT AND FIND THE BEST HOUSE IN THE BEST SUBURB Knowledge is power and as a buyer the more knowledge you have the more informed and savvy a decision you can make when purchasing a property. Whether you are coming to the coast from Sydney or considering moving a few suburbs within the Illawarra it pays to be a local area expert and truly live the local life before you make that big move. Becoming an expert takes time and research, the good news is that you can do most of it from your desk and the rest is pretty much just hanging out and having fun. 1. Spend time in the suburb – take long walks, dine in the local cafés, shop locally, drive around. Visit during the week and at different times in the day.
Plus a few things about property values and turnover!
7. Talk to local residents – they will be able to tell you the joys and woes of the suburb and are 2. Use the internet – set up suburb alerts on usually full of small insights. bevans.com.au, domain.com.au & realestate.com.au. Peruse sold properties. Know what the properties in the area are being sold for 8. Talk to local businesses – there is no better way to take the pulse of an area than to talk to people and how long they are on the market. who are trading in it. 3. Check out the transport – time your commute to work in the car or by getting on the train – it may 9. Read the local newspaper – this particularly applies if you are coming from further a field. be quicker or longer than you think. 10. Visit the Wollongong Council website – check 4. Check out the noise – walk or drive through out the local amenities, events and planned at peak times and the noise levels may surprise developments. you. Consider how close the train station is. 11. Look at the RTA website – this website 5. Consider schooling and childcare – visit lists upcoming road developments and myschools.edu.au to check out the best schools upgrades. Perhaps the street you are in the area and ring around to day care centres considering is getting a major upgrade or there to check the availability of places. is a freeway planned – better to know now. 6. Talk to local agents – they live in the area and are usually long settled locals. They know the best breaks and where to get a great coffee.
SHOPPING FOR A HOME LOAN As part of your preparation for buying your first home you will be shopping around for a home loan and organising pre-approval of your finance. This can be both exciting and a bit scary. Exciting because it means you will be a step closer to your dream home but a little bit scary because you will talking about money and looking at your financial situation. Let the lender do the heavy lifting
Focus on the comparison rate
A professional mortgage manager or broker will be able to put you at ease immediately, after all, this is what they do for a living. If they make you uncomfortable or are not fully addressing your questions, this is a sign that they are not the right person for you.
Many borrowers focus on the interest rate when deciding what loan they should sign up to.
This first meeting is the best opportunity to really lay out your financial situation and gain an in depth understanding of the financial commitment of a mortgage.
It’s the comparison rate which will present the most accurate indication of the cost of the loan. In accordance with Federal law, lenders must publish a comparison rate, which takes into account:
Write a list of questions before you go into the meeting but also write questions down as they come up during the meeting. Before they leave make sure everything has been fully covered off.
- The amount and term of the loan - The repayment frequency - The interest rate - The loan’s fees and charges
Be prepared for detailed questions about your finances and have all the paperwork ready that relates to them. There is a document checklist at the end of this chapter. It’s wise to have several copies of these documents so that you can shop around with different lenders. The important thing to remember is that this is an interview on both sides, they are assessing your financial situation to see how much you can borrow, but you are also assessing the financial product and service they are offering.
While this is important, it shouldn’t be your ultimate consideration. The loans comparison rate is what you should be paying closest attention to.
Ask your lender or broker what the loans comparison rate is, this information should help you get a better idea of the particular loans cost, in full and over the long-term. Be aware however, that while it may be a more accurate cost indicator than the interest rate, it will not include everything.
Factor in unforeseen costs Costs not incorporated into the comparison rate include: - Government and statutory fees (although these are standard across all lenders and loans) - Lender Mortgage Insurance or valuation charges - Fee waivers or any discounts that your lender might apply to the loan - Event based charges, like redraw fees or early repayment fees Consult your lender about the costs of all these features and consider how often you will be likely to use them. What features will you get? This question will help determine whether the loan fits your financial situation and lifestyle. The comparison rate can give you a good idea of the true cost of the loan, but you should also consider the money saving features included.
When it comes to debt, the majority of us don’t like surprises. Posing these questions to your lender, along with an open, considered conversation, will likely help reduce any uncertainty you may have when applying pen to paper on your home loan. Home loan application checklist Here is a checklist to have handy when you apply for a home loan. This checklist is only meant as a guide, as all of the points may not relate to you or specific lenders may need other documents. Savings History You may need to provide a copy of your bank statements for your savings account(s) covering a period of the last three months. Proof of Income You will need to provide the following documentation for proof of income to support your application:
Perhaps you’re better suited to a loan with a slightly higher comparison rate, rather than one with a Salary/Wage Earner lower rate and no flexible features. Your last two consecutive pay slips, which contain the following: Remember, your financial situation could change, so a loan that offers an ability to modify it, with - Details of each component of your income minimal effort and cost, is worth bearing in mind. - Current and year-to-date gross and net income If you think your financial situation could change, a loan you can modify may be of use. Questions to ask about your home loan Here are some questions that might help:
- Your name and your employer’s name
Or alternatively, any two of the following:
- Salary/employment letter from your current employer confirming length of employment, - Can you make unlimited extra repayments without your gross basic wage together with any other penalty? components relating to your salary - Will you get free redraws that you can use at any - Most recent employment contract which identifies time? Can you access redraws over the phone or your name, employer’s name and gross basic online? wage together with any other components relating - Can you switch from a variable loan to a fixed or to your salary split loan at no extra cost? - Latest payment summary/group certificate, tax - Can you transfer your loan to another property assessment notice or tax return when you move? - Evidence of consistent income amount regularly - Can you have your salary paid directly into your deposited to your bank account loan account? - Latest pay slip, which identifies your name, - Can you pay weekly or fortnightly rather than just employer’s name and your gross and net income monthly? - Do you have the choice of principal and interest or interest only repayments?
Self-employed Applicants You will need to provide copies of your personal income tax returns and full financial statements for the past two years, and the most recent financial year’s Assessment Notice, which is no older than 18 months at the date of application. Rental Properties If you are purchasing a rental property, provide a letter from a real estate agent indicating the anticipated rental income. If you have a property, which is already tenanted, you will need to provide a copy of the current Residential Tenancy agreement and recent bank statements showing rent payments or a rental statement from the managing real estate agent. Centrelink Payments A letter from Centrelink (or Department of Social Security, or equivalent) detailing current entitlements. Commission/Bonuses Details from your employer confirming payments received over the last two years, plus copies of your tax returns for the corresponding two-year period. Maintenance A copy of the Court Order and a current statement from the Child Support Agency showing amounts received, together with copies of current statements showing payments over a six-month period. Commitments Loans and cards with other financial institutions. Provide details of other loans, e.g. credit card statements, personal loan statements. Expense Details Provide details of any extraordinary expenses, e.g. private school fees, maintenance payments.
A man’s indebtedness is not virtue; his repayment is. Virtue begins when he dedicates himself actively to the job of gratitude. Ruth Benedict
TAKE ACTION AND SECURE YOUR DREAM HOME We are currently experiencing a housing boom, supply is short and demand is high. This coupled with low interest rates and relatively low unemployment is seeing faster turnovers and rising prices. For buyers, this can be frustrating as there are fewer properties on the market and their dream homes can be quickly snapped up – sometimes several times over. This is not the kind of market to be evasive or playing it cool with your interest or intentions. If you like a property take action and do it quickly.
Essentially we are there to secure the best outcome for everyone involved, we want our vendors to be happy but we also want our buyers to be happy – real estate done well is a long term game and buyers eventually become sellers. The bottom line is if you love a property, talk to the agent, be honest and don’t wait – take action!
1. Make a private appointment See the property again, don’t wait until the next open as we have properties selling within the week 2. Organise yourself Get your building and pest providers and your Conveyancer lined up so they are ready when you make an offer
Have the courage to be uncool.
3. Let the agent know that you are interested Do not wait for someone else to put an offer in. We often get buyers asking us to call them when someone else has put in an offer, essentially asking us to invite them to a bidding war – crazy!
Dr. Lissa Rankin
Many people think of real estate agents as being on the other side and working for the vendor and while that is true to an extent, nothing can happen in the property market without buyers.
MAKING AN OFFER THAT SEALS THE DEAL You have finally found your dream home and are ready to make an offer, so now what? Making an offer can be one of the more nerve wrecking stages of buying a property, but follow our simple guide and we will help you seal the deal. Three must have pieces of information
Four essential questions before you make an offer
1. Comparable sales 1. How did the vendor come to the asking price? You will need a comprehensive list of recent, Is it based on market comparables and value? comparable sales. This will give you an informed If you are making an offer that is below the guide on what the property is worth. asking price you will need to make a case using comparable sales. The agent should then 2. Loan pre-approval offer a counter case for why they are asking for more. Your finances should be confirmed so that you know your limits and honour your offer with a 2. Have there been any other offers made? deposit. This lets you know if you have any competition 3. An understanding of your emotions and how serious the vendor is about selling their home for a reasonable price. Carefully consider how attached to the property you are and how far you’re prepared to go. It’s crushing to look back and think a small margin 3. How long has the home been on the market? could have made you the owner. The length of time that a property is on the market directly affects the bargaining power of the vendor. If the house has just come on, the vendor may want to wait and see what other offers are presented. The longer a home stays on the market the more bargaining power the buyer gains. 4. Why is the vendor selling? Asking why the vendor is selling might give you some clues as to the urgency of the sale. You may be able to negotiate a better price if you are willing to settle quickly or in some cases offer a longer settlement.
Negotiation in the classic diplomatic sense assumes both parties are more anxious to agree than to disagree. Dean Acheson
The best way to make an offer You can make an offer in writing or by phone directly to the real estate agent. Sometimes an offer in writing is perceived as more serious, although it remains just an offer and does not commit you to anything.
Keep the communication open, positive and honest and if you miss out on the property, bear in mind that 90% of buyers who make a declined offer purchase within two weeks, so your home could be just around the corner.
If you feel you are ready, you can also sign the contract, provide a cheque, and ask the agent to present it to the owner. This way you may be able to secure it on the spot with the benefit of a cooling off period.
Should I come in with my best price or leave myself room to move?
Does the agent have to pass on the offer? All offers do need to be passed on to the vendor, however if your offer is much lower than the asking price you risk offending the vendor. Don’t be afraid to ask the agent when they will be passing on your offer and for feedback from the owners. If the offer gets knocked back If your offer gets knocked back, don’t get offended or disheartened. You will be selling one day and will definitely be hoping to get the best price for your property. If you haven’t hit your limit, then by all means counter offer. Remember negotiation is essentially a conversation.
This is something to be considered for each situation. If there are no other buyers you might want to start with a lower offer and then increase it, as you need to. However, if there is a lot of competition for the property you might be better off coming in with your best offer. This way you separate yourself from the other interested parties and let the vendor know that you are serious.
THE COOLING OFF PERIOD In the last chapter we went through the ins and outs of making an offer. This week we want to continue on from there and fully explain the cooling off period. What is a cooling off period? A cooling off period is an amount of time after a contract is entered into, during which the purchaser may rescind the contract.
If the land is more than 2.5 hectares in area, it is not deemed to be ‘residential property’ and therefore, there is no cooling off period.
When does the cooling off period apply?
Can I waive my right to a cooling off period? What is a 66W?
Generally, cooling off periods protect purchasers under a ‘contract for the sale’ of residential property For residential sales contracts, you may waive the cooling off period through the use of a 66W in NSW. Unless an exception (more on that later) certificate. The certificate is named after the section applies. of the Conveyancing Act 1919 (NSW), which prescribes the content for the certificates. ‘Residential property’ is defined in the Conveyancing Act 1919 as including any of the following:
There will be no cooling off period where the purchaser (or their solicitor or agent) gives the - Land with not more than two places of residence vendor (or their solicitor or agent) a 66W certificate (i.e. a house, two houses, a duplex but not a before or upon exchange. triplex or apartment block) - Vacant land where a single place of residence is In order to be compliant a 66W certificate must: permitted to be built - under 2.5 hectors in size - Be in writing - Strata lot or lots which constitute one place of - Be signed by a solicitor, barrister or licensed residence only conveyancer (but not one who is acting for the vendor) When does a cooling off period not apply? - Indicate that the purpose of the certificate is to A cooling off period does not apply to residential waive the cooling off period properties sold at public auction. If the property - State that the solicitor, barrister or licensed goes to auction but is passed in (i.e. not sold). In conveyancer explained to the purchaser the effect these cases, if a contract for sale of the property is of the contract and that in giving the certificate to entered into on the same day as the auction there the vendor, the cooling off period would be waived will be no cooling off period.
What is the duration of the cooling off period? A cooling off period starts at the time the sale contract is made – that is, on exchange. It finishes at 5.00pm on the fifth business day, after the day on which the contract was made. Can I change the duration? The rule that a cooling off period runs until 5.00pm on the fifth business day after the contract or agreement is entered into is a default rule. The parties may agree to extend or reduce the period. This must be done by your solicitor, in writing and is only valid if the vendor’s solicitor accepts the extension.
finances in order. All while knowing the property is secured but with the ability to pull out with only minor penalty. If you feel confident in these matters, and there is competition for the property you can waive the cooling off period as a means to elevate your position against that of the other buyers and hopefully secure the property. Waiving the cooling off period may also be an expectation if you’ve made an offer prior to an auction.
How much do I need to pay as a deposit? Upon signing the contract the purchaser is required to pay 10% of the purchase price unless otherwise stated. After having the owners sign the contract it will be checked, dated and exchanged by the agent or vendor’s solicitor. What happens if I want to pull out before the cooling off period ends? If the purchaser wishes to terminate the contract within the 5 day cooling off period, they must do so in writing through their solicitor and will forfeit only 0.25% of the purchase price. What happens if you want to pull out after the cooling off period ends? If the purchaser fails to pay the full amount of the deposit on exchange, the purchaser is immediately in a position of default under the contract and the vendor is entitled to terminate the contract. They can also sue to recover any amount of the deposit, which is unpaid and/or for any loss (including legal costs) the vendor might suffer if the property is sold to another purchaser for a lesser amount. The vendor can exercise this right at any time after exchange and until the agreed deposit is paid in full. How can I use the cooling off period to my advantage? The cooling off period was initially introduced to allow buyers to make a formal offer and secure the property without the fear of being ‘guzumped’. Designed so that you can carry out your due diligence; have a solicitor/conveyancer review the contract, complete a building and pest inspection, property valuation and get the final details of your
Nothing gives one person so much advantage over another as to remain always cool and unruffled under all circumstances. Thomas Jefferson
HOW TO WIN A BIDDING WAR We are currently in a sellers market. With less stock available and buoyed by low interest rates buyers are racing to secure a property. Given these conditions you may well find yourself in a bidding war with several parties putting offers in. A major concern for many buyers is whether these other offers are real or invented to push up the price of the property and create urgency. Three reasons to trust the agent 1. Agents are tightly controlled by law and a code of conduct to act honestly with serious consequences if they don’t. 2. We live in a relatively small community where news spreads fast and with access to social media, it can spread even faster. If you are a dishonest agent you won’t be one for long. 3. Finally, to invent other buyers would be a very risky strategy. Why make up a fictional buyer that could make your real and keen buyer drop out, doubt or make an offer on another property. If you find yourself in a bidding war 1. Don’t be afraid to ask the agent for exact details about the other bids and what stage they are up to. 2. If you are really keen on the property ask the agent what you can do to seal the deal. Find out what is most important to the vendor. 3. Get your finances, conveyancer and everything you need in order so that you are prepared to sign a contract and put down a 10% deposit.
Remember an offer is intangible, but once a vendor sees a signed contract and cheque – it is far more compelling. 4. If you have room to move then let the agent know you will counter offer. Only tell the agent it’s your final bid – if it truly is. This sounds counter-intuitive to a negotiation – but if a higher offer is made, your ‘final’ bid might be taken as final. 5. Tell the agent you want to be kept up to date at every stage of the bidding so that you can make an informed decision.
Not all dreamers are winners, but all winners are dreamers. Your dream is the key to your future. Mark Gorman
Diligence is the mother of good fortune, and idleness, its opposite, never brought a man to the goal of any of his best wishes. Miguel de Cervantes
THE 3 KEY QUESTIONS TO ASK A CONVEYANCER Conveyancing is the legal transfer of the title of a property from one person to another. A licensed and insured professional best handles it, as it can be a complicated and time-consuming process. Below are 3 key questions to ask a potential conveyancer: 1. What are your qualifications, experience and can I have some references?
There are different types of professionals who can handle the conveyancing of a property, a licensed conveyancer and a property solicitor, or lawyer conveyancer. Essentially a conveyancer will only have conveyancing qualifications and a licence to undertake conveyancing work. They are not qualified lawyers. Property solicitors however will be qualified lawyers or solicitors, and can also offer legal advice. While conveyancers can sometimes provide a cheaper service, they don’t have the knowledge or access to legal resources if things become complicated and will have to refer you to a lawyer. Ask your real estate agent to refer you to a good conveyancer (they see a lot of property transactions and know who handles them well). Like any other professional, conveyancers should be able to give you a short list of clients who can be contacted to provide a reference. Once you have decided on a conveyancer or solicitor it’s always good to ask them a few questions about themselves and their experience. Ensure they are licensed, a member of the Australian Institute of Conveyancing, and hold professional indemnity insurance.
2. What are your costs and time period?
Asking about costs upfront will save a lot of time. Make sure that you receive a breakdown of all the costs involved; these include the conveyancers, government and additional fees and charges. Find out about the time frames; how long will settlement take and whether this time frame is flexible. When you speak to their references ask if there were any charges or additional fees that they did not expect. 3. What can go wrong?
Start your meeting by going over all of the details of the sale, loan(s) and the contract. Once this is done ask about what will happen if things go wrong. These include, the death of the other party, a delay in the cooling off period or tenants refusing to leave the property. Also damage or fire on the property in negotiation, illegal additions that are not council approved and boundaries of common property. Asking about these scenarios will give you an idea of how your conveyancer is going to respond to problems. Whether they are fully qualified to handle difficult situations, if there will be any additional costs and how issues arising could effect your settlement date.
A BUILDING AND PEST INSPECTION IS ESSENTIAL Your home will be your biggest purchase and investment, doing your due diligence in every aspect is very important. Unless you are a builder it is essential that you get a professional to do a complete building and pest inspection to the property you are considering purchasing. Why do I need one? There are three good reasons why you should get a building inspection report done before you buy a property: 1. So you will know in advance what the problems are and work out the possible costs of addressing them 2. So you can use the information to try and negotiate on the price of the property
However, the scope of the report can depend on the professional that you have employed and the extent of reporting they offer. Some Building and Pest Inspectors will offer several packages covering the basics right through to a premium service that will be give you cost estimates and list all maintenance items. How do I choose a good building and pest inspector? 1. Ask for recommendations from family, friends
and real estate agents 3. So you can get specialist advice about any major problems and how they will affect the property 2. When you have narrowed down a list ask the over time companies for references What does the report cover? The building and pest inspector should inspect all accessible parts of the property: The entire site, interior of the building, exterior of the building, roof space, under-floor space, roof exterior. Garage, carport, retaining walls, steps, fencing, surface water drainage, storm water run-off, paths and driveways.
3. Ensure that their report is in line with the Australian Building Codes and Standards 4. Ensure they have Professional Indemnity Insurance
Knowledge is power. Information is liberating.
Kofi Annan
Six essentials to get covered 1. Structural issues A structurally sound building is a must when you’re making a purchase because of safety issues and cost concerns.
4. Cracked wall and floors Although some small hairline cracks in the walls and floors are to be expected due to natural movement. Deeper and more noticeable cracks and gaps are a sign that there could be a structural issue.
Buildings must also conform to the Building Codes and Standards of Australia. If you 5. Mould purchase a home or commercial building that does not conform to these standards, you will be Mould could be an indicator of leaks or responsible for the cost of bringing the building inadequate ventilation and can pose a major up to code. health risk to your family.
2. Electrical wiring Faulty electrical wiring can make for a dangerous situation that could increase the risk of electrocution or fire. Replacing old electrical wiring can be an expensive and time-consuming task. 3. Roofs and ceilings A leaking or sagging roof will need to be fixed immediately and can be a costly renovation.
6. Drainage Bad drainage can cause damage to the foundations of the home, which can in turn cause sinking and structural damage. A building inspection report should not be seen as an all-encompassing report dealing with every aspect of the property, or as a fatalistic tool to rule out the property. The idea is to go into the sale with your eyes open and holding all the information you need to make a sound decision.
UNDERSTANDING STAMP DUTY
They say the only certainties in life are death and taxes. So lets talk about one of the biggest taxes you will encounter in the course of your life. Keep in mind the information below relates to the kinds of regular transactions that we experience on the coast. What the heck is stamp duty? In general terms Stamp Duty is a tax imposed on transactions, including real estate, cars and assets belonging to a business. Specifically to real estate (in NSW) it is a tax paid by the buyer as a percentage of the purchase price. Where does the cash go? It goes straight to the government, and with any luck they will use it to improve roads, transport and other stuff we all use regularly. What if I am a first home buyer? The only exemption available to first homebuyers is The First Home – New Home Scheme. This scheme is for Australian Residents who have never owned a property and are buying a newly built home under $550,000. http://www.osr.nsw.gov.au/grants/fhnh When am I going to be hit up for it? Stamp Duty must be paid within 3 months of the contract date or on the date of settlement – whichever comes first. Who takes care of the payment? Your bank or broker should account for the stamp duty and legal costs in your borrowing. Once this is done your conveyancer or solicitor will take care
of the rest, sending the information to the Office Of State Revenue for assessment and then making the payment directly to them. Having a good conveyancer who understands the ins and outs of stamp duty and its exemptions and potential issues is really important. How much do I have to pay in stamp duty? To find out exactly how much you need to pay for your specific situation use the calculators on the Office of State Revenue site for the most accurate and up to date information. If you are a first home buyer – use this calculator https://www.apps08.osr.nsw.gov.au/erevenue/ calculators/fhnh.php For anyone else – use this calculator https://www.apps08.osr.nsw.gov.au/erevenue/ calculators/landsalesimple.php
You don’t pay taxes – they take taxes. Chris Rock
THE IMPORTANCE OF STRATA REPORTS Buying an apartment, townhouse or villa can be a cost effective and convenient way of getting into the property market. However it is essential to obtain and properly understand the Strata Report.
- Strata Manager: you can book in a time with the Strata management company to go over the Strata reports provide details of the collective accounts, Annual General Meeting notes and aspects of your prospective purchase. This should by-laws yourself. There is usually an hourly charge include information on levies, by-laws and lot entitlements, details of funds held for short and long for this. term maintenance and minutes of meetings which How much does a Strata Report cost? might point to future costs. Strata Reports can vary in price from $150.00 Is it necessary to get a Building and Pest Report $250.00 as well as a Strata Report? What should I look for in the report? A Building and Pest Report can be carried out, What is a Strata Report?
but is largely unnecessary as this will only pick up on information within the apartment. Keep in mind the only things you will be responsible for fixing are cosmetic aspects; something that you can investigate just by looking over the property carefully. How do I obtain a Strata Report? There are three ways to obtain a Strata Report:
- Who is the current owner? - What are the quarterly levies for the property? - What are your voting rights? What is your unit entitlement? - When are the levies paid to?
- Conveyancer: your conveyancer should be the - Have they been paid up to date? first person you speak to about this as they will be the most cost effective and the easiest way to - Are there any current or proposed Special Levies? obtain the information. They will also know what to (additional contributions outside your quarterly look for within the report. levies that may be raised for building defects or major works) - Strata Investigation Company: there are specialist Strata investigation companies who can prepare a - Does the Strata Scheme comply with Fire report, however this can be more expensive. Requirements, Work Health & Safety Obligations and Asbestos Management?
- Has the building had any problems with pests or vermin? - Is there any information in the records approving animals? Are animals permitted? - How much is in the sinking fund and Administrative Fund?
- Are any of the funds in deficit? - Are there any current legal matters? - Have there been any legal matters in the past 3 years?
- Are there any compliance related matters within the records such as window and balcony compliance? - Is there a Sinking Fund Forecast? (a report prepared detailing what the levy contributions should be over the next 10-15 years including detailed maintenance) - Are there any known disputes within the Strata Scheme or complaints about the Strata manager? - Copies of Annual General Meeting Minutes, Extraordinary General Meeting Minutes and Executive Committee Meeting Minutes?
- Building defects or Home Owner Warranty Claims - Copies of building reports, extracts from for defects? compliance reports? - Breaches of By-Laws? (Rules and Regulations for this building) - Is there any disharmony between owners or tenants? - Major Income and Expenditure over the past 3 years? - Proposed Major Expenditure? - What is the current value of the building? - Is the building insured and, if so, adequately insured? (details of the insurance and cover)
The house shelters daydreaming, the house protects the dreamer, the house allows one to dream in peace. Gaston Bachelard
WHAT HAPPENS ON SETTLEMENT DAY?
Once you have purchased your new home you may be wondering what happens on the final days leading up to settlement and on the day itself. Settlement is the final stage of a property sale when the purchaser completes the payment of the contract price to the vendor and takes legal possession of the property. What happens on settlement day? 1. The finance lender will authorise payment of the so that any issues can be resolved well before buyer’s loan money, and payment will be made settlement date. to the vendor. When can I get the keys? 2. The buyer (or their solicitor/conveyancer) will The keys can only be handed to the buyer when authorise the vendor to collect the deposit both the vendor and purchasers solicitor advises in money from their agent, where it has been held writing that the property has been settled. This can in trust. happen quite late on the day, so don’t expect to have the keys first thing in the morning. 3. The vendor and the buyer will reconcile any adjustments that were pre-paid or accrued What condition should the property be in? during the settlement period (such as water and The property should look the same as when you council rates). inspected it. All the inclusions listed in the contract should remain in the property – these can include 4. The buyer will receive the title of the property. stoves, air conditioning units, blinds or any other The vendor’s solicitor or bank will organize for the Registrar General to register the transfer and fixtures or furniture the two parties have agreed on. The property should be in a reasonably clean home loan (if applicable). The mortgage will be noted on the title until the term of the home loan condition. is completed.
5. Both parties will advise the agent in writing that settlement has occurred and that the agent can release the keys to the buyer. What is a pre-settlement inspection? A pre-settlement inspection is a final review of the property and inclusions carried out with the purchaser, it occurs in the last week before settlement. Try to book this earlier in the week,
What can go wrong? It is not unusual for settlement to be delayed, sometimes by a few hours or even a day, as there are many parties such as solicitors, real estate agents and banks coordinating to complete the sale. Both the purchaser and vendor should have a stand by plan for accommodation and the delivery of their furniture. Factor in the costs of delays to removalists and the possibility of having to store furniture overnight.
THINKING LIKE AN INVESTOR
Legendary business magnate Warren Buffett says “Someone’s sitting in the shade today because someone planted a tree a long time ago”. Meaning a wisely chosen asset today will seed and grow into a valuable return tomorrow.
But in the heat of the current market, with buyers swarming and limited stock, emotions can take over. Of course an emotional connection to your dream home is essential, it’s the place where you are going to grow and celebrate life. But it is important to put your investor’s hat on and consider the long term, because your home is your biggest investment and asset. These are the five key considerations investors make; 1. Land Size – The design and tastes of architecture will evolve constantly but land never goes out of style. Oprah says she buys land ‘cause God’s not making anymore’. 2. Location – A house can be replaced or renovated but its proximity to the ocean, amenities and its position within the street and suburb can never be replaced. 3. Potential – Does the property have the potential for extension, renovation, subdivision or the addition of a granny flat? 4. Rental Return – Considering rental returns can help you view the home more objectively as an asset. Also circumstances change, it’s good to have a plan B and know what kind of rental return you can expect.
5. Floor plan – A sensible and flexible floor plan that flows nicely but is also workable for renovations or extensions.
The market, like the Lord helps those who help themselves. But unlike the Lord, the market does not forgive those who know not what they do. Warren Buffet
DON’T OVER CAPITALISE
With any luck, within the next couple of weeks, you will be moving boxes into your new home, ordering a pizza, cracking open a bottle of champagne and breathing a big sigh of relief.
But give it a couple of months and your brain will start percolating on renovations, extensions and adjustments. This is a natural part of the process in making your house a home. Before you start watching back-to-back seasons of The Block and collecting piles of home magazines, we recommend you stop and do one very important thing. Get a good, experienced real estate agent in, preferably from Bevans. Real estate agents literally go through hundreds of homes and are witness to all manor of renovations and extensions. All this experience means that we can translate your vision into actual value. Eventually the tables will turn and you will be the seller, and if there is one piece of advice we can give you it’s - don’t over capitalise. This means renovating or improving the home beyond its resale value. It’s easy to get emotionally involved, blow the budget and convince yourself that expensive Italian taps are the only option. Having someone who is objective and understands the real estate market look over your ideas is imperative.
Now you may be thinking that real estate agents don’t have time for this sort of thing when you are not even remotely thinking of selling. But a good real estate agent knows it’s all about relationships, good, consistent, long-term relationships –we are more than happy to help. So unpack those boxes and invite us over for a cuppa.
There’s nothing wrong with wanting to be the best in the world, as long as you know that doing so also means wanting to be the best for the world. Keith Ferrazzi
ANY MORE QUESTIONS?
We think we are pretty smart and have it all covered but what we discover is that our buyers are always bringing up questions, scenarios and weird and wonderful situations for us to tackle.
Our arms are wide open and aching, frankly to receive your feedback, suggestions and questions. Many thanks to the awesome buyers whose questions inspired this guide, and whose search for their dream home keeps us jumping out of bed every morning. We think of ourselves as real estate artists and you are definitely our muse. ‘An artist is someone who uses bravery, insight, creativity, and boldness to challenge the status quo. And an artist takes it (all of it, the work, the process, the feedback from those we seek to connect with) personally. Art isn’t a result; it’s a journey. The challenge of our time is to find a journey worthy of your heart and your soul.’ Seth Godin Well-said Seth! We would add that a second challenge of our time is about finding a home worthy of your heart and soul.
Š Bevans Real Estate 2014