Buying a property is often the largest single transaction that many people embark upon. It can conjure mixed emotions. It’s exciting to picture yourself living in your new home and injecting it with your own personality, but it also involves a huge monetary outlay and can stretch finances to their limits. Based upon our experience assisting purchasers with their conveyancing requirements, we’ve compiled a list of important (and often unknown) points that should be considered before taking the plunge into the property market.

Point 1 – secure finance before making an offer or bidding at auction

Make sure your finance is in place before making an offer or attending the auction. Once the deposit is paid and contracts are exchanged, binding obligations are created which can result in serious repercussions if you’re not able to complete the contract.

For private treaty residential purchases, a 5 business day cooling off period applies during which time the purchaser can undertake inspections and finalise finance arrangements and/or withdraw from the purchase for minimum penalty. If you buy at auction, there is no cooling off period and the contract becomes immediately binding. Private treaty vendors can also insist that potential purchasers agree to waive the cooling off period.

You should submit a formal application to your lender as soon as possible. You will often have to pay fees to your lender with the submission of your formal application, such as establishment and valuation fees. The lender will often value the property to determine whether the property is adequate security for the amount of the loan.

Point 2 – take transfer (stamp) duty into consideration

You must pay transfer duty (previously called stamp duty) within three months of signing a contract for sale, except in the case of off the plan purchases. If you buy off the plan and intend to live in the property, you may be able to defer your transfer duty liability for up to 12 months. On a $1 million purchase, transfer duty of about $40,000 will be payable on top of the property purchase price.

If you negotiate an extended settlement with the vendor beyond 3 months, which can be a common request if the purchaser hasn’t yet sold their existing home, you will need to pay the transfer duty before completion of the property sale itself. This can be problematic if your finance includes a portion for transfer duty as these additional funds won’t be available from the financial institution before the property settles.

First home buyers may be eligible for a transfer duty concession or exemption:

• If your property is valued at less than $650,000, you can apply for a full exemption so that you don’t have to pay transfer duty.
• If your property is valued between $650,000 and $800,000, you can apply for a concessional rate of transfer duty. The amount you’ll have to pay will be based on the value of the property.

Point 3 – joint tenants or tenants in common?

Most couples don’t give proper consideration as to how they would like to own the property with their partner. If you’re purchasing a property with someone else, you’ll need to decide the type of ownership you will have. There are two types of shared ownership:

1.  joint tenants, where the property is held by two or more people in equal shares. If one dies, his or her share goes to the survivors. It is common for couples to own a property as joint tenants, but this may not always be appropriate, particularly if either or both of them have children from prior relationships.
2. tenants in common, where the property is held by two or more people in equal or unequal shares. If one dies, his or her share goes to a beneficiary named in his or her will. This arrangement may be preferred for couples with children from prior relationships whose interests are to be protected.

If you own a property as a joint tenant with someone else, it’s possible to sever the joint tenancy and convert the ownership into tenants in common in equal shares.

Point 4 – determine if the property’s swimming pool is compliant

If the property has a swimming pool, the contract must include either a certificate of compliance or certificate of non-compliance which states whether or not the pool and/or the fence meet the minimum Australian Standard requirements. If a certificate is not attached to the contract, the purchaser has 14 days from the date of exchange to rescind the contract. This requirement doesn’t apply to properties in strata schemes with more than two lots or for off-the-plan contracts.

If the property is sold with a non-compliant pool, the purchaser has 90 days from settlement to undertake the necessary repairs. If this is the case, you’ll need to take these additional costs into consideration.

Point 5 – order relevant inspections and reports

Depending on the nature of the property, it may be appropriate to order pest and building inspections and a strata report.

A building inspection checks structural soundness, including foundation, the condition of all structural timber, load-bearing walls, the integrity of the outside of the building, plumbing and electrical wiring.

A pest inspection should reveal the presence of termites or other timber pests and any existing damage, plus advise of any conditions that may attract future infestations.

A strata report provides insight into the financial state of the body corporate as well as proposed strata expenditure, the balance of the sinking fund for property maintenance, defects, insurances, by laws and disputes.

Point 6 – have the contract reviewed

If you’re interested in purchasing a particular property, request a copy of the contract from the agent and send it to your solicitor or conveyancer for review as early as possible. There are often provisions in the contract that require advice or negotiation, such as special conditions, caveats and/or easements, and you’ll need to factor in time to allow this to occur.

SRM Lawyers can provide you with a comprehensive contract review and are happy to answer any questions you may have regarding the conveyancing process.