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Buyers Tips1. Purchasing a property by Private TreatyA Private Treaty sale is where a property is listed with a purchase price and is not subject to an auction. It is up to the purchaser to negotiate a mutually acceptable price with the selling agent or vendor (owner of the property). When a price & the sale terms are agreed you are said to have “offer & acceptance” to buy the property. The purchaser is then usually given a short period of time in which to conduct “due diligence” (unless done prior to the offer), which includes checking of the Contract of Sale by a solicitor or conveyancer, conducting building and pest reports, and undertaking strata inspections (for apartment purchases). When the purchaser is satisfied it is time to sign a copy of the Contract of Sale and pay a deposit (usually 10%, but can be negotiated) for the property. The vendor also signs a copy of the Contract of Sale after which “exchange” occurs. This basically means forwarding the purchasers signed Contract of Sale to the vendor’s solicitor or conveyancer and the vendors signed Contract of Sale to the purchaser’s solicitor or conveyancer. Once this has occurred the property has been officially sold, and until this has occurred there is always a risk of gazumping taking place (where another purchaser offers a higher price for the property which is accepted by the selling agent or vendor). There will usually be a cooling off period during which time the purchaser can effectively terminate the Contract of Sale. This is usually 5 days after contract exchange, but the purchaser must pay the vendor 0.25% of the agreed purchase price as a penalty. If the cooling off period is agreed to be waived at exchange then the solicitor/conveyancer must sign the 66W Certificate and attach it to the contract. Settlement will usually occur 42 days (6 weeks) after exchange, but this is negotiable between the vendor and the purchaser. At settlement all remaining monies are required (ie, purchase price less deposit & other adjustments).It is important to take into account other “hidden” costs of purchasing a property (Refer to Buyers Tip 4) which may be required prior to settlement, at settlement, or shortly afterwards.
2. Purchasing a Property at AuctionThe alternative to Private Treaty is sale by Auction. This is where a property is offered for sale to the highest bidder on Auction Day. The property will usually be open for inspection for around 3-4 weeks before auction day. It is important that all due diligence (ie. Checking the contract, building and pest inspections, strata reports etc) be carried out before the auction day, as unlike Private Treaty, once the hammer falls, the property is sold and there is no cooling off period. A deposit, usually 10% is payable after the auction at the time of signing the Contract of Sale. If a property passes in at auction and you are the highest bidder, you normally have the first right of negotiation with the vendor (or agent). It is also possible to buy a property prior to auction, simply by getting “Offer & Acceptance” and following the due diligence procedures as shown above in Purchasing by Private Treaty. After successful exchange the property auction will then be cancelled. Remember also that there is no cooling off period if you buy pre-auction.
3. Auction Bidding Register & Confidentiality IssuesThere were substantial changes brought about in relation to dummy bidding & auction bidding registers by the reformed Property Stock & Business Agents Act (2002). These New South Wales laws now allow for only one dummy (vendor) bid at a property auction, which must be announced when made, and in practice is usually done by the auctioneer. When introduced there were fears that instead of the selling agent's past practice of employing professional dummy bidders to go from auction to auction, vendors would continue to have family, friends & associates to do the dummy bidding for them, as they also have in the past. However the Australian Competition & Consumer Commission (ACCC) has since stepped in and added weight to banning the practice of dummy bidding across Australia, by promising fines of up to $1.2 Million for real estate companies, and up to $220,000 for vendors and individuals. The combination of these laws appear to have made a marked difference to the performance of auctions. A major concern from buyers about the new Bidding Register is that of confidentiality. Regardless of the Privacy Act regulations prohibiting selling agents from using the register information for future marketing, they will have records in their office of the auctions that a buyer has attended, and therefore a clear idea of their budget and other information. One way around having your name disclosed on the bidding register is to employ a Homesearch Solutions to do the bidding on your behalf, by giving us a strictly limited Power of Attorney. Under these circumstances we will only have to put our name on the register and not the actual buyer's, which will maintain confidentiality. The terms of the Power of Attorney can be as specific and limited as the buyer wants, such as keeping it to a particular property on a set date, and also be subject to a separate letter which states the bidding limit. People that may be inclined to use this system are: buyers who have made rejected pre-auction offers and who want to remain anonymous to the selling agent at the auction, high profile community members, those intimidated by the auction room, and also people concerned about selling agents having access to the register.
4. The Hidden Costs of Property PurchasesPurchasing a property is full of hidden costs on top of your purchase price. It is vital to take these into consideration when setting your budget. Also try not to set your limit spending your last dollar—there will always be some unexpected extras that you haven’t budgeted for. Some of the biggest “added extras” include:
Also don’t forget the costs of moving house such as packers and removalists, as well as building and contents insurances, and the connection of utilities.
5. Purchase Stamp Duty CalculatorNSW Government Stamp duty is based on the following calculations: Over $300,000 - $8,990 plus $4.50 per $100. Over $1,000,000 - $40,490 plus $5.50 per $100. Over $3,000,000 - $150,490 plus $7.00 per $100.00 (new premium rate).
Please note that the NSW Government has announced major changes to purchase stamp duty, particularly for first home buyers and also property purchases over $3 Million. First Home BuyersAn increase in the thresholds for First Home Plus to $500,000 phasing out at $600,000 for the purchase of new or established dwellings anywhere in NSW and the increase in the threshold for the purchase of land anywhere in NSW to $300,000 phasing out at $450,000. Property Purchases Over $3 MillionIncreasing the marginal rate of purchaser transfer duty from 5.5% to 7.0% on that part of the purchase price of a residential property in excess of $3 million. This duty has replaced the Premium Property Tax. The increased rate of duty applies to liable contracts executed on or after 1 June 2004. Please refer to website for full details www.osr.nsw.gov.au
6. Loan Stamp Duty CalculatorNSW Government Loan Stamp Duty is calculated as follows: Up to $16,000 the rate is $5, which is then increased by $4 for every $1,000 or part thereof borrowed above $16,000. Eg. A borrowing of $500,000 would attract Loan Stamp Duty of $1,941. Please note that from 1 September 2007 owner occupier purchasers of property will be exempt from loan stamp duty.
7. Location, Location, LocationThe old saying that there are 3 factors important in buying a property—location, location and location still holds true—perhaps even more so now in a real estate market in its current cycle. Be careful to consider the following when deciding on a suitable property:
Other positives to look for are:
Naturally budget restraints will limit some of the above factors, particularly if your priority is a better suburb.
8. Deposit BondsA deposit bond is a guarantee from an insurance company that substitutes for a cash deposit between signing the contract and settlement. It can be very useful for some buyers who may have difficulty in accessing funds for a deposit (eg if they have not sold their current home before purchasing a new one). During the recent property boom, many purchasers of “off the plan” apartments have been encouraged by developers to use deposit bonds as a way of purchasing before completion of the complex. Many investors have done this with the objective of on selling the apartment at or before completion as a way of making a quick capital gain in a rising market. This is however a very risky strategy as many buyers are now finding prices have fallen in some developments over recent months with further falls predicted. If the buyer is unable to settle then the guarantor will pay the developer the deposit amount and reclaim it from the forfeiting buyer. When used sensibly however, at a cost of around 1% of the property price, deposit bonds can be a very useful tool.
9. Strata ReportsBefore purchasing a unit in a Strata Scheme, it is important to have a strata search professional examine the books of the Owners Corporation, and to provide a Strata Report. Some issues uncovered in the records and accounts could make you decide not to proceed with the purchase, or to decrease your offer amount. Some examples include:
Note - We recommend that you have your solicitor/conveyancer examine the strata report to give an opinion and recommendation.
10. Building & Pest Inspection ReportsBefore purchasing a property it is important to have a building & pest inspection done. For a fee of around $450 you can have a professional building inspector examine the property to look for any major faults in the property that could make you decide not to proceed with the purchase, or to decrease your offer amount. Some examples include :
You should ask the building inspector to give you an estimate to rectify each fault, so that you can factor in the costs when deciding on your maximum purchase price. It is also worth noting that most properties have a list of problems that need to be rectified, even newly constructed dwellings. For example many of our clients get a fright when they get the inspection reports for Victorian terraces and semi attached houses in the inner city areas, where the problems of these older properties have to be put into context, and an assessment made about how the problems compare to similar properties.
11. Renovators TipSometimes you can pay almost as much for a “renovators delight” as a fully renovated home. When deciding how much to pay for an unrenovated property, always check the prices of comparable fully renovated properties. Then calculate the renovation costs and don’t forget to factor in the stress involved in major renovations. For owner/occupiers it is a good advantage to be able to find a block of land that is going to serve your needs for the long term, where you can gradually improve the property as the money comes in. The cost of moving can be substantial (stamp duty, agents fees etc), and therefore it is usually a better financial option to improve rather than move.
12. Sydney Suburbs By AreaAs your buyers agent we will be able to advise you on the the best suburbs to buy into, and what will be realistically achievable within your budget. The following are some suburbs in the main areas that we operate : Eastern Suburbs Lower North Shore Mid North Shore Upper North Shore Northern Beaches Northern Beaches / North Shore Inner West For online assistance to find any street or suburb in Sydney click www.whereis.com.au
13. NSW Regional Towns by AreaSouthern Highlands Bowral, Moss Vale, Mittagong, Berrima, Burradoo, Burrawang, Robertson, Wildes Meadow, Bundanoon, Exeter, Sutton Forest, Marulan, Fitzroy Falls, Joadja, Canyonleigh, Kangaloon, Kangaroo Valley & Alpine. South Coast Bundeena, Stanwell Park, Coalcliff, Kiama, Jamberoo, Gerringong, Berry, Gerroa, Nowra, Culburra, Huskisson, Vincentia, Jervis Bay, Hyams Beach, Callala Bay, Mollymook, Ulladulla & Milton. Central Coast Terrigal, Avoca, Killcare, Hardys Bay, Wagstaffe, McMasters Beach, Wamberal, Forresters Beach, Copacabana, Pearl Beach, Yarramalong, Wyong & The Entrance. Blue Mountains Glenbrook, Blaxland, Springwood, Faulconbridge, Hazelbrook, Lawson, Wentworth Falls, Leura, Katoomba, Blackheath, Mount Victoria & Hartley.
14. Investment Suburbs To WatchWhile harbourside & beachside suburbs in Sydney will always have enormous appeal, some other areas that we believe have potential for future capital price growth in Sydney are : Willoughby / Chatswood – although this area has experienced significant growth recently, it is still substantially cheaper than neighbouring Castlecrag, Northbridge, Artarmon and Roseville, indicating possible future potential. The area is noted for charming rows of Californian Bungalows on good sized blocks, with easy access to large shopping centres & close proximity to the city. Eastern Suburbs beachside areas will continue their popularity from Bondi through to Maroubra. These areas will remain sought after for houses, semis and units (particularly Art Deco). Forestville/Frenchs Forest areas – although not known for stylish period houses this is still the most affordable area on the mid-North Shore. Most houses are on large blocks, with access to new shopping developments, a close proximity to the Northern Beaches and the NSW government has announced it will build a major new hospital in the district. Concord/Five Dock – less congested inner west area, full of period houses and close to City & booming Parramatta River developments, and the café & restaurant scene eg. Majors Bay Road Marrickville/Tempe – this inner-West area is undergoing significant gentrification, with some very attractive Victorian houses, terraces and semis. The local shopping facilities are being improved with an enhanced cosmopolitan restaurant scene. Property is much cheaper than nearby Newtown, and there is easy rail and bus access to the City. Dulwich Hill/Hurlstone Park – these inner west suburbs are on the train line with speedy access to the city. There are period houses, terraces and semis, as well as cheap 1970’s style units. Naremburn – an inner North Shore suburb with Californian Bungalows, semis and modern townhouses, it is generally more affordable than surrounding suburbs. Close to Crows Nest restaurants & cafés, parks & recreational facilities, it is also a very short ride to the City, having the last bus stop on the express route to Wynyard. Bexley – Full of period houses, particularly Californian Bungalows on decent sized blocks. The area no longer has traffic congestion as it has been by-passed by the M5 extension. The area has easy road access to the City and Southern beaches, and is also a short drive to the trendy Brighton le Sands restaurants. Darlington – Adjacent to Newtown & the King Street shopping & restaurant strip, it is served by MacDonaldtown & Redfern Train Stations. The area is currently being gentrified which will be further strengthened by the proposed re-development of the Eveleigh Railway Workshops into new housing and arts centres. The properties in this suburb are currently selling for much less than Newtown, and are easily rentable with nearby hospitals and Sydney University within walking distance. Click on the Hotspotting website by Terry Ryder for investment property reports.
15. First Home Owners Grant SchemeIf you are an Australian citizen or permanent resident and have never previously owned a property in Australia, then you may be eligible for a first home owners grant from the Commonwealth Government. Refer to web site for further information http://www.firsthome.gov.au. The Government announced a boost to this scheme on 14 October 2008, which will triple the grant for newly constructed homes to $21,000 (previously $7,000). First-home buyers moving into existing properties will receive a doubling of the allowance to $14,000 (previously also $7000).
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