Buying a property is a stressful scenario. The rules and regulations, the financial requirements and even selecting the right property is a stressful process for most buyers.
Reading this short guide will assist you in avoiding some of the most common traps that land buyers in hot water.
FINANCE
The first step when buying a property is to make sure you have the money to buy it. We recommend working out how much you can spend before getting serious about buying. If you need a loan, speak to the bank or a mortgage broker and get your pre-approvals in place. The old days of getting a loan in a day are gone – you need to get the ball rolling with finance as early as possible.
If you need to sell your existing property before being able to afford to buy a new one, we highly recommended that you sell your property before buying a new one. This way, you avoid the potential trap of signing a contract and then having to rescind the contract before exchange because you are unable to obtain the sufficient funds to pay for the property. This is especially true in a declining property market – you might not sell your house for what you thought, and not be able to complete the contract. Bridging finance may also be useful, which is a short-term loan if you can’t sell your existing property before completing your new purchase.
All this confirms that it is important to speak with a bank or mortgage broker before you begin the process of buying a property.
TRANSFER DUTY
Another potential pitfall most buyers don’t realise is that they have to pay Transfer Duty (formally known as Stamp Duty) on any purchase of property, within 3 months of the contract being signed.
With property prices as high as they are in metropolitan Sydney, this means that there is a large payment that needs to be made fairly soon after buying a property.
Similar to obtaining finance the main issue stems from people who rely on the sale of their existing property to pay for Transfer Duty. Too often people are caught with their property not being sold, and the Transfer Duty still being payable on their new property.
DUE DILIGENCE
Too often potential buyers do not conduct the necessary due diligence before exchange of contracts. It is very easy to get swept up in the excitement of buying a property, especially at auction, and sign and exchange a contract before you have conducted the necessary inspections and reviews.
The old adage “buyer beware” is particularly important in the buying of property. It is important to conduct thorough inspections and pre-purchase reports (such as pest and building reports and strata reports) in order to ensure that the property you buy is not plagued by significant issues. The property could have a severe pest problem, asbestos and/or structural issues. It is important to know about these issues and to understand the costs of any such repairs or maintenance before you buy the property.
In addition to this, it is important that your solicitor thoroughly reviews the contract before you exchange. Imagine a scenario where a property looks amazing and you buy at auction, however, you are unaware that someone is renting the property, and that their lease means that you will not be able to move into the property as quickly as you previously thought.
Other issues could include that the property is on a flood plain, or has a significantly high risk of bushfire danger. Issues such as this can increase your insurance premiums, therefore making the property far less attractive. Having a solicitor review the contract will ensure that you are made aware of any such issues, to ensure that when you sign the contract, you understand exactly what you are buying.
WE CAN HELP!
Contact our friendly solicitors at Eleven Legal and we will be able to guide you through the entire conveyancing process. Our fixed fee services ensure that you will have peace of mind when selecting us as your law firm.
If you would like to discuss any aspect of conveyancing or this article with our friendly team, please contact us at enquiries@elevenlegal.com.au or (02) 9450 2985.
