Buying A Home in Australia

Buying or selling a home can be a complex and time-consuming process. Even before you make the ‘big  decisions’ about which property to buy, home loan to select, and estate agent you engage to sell your home, there are many other important decisions you will need to make.

Finance

Eligibility requirements vary between institutions, but lenders generally use two criteria to work out how much they will lend: the borrower’s income and repayment capacity as well as the loan to value ratio. This is the percentage of the purchase price that lenders will agree to lend. Depending on the lending institution and type of loan, a deposit equal to a certain percentage of the purchase price will be required. While most minimum deposits are ten per cent of the purchase price, in some cases an institution may lend 100% of the purchase price, requiring no deposit at all. If you are borrowing 80% or more of the purchase price, lenders generally require you to pay for mortgage insurance, which means an additional upfront payment.

Selling a property

Before a property is sold, the seller (vendor) is required by law to provide the buyer with a vendor’s statement or ‘section 32’. This process is usually undertaken with the assistance of a solicitor or conveyancer.  Once prepared the vendors statement or section 32 is signed by the seller and made available to prospective buyers, usually via the agent before the sale or auction. The vendor’s statement contains information about the property’s title, including mortgages, covenants and easements, zoning and outgoings such as rates. It does not include any information about the condition of any buildings, whether they comply with building regulations or if measurements on the title are accurate. The onus is on the buyer to find out about anything that is not covered in the vendor’s statement. The information that must be included in the vendor’s statement is outlined in section 32 of the Sale of Land Act 1962.

There are two main ways that real estate can be bought and sold.

Private sale - In a private sale the property is advertised and offers are invited from prospective buyers. The sale is negotiated between the buyer and seller, usually with the assistance of an
agent.
Public auction - An auction is a public sale, usually conducted by an estate agent acting as auctioneer.

Sourcing and inspecting properties

There are several ways prospective buyers can source properties.

The internet - this is the most popular means of sourcing properties for sale. As well as individual agency websites, there are several large property websites which list properties.
Newspapers - most local newspapers have a property section or lift-out. Major metropolitan papers have a comprehensive list of properties for sale and inspection.
Direct contact - directly contacting estate agencies by telephone, email, fax or in person is another way of sourcing properties for sale.
Promotional magazines - many agencies produce weekly colour magazines which provide a comprehensive list of properties for sale. These magazines are available free of charge from most agencies.

Other ways of sourcing properties for sale include noting signboards in front of properties and hearing of listings through word of mouth.

Open for inspection times are usually advertised in newspapers and on the internet.

Making an offer

The agent will communicate the offer to the seller. Although an offer can be made verbally, it is not legally binding until it is in writing and signed by both parties. This will generally be in the form of a contract note or a contract of sale of real estate signed by the buyer and, if accepted, signed by the seller. The agent may also require the buyer to pay a deposit. The deposit will be returned if the offer is not accepted. An offer becomes binding when both parties sign the contract note or contract of sale and all conditions are met.

The contract note contains details of the property for sale, names of the seller and buyer, seller’s estate agent, price, the deposit paid, balance owing at settlement and any special conditions such as a clause ‘subject to finance’. A contract of sale of real estate is a more detailed legal document than the contract note and is usually prepared by a seller in consultation with a solicitor. The terms agreed upon in the contract note can be set out more formally and in greater detail in the contract of sale. It is possible to proceed straight to a contract of sale without first completing a contract note.

If the seller does not accept the offer, the agent may go back to the buyer and see if he or she is prepared to make another offer. Through a process of negotiation the agent will attempt to achieve a mutually acceptable price.

Unless you intend representing yourself and doing your own conveyancing, you will need to employ a legal representative. Your representative will check that the contract is in your best interest and contains nothing detrimental. They will also negotiate terms for you and conduct the conveyancing to ensure that the title is free of encumbrances. The final contract and attached documents should set out the price,
settlement date, inclusions ie chattels, zoning restrictions, caveats, easements — such as RTA and utility plans, sewer and drainage diagram; and any special conditions, such as the purchase being subject to finance approval, or termite and building inspections, that you have negotiated. All sorts of special conditions can be written into the contract in your favour, such as early or late settlement, etc. So consider carefully the things you might like to include.

Before signing a contract, a buyer should consider enlisting the services of a qualified building inspector, surveyor or architect to provide a professional condition report. 

Exchanging contracts clinches the deal for the buyer, on the proviso all contract conditions are met and there are no undisclosed faults with the property. The buyer is usually given a five-day cooling off period, although this varies from state to state. The contract may be modified after negotiation from the original held by the agent. The deposit must be paid on exchange of contracts. It is usually paid to the real estate agent who holds it in trust until settlement is completed. It cannot be released without consent by both parties, and the interest that accumulates is shared between the vendor and buyer.

Settlement, when you become the legal owner of the property, occurs 30-90 days from when you sign the contract. This can be negotiated to a period that suits both you and the seller. You pay the balance of the purchase price, take possession of the property and the keys and title deeds are handed over. The balance of the deposit will need to be drawn and given to your conveyancer the day before settlement.

Useful websites

Real Estate Institute of Australia
www.reiaustralia.com.au