Home Buying Process

Buying your first home can be a daunting process. With so many steps along the way, it’s easy to get confused.
We’ve simplified the process and outlined the 10 steps that will make you a home owner!

  • 01

    Organise your finances

    Find out how much can you afford in mortgage repayments, as well as other ongoing costs associated with owning a property, and how much is your lending institution willing to lend you.

    Buying or building a home is the most expensive purchase most people will make, and many will have to take out a loan. There are many different types of loan and lenders to choose from. The two main types of lenders are banks
    and non-banks – e.g. credit unions. HomeStart Finance offers a range of loans specifically designed for low and moderate income households.

    Your eligibility for a loan will vary depending on the lender. Generally, they will calculate how much they can lend you based on these criteria:

    • Your household income
    • Your repayment capacity
    • The loan to valuation ratio on the property you want to buy or build.
      When working out how much you can afford you should also take into account other charges you may have to pay, including:
    • The deposit
    • Loan establishment fees
    • Legal and conveyancing costs
    • Government charges – eg stamp duty, GST
    • Moving costs
    • Connection fees for utilities and services – eg water, electricity
    • Insurance costs
    • Any furniture or white goods you may need to buy
    • Any immediate repairs or renovations you may need to make to the property.

    As a general rule you should aim to spend no more than one third of your gross household income on loan repayments.

  • 02

    Find a property

    Determine what kind of house and where you would like to buy. Attend open inspections and auctions to get an idea of how much properties are selling for and to get an idea of what the buying process is.

    Buying a home is a major decision that takes planning, research and careful budgeting. When you begin looking for a property, you should first determine what kind of house you want to buy and in what location. Attend open inspections and auctions to get an idea of how much properties are selling for and what the buying process is.

    In deciding on a property, some factors that you should consider include:

    • What area do you want to live and/or invest in?
    • How far are the schools, shops, medical centres, city, beaches and other points of interest?
    • Research property prices in the area you want to buy in.
    • What is the projected growth for the area?
    • Are you buying to invest or live-in?
    • If you are buying as an investment, look at the rental market in the area and consider the tax implications.
      Not everyone can afford to live in their ideal location, to get into the property market some things you might need to consider include:
    • Widen your property search
    • Consider a smaller property
    • Compromise on finishes
    • Consider an investment property rather than living in the home
    • Get an interest-only loan
  • 03

    Engage a conveyancer

    It is recommended that you engage the services of a professional conveyancer or solicitor as early as possible in the house buying process. They will help you with the legal documentation and the settlement process.

    Conveyancing is the process of transferring the ownership of property from one person to another. A conveyancer is a licensed and qualified professional who can:

    • Provide information and advice about the sale or purchase of property
    • Prepare legal documentation for property transactions
    • Represent either the vendor or the buyer during the settlement process.
      Conveyancers are not legal practitioners but solicitors can undertake conveyancing work. You are not legally obliged to engage the services of either a conveyancer or solicitor but due to the complex legal nature of the work involved, it is strongly recommended that you do so if you are planning to buy or sell a property.
      You should organise a conveyancer as soon as possible rather than wait until legal documents are ready to be signed.
      When looking for a conveyancer you should:
    • Be aware of your rights and responsibilities
    • Talk to at least three conveyancers to find one that is right for you
    • Check the public licensing register to ensure they are legally allowed to carry out the work
    • Check the assurances register to make sure an assurance hasn’t been received from that person or business for an alleged breach.
      Never sign a contract without carefully reading it first. Do not sign it if there is something that you don’t understand or are unsure of. Ask the conveyancer to clarify any areas or contact Consumer and Business Services for advice and information.
  • 04

    Research the property

    When you find a property you are interested in you should do some background research to help you identify any building issues or other factors that may affect whether you buy the property or not – eg easements. Certain documents must be given to y ou by the vendor or their agent to help you make this decision. These are listed below under Documents to be given to a buyer.

    Whether you are buying an established property or land to build, you should always do research on the property – assessing the location, the land, regulations and the building structure (if one exists).

    When you find a property you are interested in you should do some background research to help you identify any building issues or other factors that may affect whether you buy the property or not – e.g. easements, structure integrity, etc. Certain documents must be given to you by the vendor or their agent to help you make this decision. These are listed below under Documents to be given to a buyer.

    If you are thinking about buying a block of land and planning to build a home some things to research include:

    • Infrastructure and utilities available.
    • Zoning and development regulations.
    • Are there commercial or industrial developments nearby that could affect the value of the property or your quality of life.
    • Site access – is there access for heavy machinery and construction.
  • 05

    Make an offer

    If the property is for sale by private treaty you can make an offer to the vendor or their agent. This should be in writing and must be signed by you. You can make an offer in the form of a contract of sale which will become legally binding if the vendor signs it. If you are planning to make this kind of offer it is recommended that you include a condition in writing that if it isn’t signed by the vendor by a particular date the offer and the contract become invalid. Your conveyancer or solicitor will be able to help you with the wording of this condition.

    The vendor’s agent may ask for a holding deposit of up to $100 at the time of making an offer which is held in a trust account.

    A sale by private treaty occurs when a property is offered for sale at a negotiated price. Often the vendor will set a bottom line price. Ultimately, it is up to the buyer to decide how much they are prepared to pay. The price can be negotiated until a mutually acceptable amount is reached.

    Potential buyers will be unaware of how many other offers have been made or the amount offered.

    MAKE AN OFFER

    It will be up to the individual buyer to decide how much they are willing to offer for the property. You will need to decide whether to make a low offer, or offer your best price up front.

    It is possible that another offer of a higher amount will be accepted without giving you the opportunity to negotiate with the vendor or their agent. Some vendors may not be willing to negotiate on the price at all.

    All offers and counter offers must be made in writing and signed by you. The agent is legally obliged to pass all offers on to the vendor as soon as possible, usually within 48 hours. When making an offer you may be asked to pay a holding deposit of up $100. This is kept in trust by the agent and will be returned to you if your offer is not accepted.

    Offers are not legally binding. The vendor and buyer must both sign a contract of sale document before the offer becomes legally binding. You may make an offer in the form of a contract of sale. If you do, it is a good idea to add a clause stating that the offer will become invalid if the vendor doesn’t sign the contract of sale by a certain date. The contract of sale will become legally binding once the vendor signs it.

    It is recommended that you get a copy of the buyer’s information notice before you make an offer. These are usually made available to prospective buyers during open inspections.

  • 06

    The auction

    If the property is up for auction you can attend and register as a bidder. If you are successful at the auction you will be expected to sign the contract of sale and pay the deposit as soon as the auction finishes.

    You should organise for any building inspections or for your financial institution to conduct a property valuation before the auction day as you won’t be able to make the contract of sale subject to any conditions and are not entitled to a cooling off period.

    If the property is up for auction you can attend and register as a bidder. If you are successful at the auction you will be expected to sign the contract of sale and pay the deposit as soon as the auction finishes.

    You should organise for any building inspections or for your financial institution to conduct a property valuation before the auction day as you won’t be able to make the contract of sale subject to any conditions and are not entitled to a cooling off period.

    You can negotiate certain terms with the vendor before the auction (i.e.longer settlement date) and if the auction is passed in and you negotiate the price after it is still bound under auction conditions.

    All registered bidders must be provided with a copy of all of these documents:

    • The bidder’s guide
    • The collusive practices statement
    • The buyer’s information notice

    Dummy bidding is when one or more persons are asked to pose as genuine bidders in order to increase the bidding price. This is illegal and carries a fine of up to $20,000. An auctioneer can’t knowingly accept a dummy bid.

    A vendor is entitled to make up to three vendor bids. These bids must be lower than the reserve price. The auctioneer must announce any vendor bids as and when they are made.

    Have a plan before you walk into an auction and determine what price you are willing to pay, which should not be above the banks valuation.

  • 07

    Contract of sale

    This is the legal contract which will become binding once you and the vendor have both signed it. If you are buying a property through private treaty you may make the contract subject to certain conditions – eg subject to satisfactory approval of finance, subject to receiving a satisfactory building inspection report.

    If you are buying through private treaty your financial institution may want to conduct a property valuation at this point to ensure that the property is enough to act as security against the amount you want to borrow.

    If you are buying a property at auction you will be expected to sign the contract immediately after the auction finishes and it can’t be made subject to any conditions.

    NOTE: You should lways engage a conveyancer.

    This is the legal contract that will become binding once you and the vendor have both signed it. If you are buying a property through private treaty you may make the contract subject to certain conditions – e.g. subject to satisfactory approval of finance, subject to receiving a satisfactory building inspection report.

    The contract states that the ownership of the property is to be officially transferred from one person to another. Two copies are drawn up, one for you and one for the vendor.

    Information in the contract includes:

    • The name and address of both the vendor and the buyer
    • Details of the land
    • Chattels included in, and excluded from, the sale
    • The price
    • Information about the deposit
    • The settlement date
    • Any exceptions
    • Tenancy details if the property is currently being rented
    • Conditions of the sale – e.g. subject to the buyer receiving a satisfactory building inspection report.
      Things you never do:
    • Never sign a contract without a conveyancer or lawyer reading it first.
    • Never sign a contract without knowing your rights and obligations.
    • Never sign a contract without getting finance preapproval first.
  • 08

    The deposit

    The deposit is payable after the contract of sale has been signed. Usually this is up to 10% of the purchase price. You will need to organise for the transfer of the money to the vendor’s agent or conveyancer who will hold it in trust until settlement. If you have engaged a conveyancer they will organise for this on your behalf.

    If you are buying a property at auction you will be expected to pay the deposit as soon as the auction finishes.

    PRIVATE TREATY

    The deposit is payable after the contract of sale has been signed. Usually this is up to 10% of the purchase price. You will need to organise for the transfer of the money to the vendor’s agent or conveyancer who will hold it in trust until settlement. If you have engaged a conveyancer they will organise for this on your behalf.
    Deposit must be paid at the end of the cooling off period.

    AUCTION

    If you are buying a property at auction you will be expected to pay the deposit as soon as the auction finishes.

    BUILDING

    If you are buying a house and land package, you will most likely have to settle on the land before you start building. All building contracts should have progress payments broken down into 3-5 payments. Final payment should always be 10% and greater.

    FINAL PAYMENT

    In final payment you talk about making sure all work is done, do not pay final payment unitl you are satisfied that it is done

    Make a note about how you do not have to pay the final amount until the work is completed. Know your rights about the final payment. Defect work and warranty

  • 09

    Cooling off

    This period is usually for 2 business days from either the date the contract of sale was signed by both you and the vendor, or from the date you received the vendor’s statement, whichever happened later.

    If you buy a property through a private treaty you will have 2 business days as the cooling off period. You can change your mind during this time and withdraw from the purchase without any legal repercussions.

    If you decide to withdraw from the purchase any holding deposit you paid is forfeit to the vendor, but any larger deposit you have paid will be returned to you. There are no other consequences from withdrawing during the cooling off period.

    If you buy a property at auction or on the day of the auction you are not entitled to a cooling off period.

    This period is usually for 2 business days from either the date the contract of sale was signed by both you and the vendor, or from the date you received the vendor’s statement, whichever happened later.

    If you buy a property through a private treaty you will have 2 business days as the cooling off period. You can change your mind during this time and withdraw from the purchase without any legal repercussions.

    It is recommended that you get building inspection done during cooling off period.

    If you decide to withdraw from the purchase before the conditions of the contract are met you may lose any holding deposit you paid to the vendor (up to $100). However, most vendors will return your holding deposit. There are no other consequences from withdrawing during the cooling off period.

    Make sure you understand the contract and its conditions because once the cooling off period expires and if there are no exit clauses in the contract then you are locked into that contract. A contract is an agreement made between two or more parties that is legally enforceable.

    NOTE: If you buy a property at auction or on the day of the auction you are not entitled to a cooling off period.

  • 10

    Settlement

    This is the date on which all legal documentation is transferred from the vendor’s name into yours. The adjustment of rates and taxes are calculated, and the balance of the price of the property is to be paid to the vendor. If you are using a conveyancer they will attend the settlement and represent you throughout the process. This is a complex legal process and it is strongly recommended that you engage a conveyancer or solicitor to represent you.

    After this date you will be given the keys to your new property and you can take possession.

    Settlement is the official process of legally transferring a property from one person to another.

    It is usually conducted by the legal and financial representatives of both the buyer and the vendor e.g. conveyancers. Settlement normally happens four to six weeks after both parties have signed the contract of sale.

    The settlement date is included in the contract of sale and agreed to when you signed it. It is the date that:

    • The balance of the purchase price is to be paid to the vendor
    • All relevant legal documents – e.g. memorandum of transfer, are completed and lodged with the appropriate agencies
    • The certificate of title is transferred into the buyer’s name
    • The property is legally transferred to the buyer
    • The adjustments for rates and taxes are calculated.

    Settlement is a complex legal process and it is strongly recommended that you engage the services of a professional conveyancer or solicitor to represent you.

    The majority of settlements occur in the settlements room, a room provided by Land Services which is open weekdays between 9.00 am and 5.00 pm. No booking is required.

    Once the contract of sale has been signed by both parties and the cooling off period has expired neither the buyer or the vendor can withdraw from the contract without legal repercussions – e.g. compensation may have to be paid. Withdrawing from the legally binding contract of sale can be expensive and complex and legal advice should be sought.

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