What you must do when purchasing property
If you are purchasing a property in Victoria, before you sign the contract you need to have considered each of the points raised in this article. This will reduce the stress on what is already quite a hectic period. This article outlines some of the common mistakes that are made when purchasing a property, and some tips on how you can avoid them.
1. Consider obtaining a property inspection
When compared to the overall cost of purchasing a property, the costs of conducting pest and building inspections are negligible. Their importance, however, cannot be understated, given that they may save a lot of money and problems in the future. These inspections will allow you to:
- Be aware of any existing problems with the property ahead of the purchase;
- Negotiate a lower price for the property with the vendor, if there are any problems; or
- Negotiate with the vendor for any problems to be rectified; and
- Gain expert advice on major problems, and how this will affect the property in the future.
2. Failing to get finances pre-approved
The property market is highly competitive and there may be several parties that have an interest in the same property as you. For that reason, it is crucial that you gain mortgage pre-approval either through a mortgage broker or bank before you start looking at properties. A mortgage pre-approval is when a financial institution such as a bank, assesses your finances and ability to repay a loan, and provides an estimate as to how much you can borrow. You need to know this before you make an offer on a property.
3. Signing a document prior to getting legal advice
It is crucial that you do not sign anything without first consulting a property lawyer. It is true that most property transactions go through without problems, but not all. For most people buying a house, it is the biggest investment they ever make, why wouldn’t you get the Contract of Sale and Section 32 statement checked before you sign. In this digital age, you can easily forward the document to your property lawyer via email to review.
4. Not engaging an experienced property lawyer
When looking for a legal representative for conveyancing, it is important that the engage a lawyer that is experienced in property law. Like all things in life you get what you pay for. Cost cutting cheap conveyancing operations increases the chances of the property purchase going off the rails.
5. Failing to sign and return mortgage documents to a lender promptly
When purchasing and selling property, there are strict deadlines and schedules that must be adhered to. When you are taking out a loan, it is critical that you maintain regular contact with your financial institution. Additionally, sign and return paperwork well before the deadline, a failure to adhere to a schedule in conveyancing can potentially lead you to being in breach of Contract of Sale, and this can have serious and expensive consequences.
6. Failing to be clear on the contract before it is signed
Generally, a vendor is only required to adhere to the terms that are outlined in the Contract of Sale. Both the vendor and purchaser will have a copy of this. If the vendor has made additional verbal promises, such as a chattel (movable property like a statue) being included in the sale of property, then you should ensure that this is included in the contract before it is signed. If this is not included in the contract, it is unlikely that the vendor will be bound by their promise.
7. Not taking additional fees into account
When you engage a lawyer, you will be charged a combination of professional fees and disbursements. Disbursements include settlement fees, plus costs related to title searches that are conducted on the property. The following list outlines some other mandatory fees that you need to anticipate, and plan ahead for.
The purchaser is required to pay stamp duty on the purchase. The estimated rate of stamp duty can be calculated using the Land Transfer Duty Calculator. Your lawyer will also be able to calculate the rate of stamp duty, and whether you may be eligible for any concessions.
The purchaser is also responsible for paying a Transfer Fee to the land titles office in Victoria. This government fee is for processing the transfer of land, and can be calculated using the Transfer of Land fees calculator. Your solicitor can also advise you on the costs of this, as well as other titles office fees that may be associated with your transaction.
There may be unpaid taxes/rates on the property being purchased, that are prepaid or outstanding for that year, such as land tax, council rates and water rates. The sale price is adjusted to reflect this and apportioned between the purchaser and vendor at settlement. Generally, this can range from a couple of hundred, to a couple of thousand dollars.
All conveyancing transactions in Victoria are completed an electronic platform called Property Exchange Australia (PEXA). The cost of transacting a title transfer is $11.80 for a single title or $130.68 for multiple titles. You can check the PEXA Pricing Schedule for more information on the costs of other transactions services.
Both purchasers and vendors will likely be responsible for discharging mortgage fees if they are going through a financial institution.
When taking out a loan, purchasers should ensure they carefully read and understand the bank’s loan offer, prior to signing any documents. These documents should clearly outline the fees that you will be responsible for some bank fees that purchasers can expect to pay include:
- Application fees;
- Legal fees;
- Settlement fees; and
- Banks will deduct from of their loan the stamp duty and titles office fees.
Vendors will also be responsible for a number of bank fees, and should incorporate these into their budget, in addition to other associated costs of the sale, such as Real Estate agents fees and advertising.
Given that all of these can be confusing to navigate through on your own, it would be beneficial to engage a solicitor, who can advise you on each of these. Once again, it should be stressed that you need to engage a lawyer that is experienced in and has significant experience in property law.
Given the complexity of purchasing or selling a property, it is highly advantageous to engage a solicitor that can advise you on the various fees that exist, as well as signing documents.
Signing documents will have binding consequences, therefore, ensure that you obtain legal advice before doing this.