This information has been gathered from various industry resources including REINSW, Australian Property Monitors, Local Community Councils and City of Sydney websites to assist you in your knowledge about the property market. The content is provided as a general overview for information purposes only and is not legal advice
Frequently Asked Questions: Buying a Property
Where is the best place to look for a property?
What should I look for where inspecting a property?
What should I do to prepare for purchasing a property?
How are properties offered for sale?
What does “closing the deal” mean?
How do I know what’s included in the sale price?
What sort of deposit will I need?
What happens at Exchange?
What is a “Cooling Off” period?
What should I do in the “Cooling Off” period?
What happens at Settlement?
Buying “off the plan”?
Where is the best place to look for a property?
A traditional place to start your search for a home or investment is the real estate section in your metropolitan or local paper. The internet is also a quick and convenient resource that is extremely popular and simple to use. The most popular and user friendly are www.domain.com.au and www.realestate.com.au.
What should I look for where inspecting a property?
It is important to know what to look for when inspecting a property, and to check whether any secrets might be lurking behind its facade. It is a good idea to engage a professional building inspector, who will examine the entire house and yard area, and provide you with an Inspection Report. To find a building inspector, check the Yellow Pages under 'Building Inspections and Building Consultants', or contact the Master Builders Association of NSW on Freecall 1800 451 393.
Some simple things you can look for in the first instance include:
What should I do to prepare for purchasing a property?
As soon as you decide to look for a property, contact your lending institution for finance approval. While final approval may not be given until a property is chosen, many lending institutions can give you preliminary approval up to a certain figure, based on your capacity to repay the loan – that way you know exactly what is in your range before you start looking.
It is important to understand that in the period between agreeing to buy your home and exchanging contracts, the seller may choose to accept a higher offer from another prospective buyer, leaving you both disappointed and possibly out-of-pocket. This is called being 'gazumped'. To avoid this happening to you, it is in your interest to be ready financially to proceed as soon as possible once a sale has been negotiated.
How are properties offered for sale?
There are two standard methods used to sell a property.
Private Treaty
When a house or unit is advertised at a disclosed asking price, it is available to be bought by private treaty.
What does “closing the deal” mean?
Negotiations over the price of a property, and what is included in the sale, may go on for some time. 'Closing the deal' refers to the process whereby the buyer and the seller have agreed on a purchase price and there are other issues that must be agreed upon.
How do I know what’s included in the sale price?
Never presume that everything you see in the property will be included in the sale. The 'rule of thumb' is if it is attached to the building and is essential (eg hotplates and hot water systems) they are automatically included. If the items are easily removed they are excluded unless specifically mentioned in the contract. This information is normally on the front page of the contract so ensure that you read it carefully. The estate agent will advise you of items that are included, excluded or negotiable.
If an item is not mentioned in the contract, such as the dishwasher, and the seller agrees to include it, make sure the agent adds this to the contract before you sign it.
What sort of deposit will I need?
Normally a seller will require a 10% deposit when you make an agreement. It is not unusual however for the deposit to be less than 10%. Some buyers do not have sufficient funds for a cash deposit and in such a case some lending authorities will provide a "Deposit Guarantee Bond", in other words - they will guarantee the deposit. These bonds cost between $200 and $400 depending on the amount of the deposit.
What happens at Exchange?
Once you and the seller have agreed on all issues and you have read the contract and understand your rights and obligations, the agent will invite you to sign the contract and an "Authority to Exchange". When you have signed the copy contract, the agent will deliver this to the seller and will deliver to you the original contract signed by the seller.
The agent will, when instructed by you and the seller, proceed to exchange contracts. This means that the seller is legally committed to selling the property to you under the agreed terms. This process - known as exchange - results in each party holding a contract signed by the other party. At this stage you are committed to buying the property subject to the 'cooling off period', explained below.
You would be well advised to contact your solicitor or conveyancer immediately after exchange has taken place.
What is a “Cooling Off” period?
Most buyers of residential property are granted a cooling-off period. This period commences on the day of exchange and ends at 5pm on the fifth business day following. Within this time, you can withdraw from the contract. However, if you do so, you will forfeit an amount of money equivalent to 0.25 percent of the purchase price.
What should I do in the “Cooling Off” period?
If you haven’t already done so, it is highly recommended that you organise a building inspection or a pest report. If you want these things done, it is essential that you act quickly in order not to lose the benefit of the five day cooling off period. While the seller may agree to an extension of the cooling-off period, it is safer to presume that they may not.
It is also vital that you receive written confirmation that you have loan approval before the expiration of the cooling off period. Your lender will then be able to process your loan so that you have the money ready to be paid at settlement.
You should therefore aim to be in a position where you can make your final decision well before 5 pm on the fifth business day.
What happens at Settlement?
Once an exchange of contracts has taken place and the cooling-off period has expired, your solicitor or conveyancer will conduct a number of searches and enquiries to verify that all is in order with the legal title of the property. At the same time, you should finalise your finance with your lending institution. This process can take four to six weeks.
When such arrangements have been attended to, the solicitors for both parties will make arrangements for settlement to take place.
At settlement, you will be required to pay the balance of the purchase price, certain adjustments for water and council rates will be made, any outstanding mortgage will be attended to and you will then become the legal owner of the property.
Buying “off the plan”?
'Buying off the plan' means buying a property before it is fully built, or even when it is just an architect's plan. You pay a deposit when you exchange contracts, then when the property is ready, you pay the remainder.
Where is the best place to look for a property?
What should I look for where inspecting a property?
What should I do to prepare for purchasing a property?
How are properties offered for sale?
What does “closing the deal” mean?
How do I know what’s included in the sale price?
What sort of deposit will I need?
What happens at Exchange?
What is a “Cooling Off” period?
What should I do in the “Cooling Off” period?
What happens at Settlement?
Buying “off the plan”?
Where is the best place to look for a property?
A traditional place to start your search for a home or investment is the real estate section in your metropolitan or local paper. The internet is also a quick and convenient resource that is extremely popular and simple to use. The most popular and user friendly are www.domain.com.au and www.realestate.com.au.
It is also important to personally visit the areas you are interested in. Remember that neighbourhoods can change their personality according to the time of day or day of the week: what may seem a quiet street on a Sunday afternoon may turn into a busy street on Monday morning.
What should I look for where inspecting a property?
It is important to know what to look for when inspecting a property, and to check whether any secrets might be lurking behind its facade. It is a good idea to engage a professional building inspector, who will examine the entire house and yard area, and provide you with an Inspection Report. To find a building inspector, check the Yellow Pages under 'Building Inspections and Building Consultants', or contact the Master Builders Association of NSW on Freecall 1800 451 393.
Some simple things you can look for in the first instance include:
- Is the dwelling structurally sound? Floors should be level and stable, doors and windows should be square. Check inside and outside walls for cracks. Are there any big trees near the house that could cause subsidence?
- Are there signs of rotting or termite damage in woodwork?
- Look along the carpet and over the walls and ceiling for signs of mould or rising damp.
- Try to ensure that sewerage and electricity are functioning properly.
- Check the roof for damage, including tiles and guttering.
- Do the light switches work? What about the power points (check by using a point tester bought from your local hardware store).
- Is the plumbing sound? Test water pressure in both hot and cold taps by turning more than one on simultaneously. Test the drainage by partially filling the bath or laundry tub: if the water drains away slowly it may indicated blocked pipes.
- Consider checking during heavy rain for leaks, local flooding and ponding, and also during dry spells for cracking.
- Does the building comply with council standards, and does it have council permission?
What should I do to prepare for purchasing a property?
As soon as you decide to look for a property, contact your lending institution for finance approval. While final approval may not be given until a property is chosen, many lending institutions can give you preliminary approval up to a certain figure, based on your capacity to repay the loan – that way you know exactly what is in your range before you start looking.
It is important to understand that in the period between agreeing to buy your home and exchanging contracts, the seller may choose to accept a higher offer from another prospective buyer, leaving you both disappointed and possibly out-of-pocket. This is called being 'gazumped'. To avoid this happening to you, it is in your interest to be ready financially to proceed as soon as possible once a sale has been negotiated.
How are properties offered for sale?
There are two standard methods used to sell a property.
Private Treaty
When a house or unit is advertised at a disclosed asking price, it is available to be bought by private treaty.
Auction
The other option is to arrange for potential buyers to bid against each other at an auction. The seller of the property sets the reserve price, the lowest sum they are willing to accept and an auctioneer facilitates the process in conjunction with your appointed real estate agent.
What does “closing the deal” mean?
Negotiations over the price of a property, and what is included in the sale, may go on for some time. 'Closing the deal' refers to the process whereby the buyer and the seller have agreed on a purchase price and there are other issues that must be agreed upon.
- The inclusions, such as curtains, barbeques and light fittings
- The settlement date (normally about 35 to 42 days)
- How much deposit will be needed
How do I know what’s included in the sale price?
Never presume that everything you see in the property will be included in the sale. The 'rule of thumb' is if it is attached to the building and is essential (eg hotplates and hot water systems) they are automatically included. If the items are easily removed they are excluded unless specifically mentioned in the contract. This information is normally on the front page of the contract so ensure that you read it carefully. The estate agent will advise you of items that are included, excluded or negotiable.
If an item is not mentioned in the contract, such as the dishwasher, and the seller agrees to include it, make sure the agent adds this to the contract before you sign it.
What sort of deposit will I need?
Normally a seller will require a 10% deposit when you make an agreement. It is not unusual however for the deposit to be less than 10%. Some buyers do not have sufficient funds for a cash deposit and in such a case some lending authorities will provide a "Deposit Guarantee Bond", in other words - they will guarantee the deposit. These bonds cost between $200 and $400 depending on the amount of the deposit.
What happens at Exchange?
Once you and the seller have agreed on all issues and you have read the contract and understand your rights and obligations, the agent will invite you to sign the contract and an "Authority to Exchange". When you have signed the copy contract, the agent will deliver this to the seller and will deliver to you the original contract signed by the seller.
The agent will, when instructed by you and the seller, proceed to exchange contracts. This means that the seller is legally committed to selling the property to you under the agreed terms. This process - known as exchange - results in each party holding a contract signed by the other party. At this stage you are committed to buying the property subject to the 'cooling off period', explained below.
You would be well advised to contact your solicitor or conveyancer immediately after exchange has taken place.
What is a “Cooling Off” period?
Most buyers of residential property are granted a cooling-off period. This period commences on the day of exchange and ends at 5pm on the fifth business day following. Within this time, you can withdraw from the contract. However, if you do so, you will forfeit an amount of money equivalent to 0.25 percent of the purchase price.
If you exercise your cooling-off rights within the five day period, the agent will refund to you the deposit paid, less the 0.25 percent of the purchase price forfeited to the seller.
The cooling-off rights do not apply in certain cases, such as a sale by public auction.
What should I do in the “Cooling Off” period?
If you haven’t already done so, it is highly recommended that you organise a building inspection or a pest report. If you want these things done, it is essential that you act quickly in order not to lose the benefit of the five day cooling off period. While the seller may agree to an extension of the cooling-off period, it is safer to presume that they may not.
It is also vital that you receive written confirmation that you have loan approval before the expiration of the cooling off period. Your lender will then be able to process your loan so that you have the money ready to be paid at settlement.
You should therefore aim to be in a position where you can make your final decision well before 5 pm on the fifth business day.
What happens at Settlement?
Once an exchange of contracts has taken place and the cooling-off period has expired, your solicitor or conveyancer will conduct a number of searches and enquiries to verify that all is in order with the legal title of the property. At the same time, you should finalise your finance with your lending institution. This process can take four to six weeks.
When such arrangements have been attended to, the solicitors for both parties will make arrangements for settlement to take place.
At settlement, you will be required to pay the balance of the purchase price, certain adjustments for water and council rates will be made, any outstanding mortgage will be attended to and you will then become the legal owner of the property.
Buying “off the plan”?
'Buying off the plan' means buying a property before it is fully built, or even when it is just an architect's plan. You pay a deposit when you exchange contracts, then when the property is ready, you pay the remainder.
When you buy highly desirable property off the plan, such as an inner-city apartment, you have a good chance of seeing your asset accumulate rapidly in value after you pay the deposit. When it comes time to pay the remainder, you may be buying a property for considerably less than its market price.
But remember, buying off the plan means legally committing yourself to the purchase long before seeing the property and knowing how it will be treated by the market.
Ask yourself the following questions before 'buying off the plan':
- how will the property look when it is completed?
- what standard of finishes is included?
- what kind of area is the property in, and is the property suited to it?
- am I familiar with the developer's previous work? Check some of the developer's other projects to check that your property's quality will meet your expectations.
- am I prepared for the long wait before moving into my new home (or renting it out)?