Property Buying Guide 101

justanick on 12/03/2023 - 04:52

Hi All,

We are in the market to purchase a townhouse. The rental market is insane and our landlord will most likely increase our rent again.
I understand the basics of buying but getting myself confused on few things. Our finances are set and pre approved. We also liked a property and plan to offer next week.

Could you please check if my steps are okay?
1) I’ll get my solicitor to review the contract
2) Give an offer to the vendor if he accepts then
3) I’ll pay 0.25% deposit and a cooling off for 5 days
4) During cooling off period my solicitor will get the pest and building inspection and go through Strata report. My agent/broker will start the paperwork with the bank. The bank will send someone to inspect the property for valuation.
5) At the end of the 5 day period do I write a check of 5 or 10% to the vendor? Or my bank pays and I pay the bank the deposit?
I’m confused in this step.
6) The settlement date is usually 42 days after the 5 day cooling off period, right?

Financial

Comments

  • garetz on 12/03/2023 - 05:15
    +1

    There is no point in having the contract reviewed until they accept your offer, you are wasting money here unless you are 100% sure they will sell.
    If you do this every time you want to purchase it will end up costing you alot over time.

    If you are paying .25% deposit, then you gotta wait for the bank to make the funds available before you make the check, the amount or % will be specified in the contract.

    So you make the offer, they accept the offer, then provide you the contract, then you review the contract with your conveyancer which will be cheaper than a solicitor as its a fixed cost instead of a per hour cost.

    • justanick on 12/03/2023 - 05:52

      Thanks a lot. That really helps. So if the vendor accepts my offer on the property then at what point my 5 day cooling off period starts? And at what point I pay the deposit and they take the property from the market as under contract?

      Also, the 5% -10% deposit when do I pay this and is that to the sellers agent?

      • Andrew Ong on 12/03/2023 - 10:30

        I just went through this process - there was a $2000 (usually a fixed sum or percentage - greater of both) holding deposit payable when you make the offer. On acceptance by the vendor I had to pay 10% (dependent on the contract - I did this as a bank transfer) of the price as a sales deposit. The holding deposit was deductible from this amount (so it amounted to 10% - $2000) and was payable immediately (practically within 2-3 days of acceptance). That's also when the cooling off period starts.

        All monies in the dealing should be paid into the a trust account (usually the real estate agent will provide you with this).

        The settlement period is up to negotiation - usually you can factor that into your offer as part of the negotiation - eg if you offered less but in return offered a shorter settlement period or whatever - check your contract.

        Between the period your offer but before the end of the cooling off period it is customary for the real estate agent to list the property as "Under Contract". After the cooling off period it would then be customary to list it as "Sold".

        Hope this helps!

        • MondaySleeper on 02/04/2023 - 16:59

          I think there is a slight change here

          Most times you need to pay holding deposit. This is fully refundable if you withdraw the offer before contract is signed and exchanged. From that point the cooling off period starts and you will lose .25 that you paid if you step out.

          Ref… Nsw fair trading website and real-estate.com articles

          • justanick on 02/04/2023 - 17:06

            @MondaySleeper: Nah. The holding deposit is usually the 0.25% cooling off period which is usually non-refundable.
            Why would there be a holding deposit and what purpose would it serve?

            • MondaySleeper on 02/04/2023 - 22:31

              @justanick: @justanick … I am referring to the holding deposit not the amount you pay after you sign the contract. Most agents ask you to pay it once you make the offer but before the contract is sent to you

              "Step 3: Expressing an interest in a property
              Once you have found the property you intend to buy,
              give a copy of the Contract of Sale to your solicitor
              or conveyancer to check.
              Once you make an offer, most real estate agents
              will ask you to pay an initial or part deposit as a sign
              of good faith. If you haven’t signed and exchanged
              contracts this payment does not ‘hold’ the property.
              It is refundable if you change your mind. You can
              still miss out if another buyer exchanges contracts
              before you.
              You can make arrangements through your solicitor
              or conveyancer with the agent to exchange
              contracts with a five day cooling-off period in order
              to secure the property. It is unwise to enter into any
              contract without first obtaining legal advice."

              from This page - https://www.housing.nsw.gov.au/__data/assets/pdf_file/0020/3… - page 9

              From FairTrading website - https://www.fairtrading.nsw.gov.au/housing-and-property/buyi…

              The moment you sign the contract, you cant do anything. Until then, both you and vendor can change their mind, make any number of opn-house events, get another buyer etc.

              • justanick on 03/04/2023 - 01:50

                @MondaySleeper: Great thanks a lot for the info. Could you please let me know how long can the vendor hold the property with the holding deposit? What’s the usual amount to pay?

                Also I always wanted to know when does realestate agents mark a property under offer?

                • MondaySleeper on 03/04/2023 - 07:58

                  @justanick: Well… The amount you pay as an expression of interest wont really hold the property for you. Hence fully refundable in 14 days as per fair trading.

                  The actual holding, after you sign the contract, is based on the cooling off period. At this stage if you walk away or do not pay the balance of the 9.75% deposit, you lost that money. Once the contract is signed and cooling off start, its actually under offer. But sometimes agents delay until the cooling off is completed so that the property doesn't look "bad" if it had to comeback to market should the buyer walks away.

                  I am not a convyencer or RE agent. Just some knowledge after going through some house inspection and research activities before the buying process.

                  Check with a convyencer to get the up-to-date and complete details.

  • justanick on 12/03/2023 - 05:58

    Also for new townhouses do you get 5 year builders warranty?

  • Gunnar on 12/03/2023 - 08:20
    +1

    Do you have a good broker or conveyancer? They can talk you through all of this. The key word is good, conveyancers are usually decent brokers can be hit and Miss with giving you info.

    You can play with the steps a bit. There’s no reason when you can’t do a building and pest or strata inspection before you sign the initial contract as well. That being said this depends on how you are purchasing the property and the type of market you’re in

    You can also make an offer whenever you like in the process. The issue is signing on the offer (and hoping that no one will beat you to signing)

    Personally when I’ve bought places that were on sale it was offer>Offer accepted>inspection>sign contract.

    The risk here is that you could lose the place but waiting that time to sign or you could do a building and pest for nothing but I’d rather lose the few hundred dollars on a building and pest than the thousands of dollars on a deposit that you probably won’t get back if you back out during cooking off.

    If it’s a hot market then sign diner and do the things in your cooking off period (like you outlined above)

    If it’s at auction everything needs to be done before you sign because there isn’t a cooling off period in an auction (I really hate auctions)

    With both deposits speak to your conveyancer. This money will go into a real estate agents trust account and not to the vendor directly. The amount In the second deposit will vary and this will be in the contract.

    • TheMindsetTraveller on 12/03/2023 - 10:46
      +2

      And I love auctions!

      To me, they are a transparent process.

      In other sales processes, there is BS'ing around in the background where agents try to suggest the house has lots of demand, and you need to rush in your serious offer now. You self-guess yourself and FOMO. You saw 15 people at the inspection and now think all of them are interested. You make random offers (without reviewing the contract, getting your inspections done etc)to the agent thinking you have a legitimate offer on hand, but its nothing more than market feedback. Unless one's offer includes waiving off your cooling off period, an offer is just imaginary.

      At least at auctions, you know who is who, and who is interested. But the important part is being ready. Learn as much as you can about the auction process, watch action strategies, understand keywords auctioneers use, on auction day loiter near the registration desk to scope out your potential competition, register last, avoid being induced by sales staff. Once an agent came to me and said if you don't bid now, you won't get it …. and I basically told her "I've won this so don't worry about me". I was also hiding behind a tree that other bidders did not see me but the auctioneer had great sight of me. Plenty of strategies and I love the process. From a sales POV, love the experience as well because the very first house I sold in 2007, my agent told me to set the reserve as high as possible to give you one final control item. My aim as a seller in this instance is to get the most out of the highest bidder and never the highest bid, as the highest bid may actually be well below that that bidder is prepared to pay. This strategy has stuck with me until now.

  • tsunamisurfer on 12/03/2023 - 11:53

    If the contract of sale has special conditions and you don't understand them then getting someone to explain it to you is prudent before signing.

  • justanick on 13/03/2023 - 03:45

    Thank you guys. Let’s assume my LVR is 95%. If I am supposed to pay 10% to the vendor upfront of the property value then i automatically can’t get into the property..I’m confused? If I’m to pay 5% then I should transfer bank pay to the realtor trust account?
    Let’s assume I can afford to pay 10% of the property value. LVR is 90%. So that means I pay the vendor 10% otherwise 5%?
    Bank transfer has a daily limit I think $20k how do I transfer more in a day?

    Also 6 week settlement can I ask for 8 week settlement and does it looked upon negatively by the vendor? I am renting and if we leave our property towards the tail end we pay less fine plus we will be back from overseas by then.

    So to recap the process:
    1) Get the offer accepted by the vendor
    My 5 day cooling off period starts
    2) Get the sales contract reviewed by solicitor
    3) Solicitor to request pest inspection building inspection
    4) My broker arranges valuation through the bank
    5) once above is completed and I get positive valuation from the bank and pest negative I’ll transfer 5 or 10 of the property value
    Cooling off period ends
    6) Bank settlement process of 42 days starts
    7) Contract of sales are exchanged
    8) we get keys after the 42 days and that’s the settlement day. Our mortgage payment starts from that day.

    • Hearthstone on 14/03/2023 - 09:49
      +1

      you eventually have to pay 100% to the vendor so 10% deposit and then 90% at settlement, banks will fund this, your LVR is with the bank not with the vendor.

      Banks will lend you 95% of this 100%
      Large amount get a bank cheque on the day and hand it over

  • justanick on 15/03/2023 - 01:03

    Thanks a lot. I came to know the townhouse property we liked was built by Delt Corp PTY LTD.
    I can’t find them in Google. Let’s say the developer gets bankrupt do owners have any legal right to get the issues fixed?

    Before I pay 0.25% during cooling off period 1) Do I let my solicitor know before proceeding? If yes what’s the next thing I need to do before I pay the 5% deposit? 2) Yes bank will only give me 95% of the property value so I’ll have to give the 5% to the vendor directly, right? The monies is usually held up in trust fund.
    After I put forward my 0.25 deposit my solicitor will do most of the work, right? My broker will just do the paperwork with the bank.

    I bank with Macquarie Bank. I never received a check book. How do I transfer the 5% which is a significant amount above daily limits?

  • Hearthstone on 15/03/2023 - 06:47

    I don't buy properties off the plan, too risky for me personally, lot of things can go wrong and you wasting a lot of time.
    If the developer gone bankrupt you are a creditor to the deposit and if there is no money to be recovered you are out of pocket.

    some states have builders' insurance and you can get compensate from that pool but you have to research

    you can ring up your banks to increase limit or make one large off payment, bank cheque are not cheque books (you can write cheque and get bounce because there is no money in the account)

    bank cheque is like cash, you got to have money in your account before they can issue you a bank cheque, walk into a branch and ask to get a bank cheque it will cost you $5 or $10

  • Venustrap87 on 03/04/2023 - 12:42

    Did u pay the deposit yet it’s been awhile now

    • justanick on 03/04/2023 - 14:23

      I went through a very bad experience. After negotiations, lawyers reading the contract and feedbacks. The realestate agent pulled the plug saying they won’t sell the property at this stage. The property was owned by one of the realtors director which we didn’t know until late.

      When we agreed the property price we were asked to pay the 0.25% holding deposit and 5 day cooling off period. That’s where my confusion was as there’s no mention of holding deposit by my solicitor or the realtor.

      I’m back in the market looking for a place.

  • Venustrap87 on 03/04/2023 - 15:37
    +1

    Right u missed out but there are always other property’s keep lookin. Gotta be qwick before someone else snags the property.

    • justanick on 03/04/2023 - 17:13

      Thanks mate. I hope I find something otherwise I’ll be finding a rental place and usually comes in with a year contract.

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