It’s both exciting and nerve-racking when buying or selling a property. So I’d like to share a list I put together that helped us purchase our recent home near the beach here in Melbourne.
I thought it would be ideal to use the services of a highly experienced property and finance group once again. Especially since we wanted a property that could earn enough capital gains to leverage off for a future purchase.
However, we decided it would be best to go at it alone because we knew exactly where and what we needed in this new home. Armed with this checklist, I put together and some ol’ fashion research, I was confident enough to search for our new home. After 6 months, the perfect one appeared online. Funny enough, it was the first and one of three that hubby inspected and the only one we put an offer in for. I was confident in the choice that I didn’t feel the need to inspect the property before we put in an offer.
At this stage, you can say that hubby had a lot of pressure to deliver, but when I did see the new home prior to settlement. I can safely say that Socrates passed with flying colours 🙂
Before we dive into my checklist, I just wanted to let you know that most of the references used to pull this information together relate to property purchases in Victoria, Australia.
The top 7 things I considered before we purchased our new home.
- First Home Owner Grant (FHOG): Only applicable if the asset does not exceed $750,000
- First Home Buyer stamp duty concession: Purchase must be less than <$750k
- Homebuyer Fund: Combined income must be <$200k
There are two stages of approval:
- This indicates how much you can borrow and is valid for 3 – 6 months
- You can’t purchase with pre-approval. Things might change, so you can only purchase with unconditional approval.
- This occurs only after the contract is exchanged
- It requires a formal loan application
2. Review suburb data
Get a breakdown of the data for the suburb you’re interested in. The CoreLogic report provides a neighbourhood snapshot combined with historical sale prices. You can also obtain interesting suburb data from REA and Census.
3. Inspect the property
- If it’s built before 1990, you’ll require an asbestos assessment
- Are they any curtains installed?
- What is the quality of appliances and fixings used?
- Are the windows double-glazed?
- Check for water damage in showers
- If there’s any building work carried out in the past 10 years, it should be registered in Section 32
- Inspect the backyard and notice the neighbour’s cars/house etc.
- Is there heating and cooling in key areas?
- What is the street appeal?
- What is the distance from shops, schools and train?
- Is there noise transfer from neighbours?
- Star rating
- Owner-occupied or investment
- Has the owner purchased another property yet? Do they prefer a short or long settlement?
- What is the reason for selling?
- Have there been other offers?
- Has a building inspection been done yet?
- If it’s a townhouse:
- What are the land size and strata fees?
- What are the restrictions on what can be done to the property?
- GST applies to the sale (only on brand new homes)
- Ask for a Statement of Information:
- This indicates the sale price alongside comparable prices of houses in that area, and you can usually get from online listing
4. Make an offer
Submit it in writing to the agent
Specify things including:
- How much you’re willing to pay
- Any conditions you attach to the offer (subject to finance, B&P, initial down payment, and timeframe)
- Details of your down payment
- The date the offer will lapse. Include an expiry for acceptance
Different types of offers:
- This is a binding contract to buy, so long as certain conditions are met, e.g. valuation, finance approval, passes building and pest inspection
- If your offer is accepted, exchange contracts asap to avoid a change of mind. There is a 2-5 day cooling-off period.
- The standard down payment is 10%, but you can go lower
- It would help if you used a solicitor before signing Contract of Sale (this is when a contract is legally binding)
Conditional pre-approval loan types:
- This is an indication from a lender that you’re eligible to apply for a home loan up to a certain limit
- This estimates how much you can borrow and shows you’re serious.
- There is a requirement to have this at some auctions
- Valid for 3-6 months
- Pre-approvals are intended to guide your application to fit the lender’s criteria. You’ll still need unconditional approval before committing to a property purchase.
If you’re sure about the property, you just put in an offer, and there are no conditions. Compared to an auction where there’s no unconditional, you have to buy outright.
Unconditional approval loan types:
- This occurs after the exchange
- You need to complete a formal loan application
5. Options to purchase
- There is no cooling-off period and you need to pay a deposit and sign the contract immediately
- Look at auction results to see how ones in your suburb performed
You need to:
- Have a limit to how much time you have to view the property
- Have your building and pest inspections and, in the case of an apartment, strata report done before the auction date
- Have your finance approved and have your solicitor or conveyancer look over the contract of sale before the auction
- Use a solicitor before signing the contract (conveyancer)
- Get building and pest inspection report:
- building inspection — structural issues, damp, electrical safety, cost of maintenance or repairs
- pest inspection — termite activity and/or other pest issues
- once your offer is accepted, you should try to exchange the contract of sale and pay the deposit (usually around 10%) as soon as possible as, until this is done, the seller could change their mind or accept a higher offer. All this is open for alteration in the contract via conveyancer
Bear in mind that any offer you make isn’t legally binding until a Contract Note or Contract of Sale has been signed by both you and the seller. Once your offer is accepted, inform your financier and your solicitor or conveyancer of the settlement date.
Check the quality of innings:
- If the property was built before 1990, you could also get an asbestos assessment if one isn’t available to see where there may be asbestos present in the home.
- Check all items you believe come with the property are in good working order and stated on the Contract of Sale.
- Check everything off in the due diligence checklist provided by the estate agent.
- You may want to change the locks to increase security, mainly if the home has been rented out before.
- If building work has been carried out on the property in the past 10 years, check if these works were registered by:
- checking the Section 32 statement, which should include these details:
- You should have the Section 32 statement checked by your legal practitioner or conveyancer before buying.
- Contacting the local council.
- checking the Section 32 statement, which should include these details:
- Check measurements: legal practitioner or conveyancer will send you a plan of the land so you can check that all measurements and boundaries correspond with the Certificate of Title.
- Some fittings and fixtures may not be included in the sale, so be sure to read the contract of sale thoroughly.
6. Finalise loan
- Home and contents insurance may be a requirement of loan
- many real estate agents will advertise the property priced at about 5 to 10 per cent higher than the price the vendor expects. The start date should be at settlement
- You are entitled to inspect the property at any reasonable time during the week before settlement. Contact the agent to arrange this inspection.
- Offers should be submitted in writing to the agent, who is legally obliged to pass the offer on to the vendor for consideration. Specify how much you’re willing to pay and any conditions you want to attach to the offer, such as repairs required, the deposit you will put down, and perhaps a timeframe for moving in.
- Include into the contract a date by which your offer will lapse. This way, you’ll know whether or not the seller has accepted your offer by that date.
- Check security of property and crime around the area
- Do not sign the contract without checking whether GST applies. If uncertain, seek professional advice.
7. Other things to consider:
- Find the best home loan rate:
- Home loans features (offset, redraw, line of credit) cost more money. Understand whether the additional cost is worth it
- Mortgage broker:
- Check the broker is licensed (search their name/license here)
- Questions to ask:
- Do you offer loans from a range of different lenders? What sort of lenders do you work with? What kind of lenders can’t you access?
- How do you get paid for the advice you’re giving me? Does this differ between lenders?
- Why did you recommend this loan to me? Why is this loan in my best interests?
- What fees will I have to pay when taking out this loan?
- What features (options) come with this loan? Can you show me how they work?
- How do the fees and features of this loan affect how much the loan will cost me?
- Can you show me a couple more options, including one with the lowest cost?
- What is the threshold for lender’s mortgage insurance (LMI), and how can I avoid it?
- Security installed?
- Railway noise?
- Double-glazed, energy star rating
- Check the quality of lighting and floor, water leakage etc.
- Does the seller have another property purchased?
- If so, is it local or far away? For sellers paying for two properties, mainly when they are far away from one another, the motivation to sell quickly can be high.
- Is it a home or an investment? Owner occupiers are more likely to be attached to the sentimental value of their properties, whereas investors are more business-minded.
- Received any contract requests yet?
- Have been previous pest and building inspections done (which will tell you how many serious offers there have been before yours)
- The key is to make an offer that is under the market value but not by so much that it’s insulting
- Always end with a unique number, for example; $543,200, to give an impression to the agent that you are pushing your limits
- Is the owner looking for a quick sale? Being open to a short settlement can be attractive for such sellers. By comparison, a seller who is still living in the property may appreciate a more distant closing date
- Inspection checklist
- Look at the appliances. Are they older appliances in good working order, or do they look like they’ve been replaced recently?
- Importantly, does it have the proper heating depending on your climate? Does it have suitable cooling? And how old are those things?
- Talk to neighbours
- Have a look at the fixtures and fittings. What is the quality of those things? Will they need to be replaced?
- Does the place have curtains?
- Peak over the fence to check out the quality of neighbours, check out their cars
- So a little tip is to go and find where the shower is and look at the wall behind the shower. See if there is any leaking through the grout, it might also need some maintenance or high moisture readings.