How Purchasers Can Avoid Issues When Buying Real Estate
Buying real estate is a significant event, whether you are a first home buyer or have a few properties in your portfolio. Each property presents a new set of circumstances and things you need to consider. However, with the right knowledge and preparation, there are a number of precautions you can take to avoid issues, minimise risks, obtain a better deal or make the overall transaction run smoothly.
Hire a Buyer’s Agent
One of the first steps you can consider in assisting you with finding and securing a property is hiring a Buyer’s Agent. A buyer’s agent is a licenced professional who will help you search for a suitable property. Often, they will have connections to refer you to other required professionals such as conveyancers and building and pest inspectors who are needed in the beginning process. They can liaise on your behalf with selling agents and even bid at an Auction for you. A Buyer’s Agent can help make enquiries with authorities such as Councils and Owners Corporations to obtain more information about the property, particularly if anything was flagged in your contract review. If your confidence waivers and your negotiating skills are not your strong suit, they even can negotiate your offer details on your behalf. Overall, for a cost, you can have a guided, more timely and successful start to your buying process.
Obtain finance pre-approval
If you are obtaining finance another step you can take before you find a property you are interested in, is to apply for finance pre-approval. Included in this is to make sure you find the best deal. You can stay true to the one lender you have chosen, or perhaps, if you are unsure, you can go through an independent broker’s office who can work this out for you. This not only gets some of the paperwork and decisions out of the way, it gives you a clear idea on your budget. Having pre-approval will display to vendors and their selling agents that your interest in the property is serious when placing your offer. Another benefit is that there will be a quicker turnaround time for obtaining formal finance approval. Once you have entered into an executed contract with due dates, the typical due date for receiving finance approval is within a period of two weeks from the date of signing.
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Complete your due diligence and research on the property
Before placing an offer to purchase, it is vital that you conduct your due diligence on the property. This includes inspecting the property, obtaining professional inspections of the property such as building and pest inspectors or surveyors to inspect boundary lines. It is important to research the neighbourhood to ensure it is a suitable area for your wants and needs. Factors such as proximities to schools, public transport and amenities for example.
Get the contract reviewed
Once you have found a property you are interested in it’s easy to think ‘this is it, this is the property I want!’. Perhaps you envision yourself cooking family meals in the beautiful kitchen, or perhaps your mind is running a mile a minute as you picture the renovations you could make to the bed and bathrooms, or maybe the property looks like the perfect location to rent out to tenants. This is when you should be forwarding the Contract of Sale and Section 32 to your conveyancer for their review. Not only are they looking at the information that is contained in the Section 32, your conveyancer, will be looking for what isn’t included. Perhaps the newly built deck you picture guests congregating on at your yearly Christmas BBQ event was actually built by an owner builder rather than a certified builder and isn’t built up to safety codes. Perhaps the quaint apartment you think looks perfect has unresolved cladding issues in the building which would turn your landlord dreams into less of a positive investment and into a stressful period of safety concerns and special levy payments. Your conveyancer will also help you understand the legal jargon and ensure you are aware of what you are singing.
Make your offer subject to finance approval, building and pest inspections
As a conveyancer, it is always our recommendation to make your offer subject to obtaining finance approval if you require a loan to complete the purchase. Simply put, whilst pre-approval is a great start your formal application could still receive a rejection. Having this clause will enable you to withdraw from the contract with your deposit monies refunded. Should your offer not be subject to finance approval and your request is declined, you could lose your 10% deposit and the vendor will retain the property and can sue you for damages within one year of the contract date. Another ideal recommendation is that you make your offer subject to obtaining a building and pest inspection as it can identify any potential problems before you are locked into purchase. It can give you a thorough understanding of the condition of the property like, whether or not works completed on the property have complied with the legal building standard requirements, or any other issues that identify potential health hazards. It can also allow you the option to withdraw from the contract or negotiate a better price.
Have special conditions prepared and tailored to your situation
You can liaise with your conveyancer and the selling agent to propose special conditions to be put into the contract specific to your wants and situations. For instance, if you are concerned the property has a lot of minor defects which may require too many repairs worth your trouble, the building and pest clause can be amended to reflect this instead of only structural defects. This would entitle you to withdraw from the contract or negotiate the vendor to repair the works or lessen the purchase price to cover approximate cost of repairs. Perhaps you discover the oven no longer works before you sign the contract. As you are getting the property in the same condition as it is on the Day of Sale, the vendor isn’t required to have this repaired unless it is negotiated as a special condition. You can even negotiate that all appliances are to be provided in working order at settlement. Perhaps there is a swimming pool which has not been registered with Council as required. A special condition can be placed to ensure the vendor does so and obtains the safety compliance certificate prior to settlement. For this example, if a special condition is not included, you could find yourself needing to make repair works to fencing in order to bring the pool area up to the safety requirements needed by council post settlement – a cost you had never even considered. If you are needing to sell your current home to have funds to complete your purchase, you can make your offer subject to this sale. This ensures that if you are unable to sell your home by a certain date, you can exit the purchase contract with your deposit monies refunded. The circumstances in which you can obtain a more suitable deal are endless.
Don’t move in on the settlement day
If the property is going to be your principal place of residency, you are likely to be briming with such excitement to move in that you make arrangements to do so on the settlement date. You plan to have your hired moving trucks loaded and transport is ready for the exact time your settlement is booked. Maybe you have already hired tradespeople to get to work on some painting or repair works simply because you are so eager to get started.
We recommend against this. Settlements, whilst arranged for a set time, quite often occur at a later time than expected. This is typically due to parties such as banks or solicitors not being ready to proceed. In some cases, a delay might occur and settlement cannot take place at all. In this case, you would need to reschedule any moving trucks and tradespeople. No doubt this leaves buyers very disappointed and with a whole truck full of furniture and belongings with nowhere to put them! It often comes with a financial loss and can be a very stressful experience. Save yourself the potential headache. Move in on an alternative day to allow time to reschedule any bookings.
Purchase Title Insurance
I know what you’re thinking, not another insurance policy. Before you roll your eyes, Title Insurance is a one-time payment you make at settlement and not an ongoing outlay such as building, contents and strata insurance. This insurance covers you for the entire period you own the property, whether you decide to sell on in a year or if it becomes your forever home you never depart from. It protects you from any defects against the Title that were not known at the settlement date. Perhaps you purchase a block of land and only discover post settlement that a boundary line was incorrect. Perhaps you experience a loss from non-compliance of a zoning or planning law. Perhaps an easement was incorrectly not registered. You can make enquiries with your conveyancer to seek the cost of insurance and ensure the policy is purchased and taken out at settlement.
It may seem like buying real estate in Victoria is a daunting task, but with an educated and thorough approach it can be a smooth and rewarding experience. By taking steps such as hiring the right professionals and making the right enquiries, you can aide in ensuring a smoother purchase experience.
Contact Provey Conveyancing to discuss your requirements today.