Finding your dream home can be an exciting and rewarding experience, provided you are well prepared and equipped with the right advice. Here are a few things you should know to help safeguard your interests when purchasing a property.
How much can you afford?
Determining how much you can borrow will help give you an idea of a reasonable price range before you begin sifting through all those property ads. Sound financial advice of a bank or mortgage broker will help you know:
- your borrowing capacity, usually calculated based on your savings and income;
- whether you are able to make the regular repayments;
- the finance products available to you; and
- which lender to choose should you go further with your purchase.
Most financial institutions can give pre-approval to determine whether the property of your choice is adequate security for the amount of the loan. You should not exchange contracts before finance has been approved and in writing.
Seek legal advice before exchanging contracts
If the vendor has finally accepted your offer, this does not necessarily mean the property is now yours.
You are only legally bound once contracts are “exchanged”, which means two identical contracts, one signed by the vendor and one signed by the purchaser are exchanged. The purchaser also pays a deposit at this time, which is normally 10% of the purchase price but can be reduced by negotiation if necessary.
Because the exchange is such an important and binding step in the conveyancing process, it is prudent to seek legal advice before you even consider putting pen to paper on your contract.
A solicitor will be able to explain your rights and obligations under the contract and the consequences of any necessary searches and building inspections.
Building certificates, inspections and surveys
A standard Contract will normally give you the opportunity to obtain a:
- pest report;
- condition report;
- building status report;
- plumbing report;
- electrical report;
- gas fittings certificate of compliance;
- sacred site certificate; and
- body corporate record inspection.
You should consider and discuss the desirability of your obtaining all or any of these inspection reports.
If your property is part of strata (generally applies to a unit or townhouse) consider a strata inspection to determine any ongoing strata issues and any issues raised by the relevant strata managers. You may also require a ?survey? of the property, which confirms the boundaries of the block of land, the location of buildings and any easements that may affect its future use or value.
You should determine whether the existing use or development of land is adequate and complies with the relevant planning scheme.
After exchange
After the exchange of contracts, most states and territories have a five-day cooling-off period following exchange of contracts in a private sale. This means you can change your mind and cancel the contract without any limitations within 4 working days.
There are situations where there will be no cooling-off period, such as for commercial or rural properties, or for homes purchased at auction.
Settlement
"Settlement" will conclude you conveyance with the vendor and means the property has completely transferred into your name. It is quite an exciting finale to the conveyance as your solicitor meets with the vendor’s solicitor, along with respective bank representatives to make the final exchange of documents and payments to complete the conveyance.
Stamp Duty
Stamp duty is a tax on a property transaction, and is payable in various situations such as
- acquisition of Real Estate and Business Property; and
- acquisition of shares in a Land-holding Corporation or Unit Trust.
Dutiable documents and statements must generally be lodged for assessment and the duty paid before or on the day of settlement. According to the Territory Revenue Office, the duty should be paid “within 60 days of execution of the document or 60 days after the occurrence of the transaction that gave rise to the requirement to create the statement.”
But certain concessions may apply:
- The First Home Owner Grant scheme provides first homebuyers a grant of up to $7 000.
- The First Home Owner Concession scheme provides first homebuyers purchasing a home, or land to construct a new home, on or after 20 June 2005, a duty concession of up to $8 015.60 on the first $225 000 of the purchase price.
- The Principal Place of Residence Rebate scheme provides purchasers of a home, or land to construct a new home, on or after 20 June 2005 that is not their first home in Australia, a duty concession of up to $2 500.
The Territory is also the only jurisdiction in Australia that does not impose stamp duty on mortgage transactions.
Recent changes to Pool fencing laws
If the property you wish to purchase has a pool, you will need to be aware of complying with new pool fencing standards. The Territory’s old pool fencing act was replaced in 2004, with what was described as a “more simplified, commonsense” approach.
These laws create a new minimum safety standard, which means for pre-existing pools and spas (installed prior to Jan 2003) – there is a new minimum safety standard requiring:
- barriers to be in place; and
- a self-declaration process where pool owners can declare that their pools comply with the new minimum standard.
Upgrading to the appropriate standard will apply at the point of sale or change of tenancy. At the point of sale, a purchaser can agree to take on the responsibility for upgrading a pool within a set period.
For more details on how these laws could affect you, seek the expert legal advice of Halfpennys Lawyers.
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