Monkey Conveyancing Buying Guide
Is Buying For You?
Some people weren’t meant to buy. Why?
- Bad Credit. You can’t get a loan.
- High debt ratios. You owe more than you are worth and / or can’t service the loan.
- No savings history (although there are exceptions to this rule).
- Job instability. How secure is your job? Will you be transferred out within the next 3 years? Could you be fired / replaced / made redundant? If you had to sell the house you’d probably lose money on the sale because of the high buying and selling costs. Later in this document you will see buying costs average out at about $13,000 (minimum) and selling is more than that.
- Maintenance costs. Unlike renting you have to pay for repairs to the property if you want to keep it in good shape and value. First home buyers usually won’t have much money left over in the first few years and would not be able to afford to get professionals in to do any repairs or maintenance. It is a much better idea to buy a home in reasonable to good condition. It is estimated that you need to set aside an amount equal to 5% of the purchase price for repairs.
- Costs Less To Rent. What if the housing market crashes?
- If for example, you pay $340 a week on a rental property that is worth $350,000. Each year you pay $17,680 in rent.
|If you buy a property for:||$350,000|
|Approximate borrowing costs:||$ 15,000|
|Less deposit of 10% of purchase price:||$ 35,000|
|You would need to borrow:||$310,000|
Your loan over a 30 year period at 7%, means repayments are $476 a week plus rates, building insurance and repairs and maintenance (say $3,500pa) = $28,252pa. If you stayed renting at $340 a week the difference between renting and borrowing is $10,572 a year. The interest you would have earned on your $35,000 deposit would be $2,100, so by not buying, you are better off by $12,672.
With the market flat or falling you are better off saving that $12,672 and borrowing that much less a year later and your repayments would be less. Whether you rent for that extra year or not, you will still pay 58% of your repayments in interest over the term of the loan. On the other hand, you may just want to buy your own home now for any of the following reasons.
Why Would You Buy?
- Pride of Ownership. This is the number one reason. Home ownership gives you and your family a sense of stability and security. Nothing beats it. After love and food comes the need for shelter. It’s making an investment for your future. It means you can paint the walls any colour you desire, attach permanent fixtures and decorate your home according to your own taste.
- Appreciation. Although real estate moves in cycles, sometimes up, sometimes down, it has consistently appreciated. Many people view their home investment as a hedge against inflation.
- Capital Gains Tax Exclusion. Do you have an hour for the ins and outs to be explained? Bottom line is that as long as you live in the home, and don’t run a business from it (or claim a tax deduction for rented space to a business), then when you sell, the money you get for the sale is all tax free. There are lots of exceptions –lots – and you’d be well advised to speak to your lawyer or accountant about any situations that don’t match the usual one described above.
- Mortgage Reduction Builds Equity. The more you pay off your Mortgage, the more of your home you will own.
- Equity Loans. The more you pay off your loan the more of the home you own. The part you own is called equity. Over time you can, borrow against this equity by increasing the amount of your mortgage. Lenders like to lend where they have some security for the loan being paid and homes are good security. The interest rate is lower on a home loan Where there is no security, the interest rate is higher e.g. this is why credit card interest rate is so high. You can borrow against your equity for any reason e.g. home improvement, higher education, medical expenses or starting a new business. Some mortgages automatically come with an inbuilt line of credit against your equity if you are borrowing less than 80% of the purchase price.
Like all purchases it comes down to what you can:
- Afford to save.
- Afford to borrow.
- Afford to repay.
- Afford to buy.
- Afford to keep after you buy it (most people forget about that one)!
When you know what you can afford you can start looking at:
- Where you can afford to live?
- What you want to live in?
- The size of the property you need / want?
We know that shopping is the fun bit but first things first.
How Much Can You Afford to Save? – You Must Have a Budget First
Work out how much you spend of your monthly earnings. When you take spending away from your earnings, this is how much you can save. When getting ready to do your budget, each day for a week write down a list of your daily expenses. Try to think about each dollar spent and whether or not it was a required expense. You’ll be surprised where it all goes.
It breaks down your income and expenses to categories and then breaks them down into items. It converts your weekly, fortnightly and monthly figures into annual figures. You can see what you have left over. You also have the ability to save the planner in PDF format for ongoing use.
After you have done the budget:
- Try to find ways to ways to save money.
- Control your spending.
- Cut spending to areas that are higher than you expected.
- Find ways to make more money.
- Stick to your budget and don’t give up! Be realistic. If you don’t save money the first month, find out why (was it unrealistic? did something unaccounted for come up? did you misspend)?
- Adjust your budget as you go – it is a living thing. The more you study and understand your budget, the better luck you will have sticking to it and meeting your goals.
Having a savings plan is good practice for repaying a mortgage and most Lenders want to see a history of savings. The longer you save the better for you when it comes time to borrow.
How Much Can You Afford to Borrow?
The amount you will be able to borrow is ultimately based on how much you earn.
You can get a rough idea by using the following online calculators:
As a general rule (there are exceptions) a financial institution will loan you up to 90% of the value of the property you are buying. This means you have to find the remaining 10% plus the “costs” of buying”. So if your income lets you borrow around $280,000 you’ll need $31,111 (plus your buying costs).
Another way to look at it is by doing the calculation in reverse: if for example, you have $30,000 saved as a 10% deposit, how much will you be able to borrow?
You can calculate it this way:
10% = $30,000
90% = unknown
90 x $30,000 = $2,700,000 = $270,000
$30,000 deposit + $270,000 loan = $300,000.
Out of that $300,000 you will have to take out your buying costs. What is left will be what you can afford to spend on buying a home.
If you are building, the calculation will be slightly different:
$300,000 less buying costs, less building costs. What is left is how much you can spend on land. A house-land package can be a very good deal.
How Much Will You Have to Borrow?
Here’s an idea of what your costs of borrowing might be:
|Lenders fees (some may be negotiable)||Approx|
|Application fee – generally includes Settlement and search fees (Some financial institutions waive them).||
|Valuation fee. Major lenders normally include this cost in the application fee.||
|Monthly service fee||$10|
|Mortgage insurance. This amount depends on the purchase price and the amount you borrow. It protects the Lender and is normally charged if you borrow more than 80% of the purchase price.||$1,500+|
|NSW Government Tax – Stamp Duty||Cost|
|Stamp Duty on purchase price of $300,000. Stamp Duty differs in other States.||
|NSW Government fees (not negotiable)||Cost|
|Land transfer registration.||$199|
|Mortgage registration. This fee is normally collected by your lender.||$99.50|
Visit the relevant State Government website to see what your state charges in fees.
|Contract Fees (some are negotiable)||Approx|
|Search fees (depends which ones you do)||
|Agency fees (not always incurred)
Includes Settlement fee and conveyancing out of pocket fees
|Home building insurance – depends on value of house only||$200-$500|
|Moving costs, electricity and phone connection||$1,000-$3,000|
If you have borrowed approximately $270,000, set aside $14,000 to $19,000 for buying costs. With that sort of investment do yourself a favour and get good financial and legal advice. You will feel better if you do and it will take away a lot of the worry and uncertainty.
First Home Owner Grant
The First Home Owner Grant is a Commonwealth Government initiative.
If you are eligible for the First Home Owner Grant, you can take $7,000 off your buying budget. It is paid to you AFTER you pay for the property.
The Grant is administered by the Office of State Revenue in each State. As well as the First Home Owner Grant some State governments offer stamp duty concessions and further grants.
Can you afford to keep it after you buy it?
You won’t have to pay rent any more, but you will have to pay the Mortgage (which will most likely be more than what you were paying on rent) as well as council and water rates, insurance or body corporate levies, and repair and maintenance costs. When you are buying a house, ask the selling agent what these additional costs (council, water etc.) will be. It will be too late to worry about these costs after you have signed the Contract to buy the property!
Interest rates never stay the same for long. Build into your budget a rate rise of at least 1% to 2%. If rates fall that’s a saving for you. If rates do go down, use the opportunity to keep paying a higher amount each month and you’ll save thousands off your loan.
It Might Look Good On Paper – But Will Anyone Lend you The Money?
Always get pre-approval for your loan before you start looking to buy. How heart breaking to find your dream home and then learn no one will lend you the money. When you have found the house you want to buy, you will want to sign the Contract as soon as possible e.g. there’s another buyer lurking, and it will help you to know that you don’t have to look at a long approval period if you have been pre-approved.
Eligibility requirements for a loan vary greatly between financial institutions, but they will generally use two criteria to work out how much they will lend you:
- Your income: This will include existing debt (counting credit card limits) as well as your repayment capacity.
- The loan to value ratio (LVR). This is the percentage of the purchase price that lenders will agree to lend you.
The lender will then calculate a maximum loan amount. Again, this amount will vary greatly between financial institutions. Consider carefully what you really need and can realistically afford. Don’t allow anybody to persuade you to borrow more than you think you’ll be able to comfortably pay off. Try not to spend more than one third of your gross income on mortgage repayments.
What Type of Loan? Which Financial Institution? What Terms?
The Big Four banks are the biggest for a reason. However, in a recent opinion poll none of them were especially popular because they are monopolies and are generally a manipulative and non-caring law unto themselves with little respect for their borrowers or customers.
You should consider using a mortgage broker. They can shop around and bring the best deals to you. But always find out who they represent and how they are paid.
Understanding the Different Types of Loans
What Are You Looking For – Really?
What is your motivation in buying – Stability? Investment? Proximity? Space? Less maintenance?
Know what you want and need. Make a list of absolute requisites as well as the things that would be nice to have. If you do this, you more likely won’t be tricked into buying a property just because it looks nice even though it doesn’t have the amenities you actually need.
Are you prepared to buy a house that needs renovating? New kitchen, bathrooms or extra bedrooms?
What if the Seller had done part of the renovation and left part for you?
Would you consider buying a house that has plans approved for an extension or renovation? The “leg work” having been done could make renovations easier for you.
You may prefer a completely renovated house. You would be paying extra for the work and there would be little capital gain for you as the big renovations had been done. Neighbourhoods with post-war era homes close the city are prime locations for renovated homes but the demand to be close to work makes the investment worthwhile when you consider the travel time and cost savings.
You have no control over some factors, such as location, or worst house in the best street, proximity to transport and shops, which aspect the home faces, views, and whatever else you need or want to have. The list is endless.
If you do plan to renovate look at what renovation changes will cost in time and money.
What sort of problems do you want to buy? People sell faster with less hassle (i.e. with less price bargaining and delay) if they do all the repairs and maintenance before the home goes on the market e.g. fix cracks in the walls and ceilings, touch up paint work, have the carpets professionally cleaned and replace rusted guttering. You need to determine if these things are important to you. A Buyer will use the excuse of repairs and maintenance to negotiate a lower price. Happens almost every time. Sometimes the house may be a “renovator’s delight” and that is a different situation.
Look at the presentation of any potential houses you are interested in buying. What does the garden look like? A house that looks like it has been loved and looked after will have a more comfortable feel than a dirty one. What are the neighbour’s front lawn properties like – you’re going to have to look at them every single day.
Does the property look like it has been looked after? If it hasn’t then would you pay more for it compared to one of similar value that has been?
Unit, acreage? Yard or no yard? How much privacy? How close to neighbours? Do you need a work space? A study? A home gym? A library? A sewing room? What about the laundry? Off street parking? A cul-de-sac or off a one way street?
Does it have to be within walking distance of transport and shops?
Is it relevant what schools are nearby – or dog parks, medical centres, hospitals, freeway access, sporting facilities?
What about Buying a House and Land Package?
The Fun Starts – Shopping For Your Own Home
The first step is to look online. Websites such as domain.com.au and realestate.com.au have search capabilities built into their sites that allow you to slice and dice the information from postcode searches to price and number of rooms and garages to types of property.
Look at property listings in real estate agency windows.
Peruse the real estate sections in newspapers – most areas have a free local paper.
Drive around the area you want to live in and get a feel for it.
See who has the most for sale signs in your area.
Go to open house inspections on Saturdays and in the evenings – a house looks different at night and there’s different noises and traffic issues weekdays
Talk to your friends.
Talk to Real Estate Agents. Tell them what you are looking for.
Before buying you should also find out if:
- The Reserve Bank is expected to change interest rates anytime in the near future. If interest rates rise, you will pay a larger amount each period if your loan rate is a ‘variable’ rate.
- There are more houses for sale than Buyers (prices should be falling or steady), or more Buyers than houses (prices will be rising).
- The current cost of building is high or low – if you are looking for land.
How Much Will the Real Estate Agent Charge Me to Buy a House?
Nothing. Real Estate Agents are paid by the Seller.
REMEMBER: The Agent is there to sell the house and is being paid by the Seller to do that. They are acting in the Seller’s best interest – not yours. They are bound to have no loyalty to you.
How Much Is The Property Worth?
- That depends on what it is, where it is, how old it is, what needs to be done to it to , what Buyers are looking for, how much they are prepared to pay, what homes in the area are on the market for and what homes have sold for.
- Look at recent sales in the area. Compare values with other properties in the area. For Australia wide figures with the best breakdown of statistics go to the APM Home Price Guide website. You can search for prices based on postcode.
- Any major developments planned in a certain area will have an impact on the price of houses. Queenslanders can get information on upcoming developments in areas from the Department of Infrastructure and Planning website.
- The property is only worth what you are willing to pay for it and the Seller is willing to accept. You will almost always want to pay less than the asking price.
- For the Seller it is about getting the best price. Most Sellers will be very attached to their homes and the memories that go with it. This means the price they put on the home will be based on this emotional attachment. But in reality it is just a piece of land with a building on it. If you fall in love with it you may pay more for it than someone who is not emotional. Try and look past the “bells and whistles” that have been set up to distract you during inspections. Imagine what the place will look like with your things in it
- You can also ask an independent land Valuer how much the property is worth. Make sure that the Valuer you use is registered. You can do this by checking the Australian Property Institute website. Visit the Office of Fair Trading website for a list of instructions to give your Valuer and a list of what information to expect in a valuation report. There is no set fee for valuation advice. You should negotiate a fee with your chosen Valuer before the valuation proceeds.
- Some buyers will pay to use a“Buyer’s Agent”. A Buyer’s Agent will find properties for you based on what you are looking for. They will also independently asses the property as well as negotiating with the Real Estate Agent.
- You should be going to auctions in the area(s) you are looking to buy to get an idea of what is available and the prices they are going for as well as who else is buying in that area. Who would you be bidding against? It is also good experience if you have to buy a house at auction. Negotiating the price with the agent one-on-one is however the best way to buy. It gives you more control.
- How much can you get for your money? If you can’t find what you are looking for in one area what can you buy in another?
Should You Make Independent Enquiries?
Check the records at the Local Council. Are there any plans in the neighbourhood for a development that you would or wouldn’t like to be living near – a Westfield maybe? Or maybe a Westfield near you is just what you want for convenience or improving the value of your property – or will you lose value because of traffic? Go and find out.
Maybe there are plans to build a double-story townhouse complex on the property next door that would overlook the back yard of the house you are interested in.
Ask the Real Estate Agent if you can see a Contract.
If you are interested in a particular property, ask to see a Contract for Sale and have your Conveyancer look over it.
Be sure to check what is included in the sale e.g. light fittings, curtains, blinds, carets, dishwasher and anything else you see that you want that is not tied, screwed or glued down.
Do You Need Help With the Contract?
A Contract for Sale is full of legal terms and in some States (NSW for instance) has documents in it that may be confusing to read.
When you sign the Contract for Sale you are guaranteed certain things about the property. You should investigate these guarantees after you sign the Contract. So what you are you being guaranteed?
- Compliance – the property has to comply with certain building, town planning and environmental laws. If you as the Buyer find out that the Seller hasn’t complied, then there will most likely be an issue for the seller e.g. the Seller has converted the space under the house into a commercial space that is rented out but they didn’t get approval to run a commercial enterprise in an area zoned residential. OR they have installed a 2nd kitchen and are renting out a separate part of the house. Do you want to buy a house and find the back of it has to be demolished because it doesn’t comply? The Buyer needs to ask the agent about Compliance and look at the property carefully.
- Illegal Building Work. Has there been illegal building work such as a deck or a granny flat? If so, there could be a building or engineering safety compliance issue. If you can see alterations to the original building you might want to ask the local Council f there have been any building approvals for the property.
- Be sure that the fences are in the right place and correctly mark out the boundary. Don’t assume they are on the boundary line. Look at the Contract of Sale for a copy of the Plan of Subdivision and make sure the dimensions on the Plan meet those on the land. If you are unsure about the boundaries and where the fences sit, have the property surveyed by a professional surveyor. Just because the fences are where they are doesn’t mean that is where the boundaries are, especially if the neighbour once owned the land e.g. we’ve seen people lose a metre of land when a driveway that was presumed to belong to the land was lost when the neighbour put up a fence.
- You would be advised to have a survey done if in doubt of the boundaries. Sometimes a survey will be required by your Lender. Do not have a survey before signing the Contract of Sale unless advised by your Conveyancer first. You have different rights after signing. We suggest if there is any doubt, have the property surveyed after Contracts are exchanged so you have rights under the Contract.
- If there are no fences on the property, look for survey markers. There have been too many cases where a Buyer thought they were buying a larger piece of land than they were, and this has led to cancelled contracts. Or the Seller losing up to 5% of the purchase price in a compensation claim. If in doubt, talk to Monkey Conveyancing.
- Encroachments. You need to ensure neighbouring properties are not encroaching onto the property you are interested in – whether it is a building (including any fences) or part of the building on the property are not on the neighbour’s land. Again, investigate this after Contracts have been signed so you have rights to fall back on. You have no rights before the Contract is signed.
- Swimming Pools: In Queensland, Sellers should have a Pool Safety Certificate. In NSW the pool has to be approved by the Council as being compliant with the relevant legislation.
- Sharing Ownership. If you plan on going into a property purchase with another person, you need to start thinking about how this is going to work before signing any contracts.There are 3 ways of owning property (4 if you count companies).
- Joint Tenancy: This option is best suited for couples. Each person (there can be more than 2 people) is regarded as owning 100% of the land. If one dies the others automatically inherit that person’s interest in the land. Joint tenancy overrides a Will. The problem is that you can’t sell your share because the others all own 100%. One of the owners can be a company and the other person a real person – a company never dies (unless it is wound up) so talk to your Lawyer about arranging this situation.
- Tenants in Common: In this situation, each owner has a share e.g. 50%, 75% or any percent. This is best suited for a business or where ownership is based on how much you paid for the deposit and are paying on the mortgage. All other costs are shared in the percentage that you own the land. You are legally entitled to sell your share – if you can find a buyer. Or you could also buy out (or sell to) the other shareholder. You can leave your share to anyone in your Will and a company can be one of the shareholders.
- Sole name: This is when it is just you, or your company.
Who Can Help You With the Contract?
It is very easy to get caught up emotionally when dealing with such a big purchase. This is usually through fear of losing the property and it is not uncommon to become anxious in regards to signing a Contract without reading it first.
The law is very unforgiving when it comes to signing legal papers and especially regarding real estate. Ownership of land is one of the most important basics that our society is built on, and the right of land ownership is one of the most protected. This gives rise to a couple of very important rules.
RULE 1: NEVER SIGN LEGAL PAPERWORK REGARDING YOUR REAL ESTATE WITHOUT GETTING LEGAL ADVICE FIRST.
While this stage of the process may be new to you it doesn’t have to be overwhelming, daunting or something to fear – in spite of the horror stories that you may hear.
Getting legal advice early is a good idea because there are things that have to be done in the conveyancing process that take time and you won’t know what these time frames are – there is too many variables in the process. We have seen enough cases where the client made their own plans, only to later find that they had painted themselves into a dangerous corner because they weren’t aware that there were other facts that had to be considered. Dangerous because they had agreed to things that couldn’t be done, without a lot of stress and cost, in the time frame they had allowed.
These circumstances are explained in STAGE 5 of this document.
RULE 2: NEVER SIGN LEGAL PAPERWORK REGARDING YOUR REAL ESTATE WITHOUT GETTING LEGAL ADVICE FIRST.
This is so important; we have to give you this rule twice! Have your Conveyancer look at the Contract for Sale. You’ll want to see that there are no unusual or unreasonable conditions in the “Special Conditions”.
These special conditions will have been put in by the Seller and aren’t part of the standard printed Contract. You can also negotiate to put in Special Conditions e.g. that the Contract is subject to a building and pest report and/or finance being approved. This way you get the property on your terms. However if there are other Buyers interested in the same property you could miss out if they have already done an inspection and their finance is approved.
How Do You Buy?
- Your Conveyancer must look at the Contract before you sign it i.e. before you bid at the auction. The law insists that you are bound by any agreement that you sign and it presumes that you know what you are signing. It is almost impossible to get out of a signed contract that you freely sign if you later claim you didn’t know what you were signing– especially if you sign at an auction.
- At an auction the Contract is binding. There is no negotiation after the successful bid is received and the auctioneer says “sold”. So you will need to do your building and pest report before the auction, have your finance pre-approved, a deposit ready and had the property valued if you plan on being the successful bidder.
- Go to a few auctions to get a feel for them. They are quite unique and it’s not like what you see on TV.
- If you are buying at an auction you will need to have the deposit money with you. Find out prior to the auction what the auctioneer will accept – cash, bank cheque, personal cheque, EFT, deposit bond guarantee etc.
- Most importantly, don’t get carried away bidding at the auction. Set a limit and stick to it.
2. “Private Treaty” (or negotiation)
This is where you negotiate the sale price direct with the Agent.
Ask the Agent why the owners are selling?
- Are they are upgrading to a bigger home?
- Are they moving interstate?
- Are they downsizing because their children have moved out?
This information can sometimes give you an indication to what extent the Seller is willing to negotiate. The more pressure on them to sell, the stronger your negotiating position.
Seller’s asking price
A Seller will usually have set their sale price before listing the property for sale. This price would have been based on:
- A property valuation.
- Comparative sales with similar properties in the area.
- Or they may just want a particular price for a property based on their financial situation.
Deciding on your purchase price
This should be based on:
- A detailed Property Valuation.
- Research on similar properties in the area.
- Your financial situation.
NEVER go over your absolute maximum price.
Find out from the Agent if there are other interested buyers, or if they have received any offers on the property you are interested in and how much those offers were for. Don’t be afraid to ask what price and Settlement terms they are offering.
Before negotiating an offer, make a decision on what Settlement period you would prefer. The Sellers will usually already have an idea of what Settlement period they would like, however it is still reasonable to suggest your preferred length of time. As a general rule Settlement periods will usually be either 30, 60 or 90 days.
Don’t rush in
Negotiating is just like 2 tennis players on either side of the net, moving slowly towards each other until they eventually shake hands. The Real Estate Agent will tell you what the Seller wants. As the Buyer you will make an offer. The Seller will either reject the offer or move closer. The Buyer counter offers. And so on it goes until Seller and Buyer meet. This is by far the stronger place for a Buyer to be in whereas an auction puts the Seller in the prime position.
Some Agents might recommend that you just make your best offer and if it doesn’t get accepted then move on. The issue is that there’s no trust between the Buyer and the Seller so neither knows if the other is being honest in the statement of what they are prepared to offer and accept. Your negotiating strategy is going to depend on the state of the market that you are in. It could be rising or falling or stagnant. Every situation is different so there really is no hard and fast rule that can be applied.
Building & Pest Inspection
Now that you know the Contract is ok you must have a really close look at what you are buying.
You wouldn’t buy a car without a mechanic looking over it, so why spend a 1,000 times more on a house you’re going to live and not have a professional take a look at it first?
The place might seem “solid as a rock” but what about:
- Potential water seepage from neighbouring properties that could be undermining your foundations.
- The water hammer in the pipes.
- Any steel posts supporting verandas or part of the house that are showing signs of rust at the base.
- Is there concrete cancer?
- Is the power board sufficient or will it need replacing as it’s not enough to carry the extra power that your appliances will need?
- Is the roof full of tiny holes only visible from the manhole?
You might have grand designs and presume that “this wall” or “that wall” can be removed but any wall is potentially a load bearing wall and to remove them will mean you will have to replace it with a beam or reinforced steel joist (RSJ) which will destroy the line of the ceiling and add thousands to the cost of a house purchase. Get a builder in preferably before you sign anything and be there when the inspection is made so you can see what any issues may be and get the report in writing.
Search the Records of the Body Corporate
If you are buying a unit, have an inspection made of the Minutes of Meetings of the Body Corporate to get a history of building work and if future works will need to be partly paid by you as the new owner. You could find that you are expected to contribute thousands of dollars for major work to be done on the building.
Can Anything Go Wrong At This Stage?
Until the key to the new home is in your hand, things can go wrong.
Some of the things that could go wrong include:
1. Refusing to Confide in Your Conveyancer
Buyers withhold information for different reasons e.g.
- Fear of how they will be perceived.
- Irrational belief they have all the answers.
- Don’t feel it is important enough.
- Lack confidence in their advisor.
Your Conveyancer handles such a multitude of transactions and personality mixes, there’s little they haven’t heard before. They are representing your best interests and have a legal responsibility to not withhold any pertinent information. They can’t help you if they don’t know what you are doing behind their backs. Your Conveyancer is not just someone who you are paying to do an administrative task. They are there to HELP you and this is where it’s important to hire someone who can give YOU personal service. And service costs money. The irony is that those who need the most service (hand holding) are the ones who can least afford it (the First home Buyers).
First Home Buyers often hire the cheapest Conveyancer to save a few bucks but because those discounters specialise in turnover they usually can’t spend enough time explaining the ins and outs of what is going on and allying fears. The Buyer will not get the support and reassurance that they need. The old pros who know the value of paying for experience will use Conveyancers who are charging reasonable fees (the test of reasonable is based on the experience of the Advisor). So even they have been through the process a few times they realise the value in getting someone to do the job who is available to answer any question when they want to know the answers.
Spend the extra $100 and get some good service. Your peace of mind will thank you.
Talk to your Conveyancer about your doubts, feelings, and anxieties. Buying is a very personal experience. It’s more personal than you know, and you will want to have someone who can be there for you.
2. Getting Final Finance Approval – traps for the unwary
You can negotiate to put a Special Condition in the Contract making the purchase of the home subject to finance being approved, but someone who is approved first is in a better bargaining position than someone who makes the Contract subject to finance. Finance needs to be approved quickly. Here is how you can speed it up and not unknowingly sabotage yourself.
- Altering financial situation after pre-approval and before signing the contract
When you have applied for your pre-approval you were approved on what your financial position was at that time.
If that changes before your finance is approved, you may not be entitled to keep the pre-approval. So if you sign a Contract to buy thinking you are approved and then go to your Lender and find you aren’t approved because your financial position changed – boy are you screwed! You’ve put down your deposit but can’t pay for the property. If you can’t get the money somewhere else you will lose your deposit because you have breached the contract.
Do not buy anything on credit and / or with a credit card once you have completed a loan application especially:
- Washers, dryers, refrigerators
- Lawnmowers or garden equipment
- Expensive electronics or computers
- Furniture for your new home
Even the slightest alterations in your financial position after you have lodged your loan application could mean no loan:
- Changing jobs or becoming self-employed in between the pre-approval loan application and signing the contract. Or between finance approval and the date you need to pay for the property (‘Settlement date’). This could be enough for your finance to be cancelled.
- Incorrect or inaccurate information could be enough for your finance to be cancelled.
- Non-disclosure of all relevant information could be enough for your finance not to be approved or for it to be cancelled.
- Unrealistic value of assets could be enough for your finance not to be approved or for it to be cancelled.
- Not giving your Lender the documents that you have been asked for. Some borrowers repeatedly send in other documents than the ones requested (i.e. ATO Tax Assessment Notices in place of group certificates, or bank statements showing pay being deposited in place of pay-slips).
- Not getting a “fully assessed” pre-approval. Some lenders issue an automated pre-approval without any assessment. This usually has a page of disclaimers and is pretty worthless.
3. Buying the Wrong House
The very first thing home buyers should do is to make a list of priorities and define home purchase objectives. Figure out what features and benefits are most important and which you can live without. Before you sign the Contract, review this list. It’s easy to overlook a major factor that could come back to haunt you later.
For example, a Buyer looking for a home in Holland Park, Brisbane, found herself swept up in the excitement of buying a home that was a bit less than she actually needed. She convinced herself that having one bathroom was suitable but found after buying it and having to share the bathroom with two grown sons, she realised it was impossible. It caused her so much tension and strain that she sold less than a year later. It cost her money to sell and more money to buy. If the market had been depressed, she could have lost everything.
Another Buyer paid $45,000 more than he was comfortable spending. But he fell in love with the character, the high ceilings, the lights and wide-planked floors. A year later, he could not afford to make his mortgage payments. The house was too expensive for him to maintain. He would have been better off buying a smaller home in a more modest neighbourhood. But he let his soaring emotions cloud his good judgment. Since buying, the market softened and he could not sell. He lost his home.
Refuse to be hurried into a decision.
You will be paying off your loan for decades to come. You want to make sure you have chosen the right property.
What Can My Conveyancer Do For Me?
Conveyancing work includes:
- Checking the sale contract before you sign.
- Checking disclosure documents.
- Advising on the finance contract.
- Checking and explaining the results of title searches.
- Assisting in negotiations about fixing problems identified in pre-settlement inspections.
- Handling final payment on Settlement day with the
- Seller’s Conveyancer.
- Transferring the property title from the Seller to you.
4 – 6 weeks leading up to the move
Start getting quotes from removalist companies. Give them a date for moving so they can give you a quote (the date is not set in stone at this point). Quotes can vary by thousands of dollars. Don’t always go with the cheapest. Go with the company you feel most comfortable with. Reputable firms that have been in operation for many years will, in most cases, be your best choice.
Book the Removalist once you have your Settlement date. Start collecting (or buying) boxes for packing. The removalist company you are using should be able to supply you with boxes. Ensure you buy some heavy duty tape as well. Many removalists will also offer packing as a service so you do not have to do any of it yourself.
Label the boxes by the rooms that they should be delivered in to.
List the contents on each of the boxes and number the boxes. It will be bedlam when the boxes are delivered and it could be days before you realise you have a box missing.
Some things can be packed weeks in advance e.g. if it is summer, pack all your winter clothes. You can pack all your linen, Manchester, your library and study, garage, workshop, your sporting equipment and your good china.
BUT before you pack anything, have a good clean out and garage sale if you need to. Dispose of things you will never use again, especially clothes and those “I might use that one day” items.
Clean everything before you pack it. You don’t want to be taking dirty dusty things into a clean new place.
Take time off work on moving day. You are going to want to supervise the move and be there for the last minute things that can’t get packed until the morning of settlement – like breakfast dishes and food.
Check your insurance policy about loss and damage when moving. Home contents insurance is usually part of the insurance on the home. Be careful not to cancel the home insurance until the day after the move i.e. Settlement date. It’s a good idea not to cancel the policy until after Settlement has occurred rather than calling the insurance company in advance and cancelling it from the Settlement date – what if Settlement is delayed? You’ll have no insurance to move.
If you are moving into or out of an apartment, book a moving time with the building manager to arrange access for the moving truck and the lift.
Organise a cleaning company to come in on moving day. You will not have time to clean the home after the movers leave. You will be going to the new address. Usually the cost of hiring a professional cleaner outweighs the time and trouble it would take for you to do it yourself. In addition, they have appropriate equipment and are aware of real estate standards that you might overlook (e.g. wiping skirting).
If you like, you can prepare an information pack for the new residents of your old home. Include details such as how to use equipment, manuals for the appliances, local information such as which days to take out the rubbish and recycling bins. If you are so inclined, you might leave a bunch of flowers (in water) or a bottle of wine with a welcoming card.
If you are buying a new home, you should have already arranged insurance to cover the new home and property effective from the date of exchange of Contracts. If you will be renting, ensure you arrange any necessary insurances you may need.
3 weeks before moving
Somewhere in the last few weeks before your home starts looking like an evacuation centre, you might like to mark the occasion of your leaving. Perhaps a dinner party for your family or close friends to remember your life there and be grateful for what the home gave you. Leaving your home can be a very emotional experience. You’re leaving something behind that you will never see or experience again. Your home was part of you. If you don’t get some closure it is not uncommon to be depressed afterwards and not know why. Saying goodbye to your home is an important ritual. Being grateful for what you had is always an important acknowledgement.
Arrange to have utilities disconnected at your old home and connected at your new home so you have electricity, phone and internet when you arrive.
Cancel any newspaper subscriptions in your old home.
Organise to have your mail redirected by Australia Post to go into effect on moving day. This is your safety net. You’ll be surprised who writes to you and who doesn’t know about your new address – including parking fines, missed tolls, offers, opportunities and long lost friends. Often even after you’ve told others about an address change, there’ll be departments in the organisation whose data bases have not been updated and things “just go wrong” at some places.
Start to notify people, organistions and institutions of the change of address – much can be done online and Australia Post has a free service. These people would include:
Anywhere you have money deposited e.g. bank, credit unions, companies you have shares in, your stockbroker.
Anyone who owes you money e.g. your employer, superannuation fund, your debtors.
Anyone you owe money to e.g. bank, credit union, private lenders, credit card companies, hire purchase or lay by companies, places where you have store accounts e.g. David Jones’, Myers, rental companies, or any other place that you hold a plastic membership card to.
A company you have insurance with e.g. car, home, medical, life, disability, glass, landlord-tenancy.
A government department you have dealings with e.g. motor registry (car registrations and driver’s license), tax office, electoral roll, social security, work cover, road toll company etc.
Someone from whom you receive goods or services e.g. electricity, gas, water, telephone, mail, newspapers, child minding services, doctor, dentist, vet, solicitor, accountant, meals on wheels, Salvation Army, St Vincent de Paul, subscription services (like magazines), video hire store etc.
An organisation you belong to e.g. trade union, professional body, gym, NRMA, RACV etc.
Your family and friends, especially overseas people, people on your Christmas card list.
Start using up the food in your freezer, fridge, and pantry to reduce waste when you begin moving home.
Draw up a floor plan of your new home and decide where you will place all your main furnishings. If you’re paying a removalist by the hour, you might as well make sure they put everything in the right place so you won’t have to move it again later.
Protect delicate items during transportation by wrapping them in tissue/butcher’s paper (avoid newspaper as it can leave ink marks). Use large boxes for light objects and small boxes for heavy ones so you are able to manage them once they’re full.
Anticipate that the new owners will change the locks but you will still need to leave all your keys with the Real Estate Agent so that the new owners can get into the home after settlement.
Pack the kitchen last. It will take the longest but it is the room you use the most. Some things you will want to carry in your car – fragile and precious things. Make sure you have room for them in the car.
Last Minute Tasks
In the days leading up to moving, eat out or keep meals basic. This will allow you to pack up most, if not all, of your kitchenware.
If you have children, arrange for them to stay with a relative or friend on moving day. If you have pets, organise some boarding for them. You don’t want either getting under foot or aggravating you or them freaking out.
Check the weather forecast for your moving day. If it looks like it will be wet, purchase some tarps to protect your furniture as it moves between home and truck.
Separate all the items you will require immediately after the move, such as bed sheets, towels, toiletries, work/school clothes, toilet paper and pet food.
Make sure you have something to sustain you through the day. Pack a kettle, some cups, cutlery, tea/coffee and some snacks in a separate box for easy access when you need a break.
Make sure documents are easy to access in case you need them during or after moving home.
Consider storing valuables in a security deposit box at the bank until you have finished moving. Otherwise, keep them close to you as it is easy to lose track of things during the chaos of relocation. Depending on the items, you may want to look into whether these are covered by your contents insurance.
The day before moving home, defrost and clean your fridge out so water doesn’t spill out when you’re transporting it.
Backup all important files on your computer and give it to a friend for safe-keeping until you have safely transported the unit.
On The Day
Wake up early, shower and dress, eat, wash the dishes, strip your bed and pack your toiletries so when the removalists arrive you have nothing left to do.
Place all heavy boxes at the front of the home. Removalists generally like to put these in the truck first so it will speed the whole moving process up – something you definitely want to aim for if you’re paying by the hour.
Put padding around any areas which are difficult to manoeuvre in both your old and new homes to avoid any dents and scratches to walls as the removalists shift bulky belongings.
Check items off your moving home checklist as they go onto the moving truck and later on as they come off it to ensure you haven’t left anything behind.
Do a walk-through and double-check everything before you leave, including all storage areas such as cupboards and drawers.
Turn off the power at the switchboard.
Check all doors and windows are locked.
At your destination use the floor plan you created a couple of weeks ago to guide the removalists in placing your furniture and possessions.
Change all the locks at the new property.