Have you found your ideal property for the right price and ticked all your boxes? Buying a property for residence or investment purposes is a life time investment. This should be considered thoroughly before signing the Contract and Section 32 Statement also known as Vendor’s Statement. If you defaulted or breached the Contract resulting Contract be terminated, generally the purchaser is at risk of losing the deposit and be sued for the balance of the Contract price or the Vendor’s loss.
Here is some guidance to assist you in purchasing a property:
1. When in Doubt, postpone signing
Do not sign your contract under pressure until you have read and understood the Contract and Section 32 Statement. You should engage a lawyer to explain the Contract and Section 32 Statement before signing the documents. For instance, if you are buying an established property with the intention of renovating the property which alter the current structure of the property, you must check whether there are any encumbrances and restriction imposed on the property.
2. Securing your finance
It is important that you work closely with your mortgage broker in your loan application to ensure your loan is approved. Further, your mortgage broker can be of assistance in calculating the shortfall of funds you should prepare in anticipation of the purchase. There are disbursements to be factored into account in preparing funds such as stamp duty, land transfer fees and insurance.
How much you pay varies depending on the property’s value and whether you are eligible for any exemptions or concessions such as first-home buyer, off the plan concession, if the property is your principal place of residence, or if you have a pensioner concession.
If you are purchasing a property through an auction, you should have your finance approved before bidding as there is no cooling-off period.
3. Special Conditions of the Contract
It is critical that your contract is “subject to finance approval” if you require finance from the bank in funding your purchase. In the event you failed to obtain finance within the timeframe, your lawyer can either seek extension of time for finance approval or you can get out of the contract without losing your deposit if the Vendor refused to extend the time.
General conditions in the Contract are usually standard for established property, unless changed in the Special Conditions. On the other hand, the special conditions in an off the plan property are more complex and have various restrictions imposed on the purchasers.
For your peace of mind, you can request contract be conditional on satisfactory report of pest and building inspection report to be inserted as the special condition. If you found any defects in the property (such as holes on the wall) or any items required to be repaired prior to signing the Contract, you can negotiate special condition requiring the Vendor to fix the defects or repair the item before the settlement. Without these special conditions, you are considered to accept the current condition of the property at the point of signing the Contract including the defects and any faulty items of the property. Alternatively, you can accept the property in its current condition subject to latent and patent defects. You can then ask your Solicitors to make necessary enquiries in this regard.
4. FIRB Application
It is a requirement for all foreign investors to obtain approval from the Foreign Investment Review Board (FIRB) in purchasing new property failing which penalty will be imposed. Foreigners are foreign person who is not ordinarily resident in Australia, which including temporary visa. The investment property must be a new property or vacant land to build a new property. Foreign investors cannot buy an established dwelling as an investment property. Generally, the FIRB takes up to 30 days to grant approval. The FIRB application fee varies depending on the purchase price of the sold property and the type of property.
You should also take the opportunity to inspect the property prior to the settlement. You have a right to receive the property in the condition it was in on the day you signed the contract except for fair wear and tear. Inspections are generally organized through the real estate agent. Should there be any damage on the property which was not present at the time of signing of the Contract, the contract generally allows the sum up to $5,0000 to be held at settlement. The property issue can then be sorted out after the settlement.
Prior to the settlement, all outgoings of the property will be adjusted accordingly before issuing cheque directions. All outgoings prior to the settlement is adjusted to be paid by the Vendor and after the settlement is to be paid by the purchaser.
Delay in settlement can result in penalty interests to be charged and legal costs for the default notice. It is important that your loan is approved by the bank and you have sufficient funds prepared to cover the shortfall of settlement.
After the settlement is completed, your bank’s representative will assist in the lodgment in transferring the property. Your solicitor will make the appropriate arrangement in notifying the authorities and forwarding the bank cheques to the recipients.
If you are buying or selling a property, it is best that you first touch base with solicitors to guide you through the process.