Buying A Home
The purchase of a property can be a rather complicated and overwhelming process. It is therefore necessary to have a professional and experienced lawyer on your team.
At Marsdens Law Group, we make the transaction as simple as possible for you and will ensure that the transaction runs smoothly and that you take possession of your new property with a minimum of fuss.
To help with the process, we have put together a useful guide on the process of buying a property.
Cooling Off Period
In relation to the purchase of residential properties, where a real estate agents exchanges Contracts there will be a mandatory "cooling off period". The minimum cooling off period is usually five (5) business days or ten (10) business days if the contract is 'off the plan', however, this can be extended by agreement between the parties. If during the cooling off period you withdraw from the Contract, then you will forfeit an amount equivalent to .25% of the purchase price.
The purpose of the five (5) business day cooling off period is to generally enable you to:
- Seek the advice of a solicitor on the contents of the Contract:
- Ensure that your finances are formally approved: and
- Obtain any reports (pest, building and strata reports) as required.
The exchange of Contracts can be effected either by an agent or by your Solicitor. Where an agent effects the exchange and you have not obtained legal advice, then an agreed cooling off period will always apply where the property is residential property.
Where the agent has effected the exchange, you should contact us immediately in order to obtain the advice required in relation to the Contract, and instruct us to obtain any reports that may be required by you. However, where you do not sign the Contract with the agent and they do not effect an exchange of Contracts then it is usual for you to instruct us to waive the cooling off period. The effect of this is then that the Contract becomes immediately binding on you and you waive the right to withdraw from the Contract.
Where the cooling off period is waived we ensure, before exchange, that:
- You understand the contents of the Contract:
- Your finances have been formally approved: and
- The relevant reports required by you are received and have proved to be satisfactory.
Reports
After you have found your new home, the first major step will be the exchange of Contracts. At that stage the parties become bound to the Contract and you, as Purchaser, will be required to purchase the property as it is at the date of Contract.
It is for that purpose that we recommend that you give consideration to the obtaining of certain quality reports. The usual quality reports requested by Purchasers are:-
- A Pest Report - a pest report is carried out by a qualified pest controller. No work is done on the property but the report contains information as to any present or past infestation by pests.
- A Building Report - again a qualified building inspector or builder carries out a full inspection of the premises and reports as to its state of repair.
- Engineering Reports - these are normally obtained where a Building Report makes mention of structural damage to the property.
- Survey Report - this report is obtained to confirm that the structures upon the property being purchased sit wholly within the block. It will also confirm whether any structures upon adjoining properties encroach upon the property that you are proposing to purchase.
- Building Certificate - this is a Certificate obtained from the local Council to confirm that Council will not make any "upgrade or demolition orders" in relation to any structures upon the property.
It is a matter for yourself as to whether or not you obtain all or any of the above reports.
Binding Contract
The contract becomes absolutely binding in one of two ways:
- Where there has been no waiving of the cooling off period, then it becomes absolutely binding upon the expiration of that cooling off period; or
- Where the cooling off period is waived, then it is absolutely binding at the point of exchange.
As pointed out previously, you purchase the property as it is in its present state of repair and condition. Once the Contract is absolutely binding, there is nothing you can do about any defects in the actual physical quality of the property itself. It is therefore essential that before you allow the contract to become absolutely binding, you have satisfied yourself in relation to contents of the Contract, your finance and the quality of the property.
Timing
After the binding Contract,we will proceed with conveyancing technicalities such as the provision of particulars of title to mortgagees, the answering of mortgagees requisitions, the raising of requisitions with Vendors and consideration of replies, attending to stamping of all documents, statutory enquiries, Registrar General's searches and any other necessary documentation and preparing for settlement online.
The usual time to complete a transaction is between 3 to 6 weeks. The time for completion can be shorter or longer subject to agreement between the parties.
Paying Deposit
When the exchange of Contracts takes place that is the time that the 5% or 10% deposit is paid. It is a normal practise to pay 10% of the full purchase price. Quite often, however, we may request on your behalf whether the Vendor will agree to accept a 5% deposit. We point out that it is only by agreement that a deposit less than 10% can be paid.
Vacant Land
Where you are purchasing vacant land it is imperative that you satisfy yourself prior to the exchange of Contracts that you can develop or build on the land in the manner that you wish to. So far as the zoning of the property is concerned, this information will be contained in the section 10.7 certificate in the Contract. There will be other information in this certificate that will be of assistance. We will convey the contents of this certificate to you at your first appointment.
Also, within the Contract there will be disclosed any covenants or restrictions as to user that might be on the title. These can often govern the type of building that might be erected on the property including the size, the materials from which it is constructed and even colours. Any restrictions as to user will also be explained to you at your first appointment.
Building Certificate
As mentioned above, a building certificate is obtained from the local Council to confirm that Council will not make any "upgrade or demolition orders" in relation to any structures upon the property. So when do you need to consider obtaining one?
Where the property is an existing residence but there have been changes to the property (e.g. conversion of a garage to a living area or the addition of a significant pergola) then it is advisable to at least obtain evidence of approval to those changes. If that evidence is not available, then you should consider obtaining a Building Certificate
Taxation Implications
If you are purchasing your property for investment purposes, there may be significant taxation implications. This may also apply even if you are purchasing the property for your own use.
Taxation implications may involve income tax and/or capital gains tax. You should give consideration to your tax position.
Stamp Duty
Once the Contract has been exchanged, it immediately becomes liable to stamp duty. The regulations of Revenue NSW (the department that collects stamp duty) provide that duty must be paid within a period of three (3) months from the date of exchange. If you are borrowing to fund your transaction, your financial institution will however require stamp duty to be paid on your Contract prior to settlement. This means that despite the fact that you have three (3) months to pay the stamp duty, your bank will require stamp duty to be paid before completion.
In circumstances where you, as a first home buyer, are entitled to an exemption or concession of stamp duty, the documents will be prepared by us.
Rates
When you purchase a property you will become liable for Council Rates, Water Rates and in some cases, Land Tax. The standard Contract provides for these rates to be adjusted on completion. This means that the Vendor will be liable for that proportion of rates from the beginning of the rate year up to the day of completion and you will be liable for that proportion of the rates from the day of completion up to the end of the rate year.
Final Inspection
Prior to settlement taking place, it is recommended that you undertake an inspection of the property to confirm that the property has not been damaged between exchange and settlement. This inspection should be arranged through your agent.
Whilst the above guide is not meant to give you a comprehensive statement of what a conveyancing transaction is all about, it is intended to give you an idea of what occurs during the course of a conveyancing transaction.
We will be happy to answer any of your general or specific enquiries, contact us today (02) 4626 5077.