Buying a property can be daunting, especially if it is your first time. We’ve put together a list of Property Buyers Tips for you to help you understand the processes.
- Purchasing a property by Private Treaty
- Purchasing a Property at Auction
- Auction Bidding Register & Confidentiality Issues
- The Hidden Costs of Property Purchases
- Government charges and stamp duties
- Loan Stamp Duty Calculator
- Location, Location, Location
- Deposit Bonds
- Strata Reports
- Building & Pest Inspection Reports
- Renovators Tip
- Sydney Suburbs By Area
- NSW Regional Towns by Area
- Useful links
1. Purchasing a property by Private Treaty
A 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 time, there is always a risk of gazumping taking place (where another purchaser offers a higher price for the property which is then 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 pulling out of the sale during this time. If the cooling off period is 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 Auction
An Auction 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. Finance approval, 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 Issues
At auction, in order to bid, you need to register. At this time you are required to show identification and are then given a bidders card, which must be shown when placing a bid during the auction.
This procedure can cause some confidentiality issues for some buyers, especially if the agent is aware of your budget and circumstances. One way to avoid this is to employ 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 your 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.
Those 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.
The Property Stock & Business Agents Act (2002) allows for only one vendor bid at a property auction, which must be announced when made, and in practice is usually given by the auctioneer.
4. The Hidden Costs of Property Purchases
Purchasing 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:
Purchase Stamp Duty —a tax payable to the NSW State Government based on the purchase price of the property bought – refer to Calculator below.
Loan Application, Legal and Valuation Fees —varies according to institution. Check with your lender.
Mortgage Insurance —may be required depending on the size of your deposit and perceived risk to the lender. Check with your lender.
Conveyancing Fees including disbursements—check fees with your conveyancer or solicitor as charges vary.
Building and pest reports —usually around $500 per property inspected (for an average sized house)
Strata Reports —Starting at $250 depending on size of Owners Corporation.
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. Government charges and stamp duties
NSW Government Stamp duty is usually a sizeable part of a buyer’s property purchasing budget.
To estimate Stamp Duty payable, please refer to the Office of State Revenue Stamp Duty Calculator – Link below
First Home Buyers
From 1 July 2017 there will be no NSW Government stamp duty for first home buyers on home purchases up to $650,000, and concessional rates up to $800,000.
For first home purchases of new homes, the NSW Government will provide buyers a grant of $10,000 for purchases up to $600,000.
Premium Property Duty (payable on purchases Over $3 Million)
Properties over $3m in value are subject to Premium Property Duty. This is calculated at:
$150 490 plus $7 for every $100, or part, by which the dutiable value exceeds $3m
Please refer to Office of Sate Revenue website for full details. Link below
In addition to the NSW stamp duty charges, foreigners will have to pay other charges when purchasing property.
Foreign Investment Review Board (FIRB) charges. For FIRB Fee Estimator click here
NSW Government foreigners surcharge purchaser duty of 8%. For details click here
Foreign buyers will also be required to pay an annual land tax to the NSW Government of 0.75% of the land value, and 2% from 2018. For details click here
6. Loan Stamp Duty Calculator (applies to Investment rather than Owner Occupier Purchases)
Only payable on Investment Properties and does not apply to Owner Occupier Purchases.
NSW Government Loan Stamp Duty for Investment purchases is calculated as follows:
7. Location, Location, Location
The old saying that there are 3 factors important in buying a property—location, location and location still holds true.
Be careful to consider the following when deciding on a suitable property:
- Is the property in a quiet street?
- Is it close to transport?
- Is it handy to local facilities eg. shopping centres, parks, amenities, schools etc.?
- Consider the quality of other housing in the street
- Are there any future developments which may positively or negatively affect prices?
- Crime rates in the suburb
- Check out the neighbours as much as possible, eg. young, noisy renters,
- If buying an investment property, it is a bonus to already have a tenant on a fixed lease. If this is not the case then is the property easily rentable?
Other positives to look for are:
- Off street parking
- Open plan living – where the kitchen connects to the living areas.
- Living areas at the rear of the house
- Good natural light – however skylights can be a cure for some rooms
- Aspect – North facing if possible for living areas
- Views – Water, green or district – not the next building
- Easy access in to the property
- Level block for houses – especially for small children
- Internal brick walls (rather than gyprock), for stability & lower noise
- High ceilings
- Quality fixtures and fittings
- Outdoor entertaining areas
- Number and size of bedrooms and bathrooms, and their relationship to the other rooms
- Renovation or extension potential
- Clear of main power lines and mobile telephone towers
Naturally budget restraints will limit some of the above factors, particularly if your priority is a better suburb.
8. Deposit Bonds
A 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).
At a cost of around 1% of the property price, deposit bonds can be a very useful tool. Check with the vendor’s solicitor on whether this will be acceptable for exchange of contracts.
9. Strata Reports
Before 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 can be uncovered in the records and accounts including:
- High quarterly levies, or imminent special levies (eg fix concrete cancer in the building, re-painting, install balconies)
- Disputes and lack of harmony among unit holders
- Outstanding litigation or liabilities against the Owners Corporation
- Lack of money in the Sinking & Administration Funds
- By-law restrictions
Note – We recommend that you have your solicitor/conveyancer also examine the strata report to give an opinion and recommendation.
10. Building & Pest Inspection Reports
Before purchasing a property it is important to have a Building & Pest Inspection done. For a fee of around $500 you can have a professional building inspector examine the property to look for any major faults that you need to be aware of. Some examples include:
- Structural defects
- Existence and damage of termites and borers
- Rising damp
- Exposed asbestos
- Roofing & guttering problems
- Plumbing & electrical problems
- Illegal building and non-compliant works
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 Tip
Sometimes you can pay almost as much for a “renovators delight” as a fully renovated home.
When deciding how much to pay for an un-renovated 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 your financial position improves. 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 Area
As your buyers agent we will be able to advise you on 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 Point Piper, Darling Point, Watsons Bay, Vaucluse, Woollahra, Rose Bay, Dover Heights, Double Bay, Centennial Park, Diamond Bay, North Bondi, Bondi, Bondi Junction, Paddington, Queens Park, Waverley, Tamarama, Clovelly, Bronte, Coogee, Randwick, North Randwick, Kingsford, Kensington, Maroubra, Lurline Bay, Pagewood, Elizabeth Bay, Potts Point, Wooloomooloo, Surry Hills, Redfern, Waterloo
Lower North Shore Mosman, Cremorne, Neutral Bay, McMahons Point, Kirribilli, North Sydney, Waverton, Wollstonecraft, Greenwich, Hunters Hill, Woolwich, Huntleys Point, Riverview, Longueville, Northwood, Cammeray, Crows Nest, Naremburn, Northbridge.
Mid North Shore Artarmon, Lane Cove, Chatswood, Willoughby, Castlecrag, Middle Cove, Castle Cove, Roseville, Roseville Chase, Lindfield
Upper North Shore Killara, Gordon, Pymble, Turramurra, Wahroonga, Warrawee, St Ives, Hornsby, Waitara
Northern Beaches Manly, Seaforth, Balgowlah, Fairlight, Manly Vale, Harbord, Queenscliff, Curl Curl, Dee Why, Freshwater Beach, Long Reef, Brookvale, Collaroy, Narrabeen, Elanora Heights, Warriewood, Mona Vale, Bungan, Bilgola, Avalon, Newport, Church Point, Bayview, Clareville, Whale Beach, Palm Beach
Northern Beaches / North Shore Frenchs Forest, Forestville, Killarney Heights, Beacon Hill, Belrose, Allambie Heights, Oxford Falls, Davidson
Inner West Balmain, Birchgrove, Glebe, Newtown, Annandale, Rozelle, Lilyfield, Leichhardt, Stanmore, Petersham, Summer Hill, Lewisham, Marrickville, Dulwich Hill, Darlington, Tempe, Erskineville, Alexandria, Hurlstone Park, Haberfield, Croydon, Five Dock, Drummoyne, Concord, Russell Lea, Wareemba, Enfield, Ashfield, Burwood, Strathfield
For online assistance to find any street or suburb in Sydney check http://maps.google.com.au/maps
13. NSW Regional Towns by Area
Bowral, Moss Vale, Mittagong, Berrima, Burradoo, Burrawang, Robertson, Wildes Meadow, Bundanoon, Exeter, Sutton Forest, Marulan, Fitzroy Falls, Joadja, Canyonleigh, Kangaloon, Kangaroo Valley & Alpine.
Bundeena, Stanwell Park, Coalcliff, Kiama, Jamberoo, Gerringong, Berry, Gerroa, Nowra, Culburra, Huskisson, Vincentia, Jervis Bay, Hyams Beach, Callala Bay, Mollymook, Ulladulla & Milton.
Terrigal, Avoca, Killcare, Hardys Bay, Wagstaffe, McMasters Beach, Wamberal, Forresters Beach, Copacabana, Pearl Beach, Yarramalong, Wyong & The Entrance.
14. Useful links
Real Estate Buyers Agents Association of Australia
Holistic Home Loans
Sydney Property Conveyancing