Buying a new home is not only an exciting time but, probably one of the largest purchases you're likely to make, it can also be seen as one of your best long-term investments - so it's important that you get it right. This means doing your homework and making sure that the property you will eventually is buy is the right one for you in terms of price, location, value, size and lifestyle.

There are two main ways to buy a home - by private treaty or by auction. As a buyer, the choice is not really yours, as it is the seller (seller) who decides the most appropriate method to use to sell their property.

Private Treaty

Buying by private treaty means you buy the property at the advertised price or you negotiate the price with the seller, usually through the seller's estate agent. In some cases, the property may have been 'passed-in' at auction because the seller’s reserve price (the minimum they were prepared to accept) was not reached. Buying by private treaty allows both parties to negotiate an acceptable price, with the buyer usually starting low and the seller starting high. The negotiation continues until both parties agree on a price.

Auction

Approximately 30 percent of residential sales occur by auction in the metropolitan areas. However, outside the cities the type of area and property has a considerable effect on whether properties are auctioned.

The auction method is the ideal way to test the property market against buyer demand. However, it is also an emotionally charged and fast-moving atmosphere that requires both parties to keep a cool head. Some of the benefits of buying at auction include:

• You can compete with other bidders in an open forum and you are aware of other offers being made.
• All legal documents relating to the sale of the property are available for inspection before the auction.
• Contracts of Sale can be signed and exchanged on the day of the auction.

More tips for those considering buying at auction.

Preparing to Buy

Prospective purchasers need to do some homework: decide what you want in terms of size, location and price range. Register your name and requirements with your real estate agent and ask them to let you know when suitable properties come up. Regularly check the local and daily newspapers. There is also a number of Internet sites devoted to listing properties for sale. It is a good idea to attend some auctions and check the published results of auctions in your area.

REIQ agents have exclusive access to a timely and comprehensive sales database and can provide information about comparable sales in the area.

Inspections should be made at the advertised times or by appointment with the real estate agent, as they will be able to provide back ground information.

You may consider having a property inspected by a builder or architect to assess whether there are any defects that might affect your decision to buy. This is particularly relevant if large-scale renovation or extensions are planned.

The Housing Industry Association (HIA), among others, provide an inspection service. For a fee, they inspect and report on the state of the property, including the structural condition, damp and termites.

For a list of Surveyors including The Housing Industry Association (HIA), click here.

When choosing your new home look at the location and style of the property in relation to your requirements: the size of the property, proximity to schools, access to public transport and so on these are all factor that should be considered.

Once you have found a property that suits you, it is wise to check it out during the week as well as on the weekend, as a peaceful environment one day might be quite different at other times.

What do I do first?

Once you have identified the particular type of property you are looking for, your first port of call should be a Real Estate Agent in your preferred area. Having settled on a property contact the agent who introduced you to the property. The Real Estate Agent will put your offer to the seller, if you are successful and come to an agreement the agent will draw up a Contract, according to the negotiated terms. There is a standard Real Estate Institute of Queensland (REIQ) Contract, which is often used. It is written in plain English, and is easy to understand.

What if I need finance to purchase the property?

When negotiating the contract, if you need time to arrange finance make sure you mention this at the time. It is a standard Clause in the REIQ contract that can be filled out to make the contract conditional upon you getting a loan to finance the purchase. The details of your proposed financier should be inserted in the contract before signing - so you should make preliminary enquiries from your chosen financier before making an offer to purchase. Some lending institutions give a letter to support their offers.

However, please note, that a 'pre-approval' from a bank or building society (that is, an indication that they will lend you up to a certain figure) IS NOT an approval of finance to buy a particular property. The financier will still have to go through the normal procedures of valuing the property and then make other enquires before agreeing to lend the funds you require for the property you have chosen. Even if you have an indication that a financier will lend you a certain sum of money, don’t forget you still need the contract to be made “subject to finance”.

As with most things be warned that the lowest interest rate on offer is not necessarily the best overall finance deal - look carefully at application fees, ongoing fees, whether you can swap between fixed and variable rates, and so on. Have a look at Realtor Mortgage Watch without obligation provided by InfoChoice.

Buying at Auction

It is vital that you organise your finances before making an offer or bidding at an auction. Make arrangements to cover the deposit should your offer or bid be successful, and arrange to have the appropriate mortgage funds available for settlement.

Confirm with your financial institution or bank the amount they are willing to lend you and calculate this with your capacity to meet the repayments, without negatively impacting on your lifestyle and any other financial commitments. Also don't forget that (variable) home loan interest rates can move up and down, so you need to have a bit of leeway to cope, if this happens. Remember should you default with the payments you could loose you home. In the event that you do have difficulties contact your lender immediately in writing explaining your situation and your plan to resolve the issue. (More information)

What if I want other special clauses added to the contract?

As mentioned most Real estate agents use the standard REIQ contracts its worth noting that the following matters are NOT covered in the standard conditions of contract, so if any of these items (or for that matter any others) need to be included, special conditions will need to be written in:

• If the purchase is subject to you completing the sale of your current property,
• If you would like the contract conditional upon obtaining a satisfactory pest report, building report, soil test, or building records search,
• If you need to obtain a town planning approval to use the property for a particular purpose.

Conveyancing

How you decide to handle the paperwork associated with the property purchase is your own decision. Options include using a solicitor, or doing it yourself. It is strongly recommended that inexperienced buyers seek professional advice on the conveyance process.

What is the actual process?

Queensland differs slightly from the other Australian States in that by the Purchaser is required to conduct searches of the property. It is very much a 'Buyer Beware" situation. The solicitors for the Purchaser routinely carry out searches after both parties have signed the contract of sale. Once the searches have been completed settlement can go ahead.

One important thing to bear in mind is - in most contracts for the sale of real estate, written in Queensland, 'time is of the essence'. This means that time limits mentioned in the contract have to be strictly complied with. The penalties for failing to comply can be paying penalty interest, or getting sued for a default under the contract!

What fees are involved in purchasing?

There are 3 types of fees involved in purchasing:

1. Solicitors professional fees, search fees and outlays: These are the fees charged by a solicitor for conducting the purchase on your behalf as well as the cost of the many searches that must be undertaken to ensure the property is free from encumbrances. As in all business, it pays to shop around and obtain quotations.
2. Stamp Duty and registration fees:
The Queensland Government charges stamp duty on all purchases of Real Estate in the state. Therefore the amount of stamp duty paid depends upon the purchase price of the property, other factors include the area of land purchased, and also importantly whether or not the parties intend to make the property purchased their principal place of residence. Further concessions apply to first time buyers who will reside in the property. The Queensland Department of Natural Resources also charges fees to register the transfer of ownership and any related mortgage documents. The Queensland Office Of State Revenue has a brochure available.
3. Finance Fees:
The fees to be charged by your financier should be discussed with them well in advance and should be part of the selection process and certainly agreed upon in writing BEFORE you apply for finance. Remember, they will be getting a good deal of interest from you over the years, so they can afford to negotiate on the question of application fees, and possibly ongoing

Making an offer

Missing out on a property that you have your heart set on can be a very disappointing experience. Quite often this happens because the offer process is misunderstood. When making an offer to purchase a property, it is important to be aware of the following:

The agent will submit all offers to the seller. The property remains on the market while the seller considers all offers. just because your offer is the first one submitted, does not necessarily mean that it will be accepted. Your offer may include a date by which it will lapse if not accepted. An offer may be made subject to a finance clause i.e. bank approval, sale of an existing property or another condition such as a builder's inspection. You can make your offer conditional on certain items (such as a dishwasher) being included or excluded from the contract. Any special conditions such as these must be written into the contract.

An offer is not legally binding on both parties until the buyer and seller have signed a Contract of Sale or Contract Note. A Contract Note must contain details of the property, the price, deposit and settlement terms. Once the offer is made in writing, it is then up to the seller whether or not to accept it or whether to give other parties the opportunity to increase their original offers.

The agent is not obliged to give you another opportunity to increase your offer, and the seller is under no obligation until they accept the buyer's offer by counter-signing the contract.

It may be worthwhile making an offer for a property before it goes to auction as this gives you an opportunity to negotiate through the agent and perhaps to stipulate any particular conditions you require in the sale. If your offer is accepted, a cooling-off period applies unless the sale occurs three business days before or after the scheduled auction date.

The Contract

If you have inspected a property and decided to buy it, either by private sale or before a scheduled auction, the estate agent will generally prepare a Contract for you to sign. If you are buying at an auction, the seller's solicitor will have prepared a Contract of Sale of Real Estate, which will be available for inspection prior to and at the auction.

The Contract of Sale includes details of the terms and conditions of the sale, such as the deposit required, the settlement date and the chattels included with the property (such as carpets, curtains etc).

The Contract of Sale is a legally binding document, so it is important that you fully understand your obligations before signing.

Cooling Off Period

If you are buying a residential property by private sale, you are entitled to a cooling-off period of five business days. This means that you are legally able to withdraw from the Contract if you change your mind during this time. However, it is important to remember the cooling-off period does not apply in the following circumstances:

• If the property was bought at an auction
• If the cooling off period is written out of the contract by the purchaser.
• If the property is used for industrial, commercial or farming purposes.

Cancelling the contract within the cooling off period

The contract is cancelled by providing written notice to the seller or the seller's agent within the cooling-off period.

The purchaser is entitled to a full refund of all money paid; except for 0.25 percent of the purchase price. For example, a seller may keep a $375 deposit on a property priced at $150,000.

What happens at settlement?

Settlement occurs on the day specified in the Contract providing all the conditions are met, and will generally occur at the place and time nominated by the seller. The respective parties legal representatives and Financiers attend this settlement where Title Deeds and documents are exchanged for final payment. It is the general practice that the Purchaser can collect the keys to the property from the seller Agent involved once both parties have informed the Real Estate Agent in writing that, the matter has settled.

You should always consider using a solicitor for aspects of a real estate transaction involving contractual obligations.

Please contact us if you require more information.

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