Buying property is a time consuming task. Often by the time you find the property you really want at right price, you have had enough of the whole process. You just want to sign a contract and move on. However, finding the property is just start of the process, and if you do a few simple things to protect yourself before you sign the contract, it can make the rest of the process (and your long term enjoyment of the property) smoother.
In order to confidently make an offer on a property, or bid at auction, you need to know how much money you can access, and what you can afford to pay off. Getting a pre-approval reduces your stress because you know exactly what your limit is, and you don’t need to run around to get the tick off after the contract is signed. Many contracts are not subject to finance, and if they are, only provide a fairly short period of time to get it, so it’s much easier if this process has already begun. You also don’t need to stress about not being able to get enough finance.
When you speak to your broker/financier, ask them to advise you on the stamp duty and lodging fees, as these make a significant difference to the amount you will have available to you to pay for the property. Go to http://www.sro.vic.gov.au/calculators/land-transfer-calculator for a duty calculator – you can put in any price and it will tell you how much duty will be charged.
Information on the grant can be found at http://www.sro.vic.gov.au/first-home-owner/apply-first-home-owner-grant-fhog (refer to the notes on the form. Comprehensive Conveyancing can also help you with this.
For sales in Victoria, the Sale of Land Act 1962 provides that a purchaser has a 3 day cooling off period from the date they sign the contract unless:
If you do not have a cooling off period then we recommend that you seek legal advice on the contract prior to signing it. Comprehensive Conveyancing can provide this to you.
If you do have the benefit of a cooling off period, get the full contract and vendor’s statement to your advisor as soon as possible so that they can advise you within the cooling off period.
If you purchase at auction, the contract will not be subject to finance (and is usually also not subject to anything else, so it is ‘unconditional’). This means that if you are unable to obtain finance and cannot settle, the vendor can keep your deposit. They may be able to sue you for more money than you have actually paid to the agent, if you pay a small deposit, or they suffer additional loss. It is therefore very important that you know your finance limits and organise this as soon as possible. If you are not buying at auction then make sure that the finance terms are completed in the Particulars of Sale, including the amount of finance you need to buy the property, and the date by which you are to obtain it. Many contracts are drawn without this.
The standard form of contract in Victoria is not subject to building and pest inspections and provides that you buy the property in its condition as at the day of sale, including all damage and defects. Therefore, if you want to be able to terminate the contract if there is damage or defects that you can’t see, you need to include a special condition in the contract which allows you sufficient time to access to the property for an inspection and obtain a report. The special condition needs to be precise about what kind of defect or damage will allow you to terminate the contract, and how long you have to do so.
At first sight, the vendor’s statement often looks a bit daunting. But much of the information is not legalistic, and you can pick up a lot without being trained. Check the amount of the rates and water and land tax fees and for any special notes on the title such as easements or restrictive covenants. If you don’t understand anything, get legal advice. You don’t want to buy a property to build two houses on it and then find it has a single residence restriction on it. If there is an owners corporation, read the certificate and the minutes of the last Annual General Meeting. These can be a great source of information about security issues, the condition of the buildings and common areas, and any expensive repairs that might be just around the corner. Comprehensive Conveyancing can explain anything in your Vendor’s Statement.
These are conditions which are not part of the standard contract and should be checked before you sign. Comprehensive Conveyancing can advise you on anything you do not understand.
The standard form of contract in Victoria provides that you buy the property in its condition as at the day of sale, including all damage and defects. Fair wear and tear between the contract date and the settlement date is also acceptable, but what happens when there is damage beyond fair wear and tear? The Vendor is required to fix it or make an allowance at settlement, however, the problem is that it’s very hard to prove that something was working or undamaged when you signed the contract. Taking photos of the property at the time may be of assistance if this happens. Of course, as you do not know what is going to be damaged in the future, you will be taking photos blindly, but there is some chance that you will have evidence that you can rely on later. Check whether appliances work, doors open and close, and plumbing operates as it should. If there is anything that is particularly important to you, ensure that it is in working order and perhaps even seek an acknowledgement in the contract that is in working condition and that the vendor must maintain this until settlement. Remember that many contracts also state that the purchaser has not and may not rely on any statement made by the real estate agent, so don’t rely on their advice that something works or is undamaged.
You may feel uncomfortable doing some of these things, but when you are making such a large investment, you should do everything you can to protect yourself. If you have any questions about the contract , vendor’s statement or the process involved in buying a property, we’re happy to talk to you. Call us on 03 9754 3387.