There’s no denying Australians have a love affair with property. Around two-thirds of us are homeowners1 and for many, buying a home is a lifelong dream.
It’s also the most expensive purchase many people will ever make, so given the stakes, it pays to do your research and understand what’s involved in the buying process before making a leap into the property market.
1. Looking for a property
There are several ways to find the right property and research the property market including by visiting real estate agents in the area you’re looking to buy and searching online. You can then attend open homes or make an appointment with the real estate agent to view properties privately.
2. Checking the contract of sale
Once you’ve found a property you’re interested in, request a contract of sale from the real estate agent. The contract of sale should contain a copy of the property title, any local planning certificates, a sewerage diagram, the general terms and conditions, inclusions and exclusions (such as fixtures and fittings) and will list any special conditions. You should engage a solicitor or conveyancer to look over this for you.
They’ll also check that all rates and taxes on the property are up-to-date. If you want to negotiate any changes to the contract of sale – such as a lower deposit, longer settlement date or changes to the inclusions and exclusions, your solicitor or conveyancer will do this on your behalf.
3. Finding and applying for the right loan
If you haven’t got pre-approval for your home loan, now’s the time to engage your bank or lender. If you’re not sure who to borrow through or want to shop around for the best deal and interest rate, you may consider using a mortgage broker to help you find a loan.
4. Deciding on the type of ownership
If you’re buying a property with another person, you’ll need to decide what type of ownership structure you want to use. The most common ways to buy a property are as joint tenants or tenants in common.
- Joint tenants: – each buyer owns an equal share of the property and if one dies full ownership passes to the other. Under this structure the property can only be sold if all owners agree. This ownership structure is most commonly used by people who are related such as a married couple or a parent and child.
- Tenants in common: – under this structure buyers can own unequal shares of the property, and if one owner dies their share becomes part of their estate and is dealt with under the terms of their will. Each tenant in common has the right to sell their share of the property to someone else. This form of ownership is more often used by people who are investing together or by friends who are pooling their resources to buy a property together.
5. Arranging inspections
To make sure the property you’re interested in buying is in sound condition, it’s a good idea to get specialists in to undertake building and pest inspections. If the property is an apartment, villa or townhouse that’s subject to a strata agreement, you should also get a strata report done, which could identify any issues with the management of the property.
While these reports will add to your upfront costs, they can reveal issues that may not be obvious when you inspect the property and can potentially save you money in the long run.
6. Buying your home
The buying process can differ depending on whether the property is being sold by private sale or auction.
- Private sale: – A property being sold by private treaty will have an asking price and an open-ended sales campaign.
- Auction: – A property being sold by auction won’t have an asking price and will be listed to be sold on a particular day via a bidding process.
7. Signing and exchanging the contract
If you’re buying by private sale, you and the seller will exchange signed copies of the contract of sale and you’ll pay a deposit to secure the property shortly after your offer is accepted. If you buy a property at auction, you’ll sign and exchange the contract of sale immediately after the auction has ended.
8. Paying the deposit
Upon exchanging the contract of sale, the deposit – which is usually 10% but may be agreed by both the seller and buyer – also becomes due.
9. After exchanging contracts
After you’ve exchanged contracts of sale and paid the deposit, your solicitor or conveyancer will continue to work in the background to prepare for the settlement date.
This will include getting you to sign a transfer of land document, which will be given to your lender at settlement, then registered with the Titles Office in your state to register the change of ownership.
During this period, you’ll also need to apply for final approval from your lender to ensure your finances are in order for settlement. You may need to provide documents such as ID, payslips and bank statements. Your lender will send you a loan document to read and sign. It will tell you how much they’ll pay on settlement based on your financial situation and the lender’s own valuation of the property.
If you have a ‘subject to pest and building inspection’ clause in the contract, but haven’t had the inspection done yet, now’s the time to organise it. Engage a building inspector and give them the real estate agent’s details and the property address.
10. Paying the stamp duty
Stamp duty is a state government tax on property sales. There’s a range of concessions and exemptions, which if you’re eligible for, can help reduce the amount you’ll need to pay. It’s payable within a certain time period after the settlement date, and can vary between states. Your solicitor or conveyancer will usually arrange for this to be paid on your behalf during settlement.
11. Organising insurance
Before the settlement date you’ll also want to consider taking out building insurance to cover your new home just in case the worst should happen. If you’re purchasing an investment property, you might want to consider landlord insurance too.
12. Making a final check
On the day of settlement, you should conduct a final inspection of the property to ensure it’s being handed over to you in the condition you expected. This is usually done with the real estate agent.
13. Day of settlement
Following your final inspection, you’ll authorise your lender to transfer the remainder of the purchase price to your solicitor or conveyancer, who’ll transfer it to the seller and, in return, you’ll receive the title of ownership and the keys to the property.