So the journey begins

Buying a property can be daunting from the outset. This is our guid to relive the stress and anxiety.

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Looking for somewhere to live/buy can be somewhat taxing, however having the right information can give you a sense of calmness and the feeling of being in control.

This section makes assumptions like such that you are buying a property in New South Wales and may not be as helpful for other states where processes may be different and things like cooling off periods for private treaty differ by state.

Goodluck on your property journey, you′ve got this. 💪

Preparation

The most important thing to do when thinking about buying a property is being prepared; it means looking at life, your finances with some perspective and making some decisions like where do I want to live short/long term, can I afford to buy a property and sustain the repayments and many other things.

Evaluate your finances

Buying a property be it a house, townhouse or unit isn′t cheap, however it gives you more flexibility be it painting the walls, planting a garden, etc.

Unfortunately many first home buyers often over-extend themselves as because they′ve gotten wrong advice, been optimistic in their calculations or even develop an emotional attachment to a place.

It′s important to think long and hard about the amount that you have saved, wether it′s a worthwhile decision now, or if you should put off your intent to buy for a better season as looking for a house can be taxing and you can save yourself some pain now.

Look at properties and work out what is important to you

If you′ve decided now is the right time and you have done all the calculations then it′s good to start looking a properties, getting yourself added to the mailing lists of the different real estate agents in the areas you are looking, and to get some experience going to open homes. Also try your hand at identifying potential issues with a property (issues can potentially give you leverage as a buyer depending on the interest a property has).

Also do some research about the local market; look at recent sales as this will help you when there are time pressures later on decide if a property is a good deal and if it′s fit for purpose

Finances

It's important to have your finances in order before you start making offers or placing bids at auctions as you will better know what you are able to afford and also how much the bank would be willing to lend you.

Contact a bank or mortgage broker

When looking at getting a loan you have two options to either contact a bank directly or to reach out to a mortgage broker.

  • Mortgage Broker: depending on the lenders/banks a broker works with they may be able to offer you more competitive rates as they know what packages are available and what will give you the best return on investment. Mortgage brokers make a commission when you take out a loan so it's worth ensuring the mortgage broker is giving you the best deal rather than optimising for their commission.
  • Banks: if you already have a bank that you have your funds with and want to take out a loan with them or if you find a really good rate than it can be worth contacting the bank directly.

Apply for any relevant programs like First Home Guarantee (FHBG)

The federal government has a program called the First Home Guarantee that is targeted at first home buyers on low to middle incomes to help them buy their first home by being their Guarantor for Loan Value Ratio of up to 95%.

Some of the eligibility criteria at the time of writing is:

  • applying as an individual or 2 joint applicants
  • an Australian citizen(s) or permanent resident(s)* at the time they enter the loan
  • at least 18 years of age
  • earning up to $125,000 for individuals or $200,000 for joint applicants, as shown on the Notice of Assessment (issued by the Australian Taxation Office)
  • intending to be owner-occupiers of the purchased property
  • First home buyers or previous homeowners who haven't owned a property in Australia in the past ten years.

For a full list of eligibility criteria see the website First Home Guarantee | Housing Australia

Apply for pre-approval

Going through the process of getting pre-approval will give you a sense of the amount a bank is willing to lend you. It also shows vendors that you are an interested buyer.

You are able to apply for pre-approval directly with a bank or through a mortgage broker. It's also important to now that pre-approval is not conditional approval and that a bank could still choose not to lend you the money, and there will be an expiry on the pre-approval (typically 3 months).

Find properties you like

Looking for a new home or property can be the exciting part of the journey however it can quickly become frustrating and painful. If you are looking for a property as a couple, it's worth working through things that you like, don't like, and any non negotiables (it can be challnging if you look at something and are unable to find something that interests both parties).

If this is your first home then the chances are that you will probably need to make comprimises in order to get into the market, it might be choosing a smaller backyard rather than a bigger one, or living in the suburbs rather than the city.

It's also important to be kind on yourself.

Make sure you have pre approval!

Before putting any offers or bids on a property it's important to have pre-approval as it will give you a rough idea on how much a bank would be willing to lend you.

Private Treaty

Private treaty sales are typically the most common type of sale where a property will go do market, people will then make offers on the property which get presented to the owner and it′s their discretion which offer they will accept which typically will be the highest offer although some sellers will opt with other offers for a simpler sale. (although the later is probably as common)

Make an offer

This will often be a daunting part of the process as you are buying what may be the most expensive thing you will ever make, aswell it's a big commitment.

It's important to approach making an offer with a level head:

  • consider how much the property is worth, the location and condition of the property can be a factor here
  • how much you are willing to spend
  • the different costs that are associated with a purchase (e.g. stamp duty, lmi, bank fees, various reports)
  • if there are any immediate improvements needed (it may be worth getting quotes during the cooling off period)

If after weighing everything up you want to make an offer you should communicate your offer in writing to the realestate agent. Whilst this isn't legal advice, we would recommend including the following points in your offer:

  • the amount that your offer is for
  • terms of the offer
    • subject to a 14 day cooling off period (typically it's 5 days by default)
    • subject to building and pest inspection
    • subject to financing approval

Offer accepted

Congrats on having your offer accepted! The most stressful part should hopefully be in the past. As soon as possible you will need to sign two copies of the sale contract (one for yourself and the other for the buyer), pay a holding 0.25% deposit which for example would be $2,000 for an $800,000 purchase price (typically you would forfeit this if you choose to rescind your offer during the cooling off period). From this point your cooling off period will begin. You should contact a solicitor/conveyancer if you haven't already.

Pay holding deposit (typically 0.25%)

Upon having the offer accepted, you will need to pay a holding deposit of 0.25%. If you decide to rescind your offer within the cooling off period then you will forfeit this amount. The holding deposit will however be carried forward to make up part of your deposit.

Perform your due diligence

We cannot stress how important it is to do your due diligence when buying a property; most properties will have issues be them big and small but it's important to find out if there are any pressing issues.

If you find issues (especially big ones) then it's worth considering if you can afford to cover the expense and if there are big issues then you could negotiate with the vendor on additional terms such as them repairing things or reducing the price. (This would be where your solicitor/conveyancer comes in handy).

It's also important you make sure there are no red flags in the contract that could cause you problems down the track. Additionally it's worth looking at if there are any things like approved developments that could affect the property and/or it's value in the future.

Contract Review by a Conveyancer / Solicitor

If you haven't already organised a Conveyancer or Solicitor then you should do this promptly. A solicitor/conveyancer will identify any red flags or issues with the contract, order relevant certificates and/or documents about the property (some of these may be required to finalise financing on the property), ensure the vendor is authorised to sell the property and that there aren't outstanding finances for the property e.g. unpaid rates, etc.

(Optionally) query council records

Whilst it's not required it may be worth ordering council records for the property, this will give you an idea on when the property was built, what the complying developments on the property are and if anything hasn't been council approved or complying to building regulations.

It's important however to note that it can take up to 2 weeks to get a result back from council which could be after your cooling off period, and that your interest in records could alert council to your interest in the property. If this is the case then you could consider something like title insurance.

Order building pest inspection

A building and pest report is important as it will identify any potential issues that may exist for a property. It's important to read through the report thoroughly and to ensure that things are not missed within the report. If there was anything of note when you inspected the property at an open home then it would be wise to flag this with the building/pest inspector so they can look further into any specific issues.

Typically the report will sound bad in order to cover the building/pest inspector, however it's worthwhile giving them a call after you receive the report to ask them if there would be any reason they wouldn't buy the property as they may be willing to talk more freely than they did in the report.

Get a copy of the strata report if is a townhouse/unit

If you are looking at a townhouse/unit then it's worth looking at the strata report; it'll likely provide you an idea of the state the building is in, what funds are available for general maintenance/upkeep of the building, and what types of improvements you can do without getting strata approval.

Cooling off period (typically 5-14 days)

The default cooling off period in NSW is 5 working days can be found here: The sale process | NSW Fair Trading.

However we would recommend when making your offer to ask for 14 days as this will give you time to get the building/pest inspection completed, organise unconditional approval with the bank, and for `the solicitor/conveyancer to sort out all the required paperwork.

Accept result of due diligence

If you are happy with the result of the building/pest inspection, and all other reports and have obtained unconditional approval from the bank then you can proceed to pay the deposit. You can also opt to waive the cooling off period at any time if you complete the due diligence earlier.

Pay deposit (typically 5-10%) **excludes holding deposit

Once the cooling off period is complete, and you are happy to move forward then you will need to pay the balance of the deposit. Which will be the value of the deposit minus the holding deposit.

Conclusion

Settlement (typically 42 days later)

The settlement period is basically just a waiting game. Your solicitor/conveyancer will work with the bank and/or mortgage broker to ensure that funds are available from the bank for your purchase.

The NSW Government is moving towards doing settlements digitally, and a common platform to do this is Online Property Settlement & Actionable Insights | PEXA.

The solicitor/conveyancer will give you a list of additional funds that will be required which will constitute of (but not limited to), such as stamp duty, conveyancing fees, rates and bills, etc. They will give you details on the account (which will likely be a pexa bank account) to transfer the funds to.

The day before settlement, it's important to visit the property and ensure:

  • it's in a similar state to when you initially inspected it
  • that no rubbish is left on the property

You should be given a time of settlement from your solicitor/conveyancer. You won't be able to pick up the keys for the property until settlement is complete.

Done

Congrats on your purchase and enjoy life as a homeowner 🎉

Start your journey today

Buying a property can be daunting from the outset. We have compiled a guide that will make it a breeze

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