At Norwest Select Property Group we understand how stressful the purchase of a new home can be for prospective buyers.
The following information is intended to help you through the process of buying residential property to make sure it is an enjoyable and stress-free experience.
Before you make an offer
There are a few things you will need to have arranged prior to making an offer on a property.
Pre-approval of finance from your bank or lending institution. If you need some advice, a mortgage broker will be able to help you with the details of what you will be able to borrow in terms of your financial capacity and the bank/lending institution assessment and procedures.
You will need to have an initial deposit (payable within one business day from contract date) and balance deposit (payable within one business day of unconditional date of contract) ready for transfer following contract acceptance by the seller. Standard deposits are usually 10% of the purchase price, but can be negotiated when you sign the contract.
Once an offer is accepted, you will need to nominate a solicitor or conveyancing clerk as part of the documentation. Be sure to do your research beforehand as their rates can vary greatly.
This date will be negotiated at the initial offer stage and will depend on your finance, building and pest reports, and other stipulations you may include with your offer. Be sure that you can be ready to start paying the mortgage by this date. If you are intending on selling your current property, it is prudent to already by in the process of hiring an agent (or even have it sold or under contract for complete peace of mind). A settlement period can be negotiated when you sign the contract; usually they are around 42 days, depending on the seller’s and your requirements.
Making an offer
In NSW, offers must be in writing and presented on a contract. If you are intending to make an offer, make sure you let the agent know straight away so that they can provide you with the contract and inform you on how to correctly fill out the contract and the obligations of each party once a contract is submitted. Once presented with your offer, the seller has three options that you need to be prepared for.
Accept the offer
You are immediately bound by the contract you have signed. Once the seller has signed the contract, the property becomes ‘under contract’ and that date is the ‘contract date’ moving forward. This is why you need to ensure you are across your finance, legal and settlement information prior to signing any contract. It is wise to obtain independent legal advice from a solicitor or conveyancing clerk.
It is standard practice in Australia for a bank or lending institution to request an independent valuation of the property within 14 days of the contract date – especially if you are borrowing more than 80% of the purchase price.
One business day after contract date the property will pass to your risk at 5pm – which means that you must arrange insurance for the property. If purchasing an apartment, the body corporate will cover the building’s insurance, but it is your responsibility to insure the internal of the property.
It is your responsibility as the purchaser to arrange a building and pest inspection; this is generally one of the conditions of the contract. The standard timeframe for an inspection is within seven days from the contract date.
Sellers are hard to read and make decisions at very different speeds. Make sure you are planning for this outcome from the day you sign the contract so that you are ready for settlement.
There is a cooling off period of five days from the contract date (including the contract date if it is a business day), in which the purchaser can terminate the contract for any reason. Be very careful about this as terminating a contract can, and usually will, attract a penalty of 0.25% of the purchase price.
Reject the offer
You will have an opportunity to resubmit another offer. Make sure you get some feedback from the agent as to why the offer was rejected and a counter offer was not made in the first instance.
A seller may counter your offer with a different sale price or conditions; it is then up to you to either accept or counter their offer.
Buying a residential property can be an emotional experience and it is beneficial to know your absolute financial limits as even an additional $5,000 can secure a property. Make sure you stick to your limits so that you don’t find yourself in financial distress once the contract settles.
If participating in an auction, it is important to have your finance, legal and settlement requirements locked in as auction day is final. Be sure to register with the Auctioneer as a bidder prior to the auction starting and be ready to own the home instantly (awaiting settlement) if you are the highest bidder once the hammer goes down.
Buying a residential property is an exciting and rewarding time. Be sure to ask for help from the agent, your legal representatives and your financial institutions to make sure you are prepared and have the capacity to move forward on a property. When settlement day comes, it will all be worth it!