Buying property is one of the most significant transactions you can undertake. Good preparation and quality legal advice is not only essential, but can allow the process to be a smooth and stress-free experience.
1. Preparation
It is important to have your finances in order before you begin the buying process. This includes understanding your borrowing capacity, planning for your deposit, and checking if you are eligible for any government assistance.
Home Loan Pre-Approval
If you need finance in order to purchase, you should speak with a bank or mortgage broker to obtain conditional loan approval. Generally, to avoid lender’s mortgage insurance, you must have 20% of the purchase price saved.
Deposit
The deposit will typically be 5-10% of the purchase price.
Grants
Some purchasers may be eligible for government grants or concessions such as a first homeowner grant or a stamp duty concession. Please contact us if you have any questions regarding eligibility.
2. Property Search & Research
As you commence your property search, your preparation should include specific property research, visiting open homes, getting legal advice, and making sure critical steps have been completed before bidding at auction or making an offer.
Research
- The location – you may wish to consider things like infrastructure or planned developments, location of schools, flooding or bushfire risks, and resale or rental values.
- Property type – are you looking for a rural acreage with plenty of space, a townhouse close to the local shops, or a family home nearby to a park and oval?
Inspections
Attend property open homes and see whether they fit your requirements.
You do have the option of engaging a Buyer’s Agent who can attend property inspections on your behalf, assist you in providing industry insights, and may provide access to off-market properties. For some purchasers the additional financial cost may see savings elsewhere.
Legal Advice
Contact us to let us know you are looking to purchase and have a brief conversation with one of our solicitors. In our experience a brief conversation and quick look at the listing contract, at no cost to you, can take the stress out of the process and avoid wasting time and money on the wrong property.
Pre-Auction Steps
If you are going to auction, it is important that before you go to auction you have:
- Obtained comprehensive legal advice on the contract – contract negotiations can be done before auction day so that, if you are successful at auction, you are not locked in with nasty contract terms.
- Finished your property enquiries – e.g Strata or Building & Pest inspections
- Obtained your finance approval – speak with your lender or broker
Given you are immediately legally bound when purchasing at auction, it is very important that, before the auction, you have completed the pre-auction preparation outlined above. Please contact us to discuss before you go to auction.
3. Offer Made & Accepted
Once you have found the right property and completed your preparation, the next step is to make an offer. This is where key terms including price, deposit, and settlement period are agreed. If your offer is accepted, there are a few important steps to take before locking the deal in.
Making an Offer
Typically you will make an offer in writing via the agent. You and the seller will come generally come to an agreement on:
- The price
- The settlement period (the time between when the contract starts and is complete) – commonly 6 weeks in NSW and 28 days in the ACT
- The standard 10% deposit or a reduced 5% deposit
- Whether a cooling off period applies – if a 5-business-day cooling off period applies you can withdraw from the contract within 5-business days for a modest fee
Offer Accepted
Once your offer is accepted, there are generally a few steps to complete before the deal is locked in:
- Provide Your Solicitor’s Details to the Agent – The real estate agent will need to know who is helping you with the legal aspects of the transaction
- Agent Compiles the ‘Sales Advice’ – This is a short document which summarises the key agreed terms including:
- The agreed price, settlement period and other agreed terms
- The purchaser and seller’s details
- Each parties’ legal representatives
- Contract Updated – The seller’s solicitor will then update the contract with the agreed price and conditions, and provide it to us to review
- Contract Advice – We will check the contract terms, advise you on the terms, negotiates changes if required, and then arrange for you to sign the contract
- Property Condition – Generally you will need to arrange a Building & Pest Report and Strata Report, if required (for ACT purchases the Building & Pest Report is in the Contract)
- Finance & Insurance – You need to tell your banker or broker regarding the accepted offer. They will arrange a valuation in order to provide unconditional loan approval. You can also arrange property insurance over the property to commence from exchange.
4. Exchange – The Deal is Locked In
You may proceed to exchange contracts and enter a legally binding contract once finance and property enquiries are complete.
Finance Approval and Deposit – once you have received unconditional finance approval from your lender and are satisfied with the state of the property, you can then pay the agreed deposit into the agent’s trust account
- What Happens to My Deposit? The agent will hold this until settlement is complete, in some circumstances the Vendor may request the deposit be released to them so they may use it to purchase another house, if this is the case we will provide separate advice to you.
Contracts Exchanged – Both parties signed contracts are dated and ‘exchanged’ making the agreement legally binding. Often any cooling-off rights are waived by the purchaser.
5. Cooling-Off Period
Cooling-Off – You can withdraw from the contract within 5-business days, paying 0.25% of the price to the seller, unless waived or not applicable (for example if the property was sold at auction).
6. Preparation for Settlement
Once contracts have exchanged, there are a few final steps to ensure everything runs smoothly to settlement (when the contract is completed). These include signing loan documents, arranging insurance, completing property checks, and preparing for your move.
- Arrange Removalists – If you are moving into the property, we recommend allowing a day or two after settlement before you arrange to move in. Unfortunately there are situations where settlement is delayed for reasons beyond anyone’s control and so allowing a little bit of time can avoid additional stress.
- Property Searches – Your solicitor will conduct further property enquiries including with council for rates and water usage, and see that these are appropriately adjusted on settlement so that the seller pays their share (for the time up to settlement), and you pay your share (from settlement onwards).
- Sign Loan Documents & Insurance – Your lender or mortgage broker will arrange to sign loan and mortgage documents and ensure your finances are ready for settlement. If you have not already done so, you should arrange insurance over the property to commence (at the latest) from settlement.
- Arrange Utilities & Services – You should arrange for utilities and services to be active at the property from settlement.
- Final Inspection – You need to arrange to inspect the property one final time before settlement. It is advisable to arrange this with the agent to take place on the morning of settlement, or as close to settlement as possible. At this final inspection it is important to check if anything has been negatively altered at the property and, if it has, urgently raise your concerns with your solicitor.
7. Settlement
Settlement day marks the official transfer of ownership and the completion of your property purchase.
- Settlement Time – While settlement can take place at any time during business hours, typically banks require settlement to take place between 12–3pm on the settlement day.
- What Happens at Settlement – The balance of the purchase price is paid to the seller, and the ownership is transferred to you.
- When Will I Know? Unless there is a delay (usually caused by one of the banks), you should hear from your solicitor shortly after settlement is complete – usually 20-30 minutes after the scheduled settlement time.
- Keys – Once the property has settled the agent will give you the keys to the property. Time to celebrate!
Jemma Jones
Jemma performs a legal support role at Highlander Law.
Jemma is in her third year studying Law and Business at Western Sydney University.
Performing a diverse role in the Highlander Law team, Jemma works collaboratively with the team on legal drafting and document preparation.
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