real estate
home buyers guide
Congratulations Let us be the first to congratulate you on making the decision to purchase your first home or investment property. Chances are you’re excited, maybe a little apprehensive about becoming a homeowner or adding to your existing portfolio. So you can view the full picture we’ve outlined some key elements to consider along the way. We hope this booklet will provide relevant information, make the process less complicated and guide you through your property journey – even if you have done this multiple times before!
Research You can never have too much information when shopping for your home & it pays to do your research. Buying Requirements It may seem simple but listing all the necessities will help narrow down your search and keep you on track. For instance, looking for the right area to live in is like looking for a new car – your options can change wildly depending on your particular needs. If you’re a new parent, you might want to be within the catchment area of a good primary school. If you commute to work, an area with good bus and rail links is a must. If you can, one of the best things you can do is take a day trip to the area and get a feel for the place. Understanding the market Before you venture out to inspect potential properties to purchase it is important to do your research. Real Estate institutes and property websites provide a large amount of information that can keep you informed about current market conditions, trends and other information that might impact your final decision of where to buy and at what price. Some tools that are readily available to you include: Sold Archives – as well as property listings, property portals also have sold archives to enable you to browse recent sales for your suburb of interest.
Newspapers – many major newspapers provide detailed market analysis and commentary from a range of industry leaders, most of which will also publish weekly auction results on Sundays. Open Inspections - Attending open inspections are a necessary part of the research process. Be sure to take the time to talk to real estate agents as they are the experts on real estate in your local area. A helpful checklist can be found at the end of this document, use this during your open for inspection to ensure you don’t miss anything.
Considerations The cost of buying real estate We recommend you set a budget to ascertain how much you may be able to afford in mortgage repayments, the best way to do this is to meet with a Mortgage Broker.
The following expenses can also impact on the budget that you set, so it’s important you factor in what they might be: • • • • • • • •
Deposit The type of loan you with to get & the amount you wish to borrow Stamp Duty Legal fees Moving costs Insurance & connection fees Building & pest inspections (if applicable) Ongoing costs (such as council rates & utility fees)
Stamp Duty When you buy a property, you’ll most likely have to pay land transfer duty (otherwise known as stamp duty). Stamp duty is a charge that is applied to the sale of residential property by state governments. How much you pay depends on your property’s value, what you’re using it for, if you are a foreign purchaser, and whether you are eligible for any exemptions or concessions.
More information can be found on the State Revenue Office website: sro.vic.gov.au First Home Owner Grant (FHOG) Established homes are no longer eligible to receive the FHOG. However, if you are buying an established home as your first home and you meet the FHOG eligibility criteria you may be entitled to: • •
First-home buyer duty concession of up to 50 per cent (for homes valued at 600,000 or less), and/or PPR concession (for homes valued at $550,000 or less)
If you are buying or building a new home, you may be eligible for the FHOG ($10,000),
Ongoing Costs Ongoing costs can impact what type of property you choose to buy as well as its location. Council rates are a form of property tax put in place by state governments across the country and can vary among states and even cities. They are usually based on the property’s value, and the funds are used for local infrastructure and services such as roads, libraries and waste collection. There will also be expenses for utilities (water, electricity and gas) throughout the time that you own your home. Sometimes there may even be set-up fees for these services when you move into the home. If you are purchasing in a shared block you will probably need to pay body corporate fees to cover the cost of maintenance on common areas – so make sure you factor these costs in as well. Owners Corporations When buying inner city, it is important to understand the impact of the owners corporation (otherwise known as strata or body corporate) of the building you are considering purchasing in. An owners corporation manages the common property of a residential building. This may include gardens, passages, walls, stairwells, driveways, lifts, foyers, facilities and pathways. There are annual fees associated with an owners corporation, these fees cover general administration, maintenance, insurance and other ongoing costs. The individual property cost depends on the size of the property, complexity of the owners corporation and the location. We’ve included a section for owners corporations in our helpful checklist. This can be found at the end of this document.
The Search Searching for your ideal property is so much easier, when you have clear picture of what you need and what you want. Give yourself a head start through determining your ‘must have’ features compared to those you could possibly live without. Our website offers various filters and refinement options to make your search easy, signing up to new listing alerts gives you access to all of our new listings based on your specific details (before they are advertised to the public). Visit micm.com.au By attending open inspections, you can check out the neighbourhood and the property itself. This will allow you to judge whether the property will be a good fit for you. MICM Real Estate also offers private appointments to view properties outside of the scheduled open home times. In addition, our online booking system allows seamless integration with your own calendar, scheduling the time for you and will even SMS a reminder or notify you if there has been a change in schedule.
Auction - Auctions are a very popular buying method in Australia, as there is a chance of snapping up a property quickly at a good price. Before the auction day, you can make a pre-auction offer to the owner through the real estate agent. Properties sold by auction are not subject to any conditions, which means you will need to complete an inspection prior to auction day and have your deposit cheque ready to go at the time of sale. Unlike private treaties, auctions do not have a cooling off period. This means you need to be sure this is the property you want to buy. For more information ask your MICM Real Estate agent for a copy of our ‘Guide for buying at auction’.
Making an Offer Methods of sale There are three main types of selling methods: Auction, Tender & Private Sale Private Sale - This selling method is most commonly used and requires the vendor (seller) to set a price from the start of their campaign. As a prospective buyer, you can submit an offer through your real estate agent and potentially negotiate the price. Once the offer has been accepted, there is a cooling off period – refer to ‘cooling-off period in this section. Tender - Similar to Private Sale, a Tender requires a written offer to be submitted by a set time and date. Buyers compete against one another but neither party knows how much the others are offering, similar to a silent auction.
Once you’ve found the perfect property that you’d like to purchase, you can then enter the process of negotiating a sale with the owner and real estate agent. Ensuring your finance has been pre-approved; you can then make an offer on the property you wish to secure. You will need to nominate a price, settlement terms (when you would like to move in) and any other conditions you would like to include in your offer (e.g. subject to finance and/ or building/pest inspection). Before making an offer ensure that you have the deposit organised (usually 10% of the purchase price). See ‘deposit’ in this section for more information.
Contract of Sale Contracts of sale may look like a scary document full of clauses and fine print, but it’s actually not that hard to understand. basic parts to check for are: The basic parts to check for are: • Names and addresses. You don’t want to sign an agreement for the wrong home so always ensure these details are correct. • Chattels. These are the fixtures and fittings included in the sale such as carpets, etc. • Settlement conditions. Many sales can be subject to conditions, such as finance or an inspection – these conditions need to be identified as part of the contract, each special condition needs to be initialled by both parties.
Deposit When you make a written offer you will be asked to pay a deposit of either the full amount or a nominated amount (with the remainder to be paid by a date set out within the contract of sale). Your deposit will be returned to you if the seller does not accept your offer. The deposit will be held in the agency’s trust account until settlement or it is transferred to a legal practitioner’s or conveyancer’s trust account. Cooling-off Period A cooling-off period of three clear business days applies to private sales. This period gives you time to consider the offer, it begins from the date you sign the contract.
Section 32 Statement The Section 32 is a legal document provided by the seller (vendor) to an intending purchaser. The Sale of Land Act requires a vendor to provide certain information to a purchaser BEFORE a Contract of Sale is signed.
Sold Once you’ve successfully signed the contract of sale, all conditions are met and the deposit has been paid, you can wait for the settlement period to end. This period can range from 30 to 90 days and is usually agreed upon by both parties.
This is the best time to get legal advice from a qualified lawyer or conveyancer, as the opportunities to end the contract can be severely limited if legal advice is sought after the sale has been finalised.
Pre-settlement Inspection When moving, you expect to find your new home in the condition it was when you first inspected it. Unfortunately, it’s not always the case. When a property is emptied its defects
are clearly exposed and you may get a nasty shock! Prior to settlement you are entitled to inspect the property and we recommend you organise this with your agent in the week prior.
MICM Property Management Services
A pre-settlement inspection is to check that the property is in the same condition as when it was sold. If, during the final pre-inspection, you find something is damaged or not working as it was on the day the property was sold, you can request a repair.
MICM Real Estate are the market leader in residential property management and leasing.
Settlement Just before settlement, you’ll need to communicate with your broker/bank to ensure funds are ready for settlement. Once settlement has been finalised you can collect the keys or complete the transfer to our property management services.
As part of a team that has been providing professional real estate services since 1993, MICM Real Estate offers exceptional service and astute industry knowledge for inner city and western corridor properties. MICM Real Estate works to ensure that we maximise your rental return whilst efficiently and effectively managing your investment to ensure that your asset is well maintained to maximise capital growth. • • • • • • •
Insurance We recommend that you take out insurance effective from the date the seller accepts your offer (signs the contract). This is to safeguard their interest in the property as well as your own. The type of insurance will depend on the property you are purchasing. MICM Real Estate, via its subsidiary company City Central Insurances (CCI), offers its clients the opportunity to take out insurance, specifically designed to protect landlords for loss of rent, contents, accidental or malicious property damage and public liability. Tel: (03) 8256 1132 info@citycentralinsurances.com.au
•
•
7 day a week leasing services Melbourne’s largest leasing team Multilingual staff 8 non-franchised offices working together to look after your property Well trained professional teams that understand the market Consistently low vacancy rates Marketing campaigns to maximise your property’s exposure An extensive range of services including property management, leasing, insurance, maintenance, finance and sales ISO accredited – an international organisation for standardization
Call us today for a FREE rental appraisal 03 9697 8894
Glossary of Terms Certificate of title A document showing ownership of a property and property information. Common Property (a) Land or a tract of land considered as the property of the public in which all persons enjoy equal rights. A property not owned by individuals but by groups; (b) In a home (villa) unit or flat development that part of the property owned and used in common by all the unit or flat owners or occupiers and which is maintained by the Body Corporate. Conveyancer/Solicitor The process where a property is transferred from one party to another is called conveyancing. This is usually done using the services of a solicitor or conveyancer. Deposit Percentage of total sale price or agreed amount, paid on exchange of contract for purchase of an asset.
Fixtures Those parts of a property affixed to structures or land, usually in such a manner that they cannot be independently moved without damage to themselves or the property housing supporting or pertinent to them, Fixtures are usually included in a sale and commonly include items such as carpets and awnings. Market Price The price actually paid, or agreed in a contract to be paid, for an asset. It differs from market value in that it relates to an accomplished fact, whereas market value is and remains an estimate until proved. Market price may involve circumstances not normally included in market value. Market Value Market value is the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion.
Final Inspection As a property purchaser you are entitled to a pre-settlement inspection of the property. This inspection is conducted with the selling agent sometime within the 7 days prior to settlement.
Settlement This is the final stage of the sale when the purchaser completes the payment of the contract price to the vendor and takes legal possession of the property.
Fittings Installed items that may be removed from real estate without causing irreparable damage to the land, structure or use of the premises.
Under Offer When a property is under offer, it means that it has been sold, subject to the purchaser satisfying contract conditions, such as a finance clause for example.
Buyers Checklist General Worked out your budget Selected your preferred suburb/location Decided what features you want in a property (for example, number and size of bedrooms). Inspected similar properties in the area and checked sale results to find out how much they sold for.
Properties affected by an Owners Corporation Checked if there any contracts, agreements, leases or licenses affecting the common property. Checked the minutes of the owners corporation’s annual general meeting to ensure there are no areas of concern (also located within the Section 32)
If you plan to buy at auction, arranged a preapproved loan.
What are annual owners corporation fees, levies and charges? Are you able to manage any increases in annual fees and special levies?
Confirmed with the agent any items that appear to be fixtures of the property but could instead be items (personal chattels), which the seller may remove at settlement.
Does the owners corporation have a maintenance fund? How much are you required to contribute?
Arranged for your legal practitioner or conveyancer to check the section 32 vendor’s statement and the contract of sale. Organised your deposit, so you can pay when required by the agent. Organised Insurance prior to settlement
Inspection Check the aspect, turn lights off to see how much natural light enters the property. Assess the noise of neighbouring properties Does it have a functional floor plan? Are there any signs of structural damage? Checked all items you believe come with the property are in good working order and stated on the contract of sale.
Will you be a member of more than one owners corporation? What would your lot entitlements (voting rights) and lot liabilities (your contribution to the owners corporation/s) be as part of the whole development? Is there a resident building manager or caretaker manager?
(03) 9697 8888
micm.com.au
Copyright Melbourne Inner City Management (MICM) 2016. The information in this publication has been compiled from sources we consider reliable and given in good faith. The view expressed are not necessarily those of MICM or its agents. Content of this publication is copyright. No part of it in any form by any means may be produced, stored, adapted or transmitted be it by means of photocopying, scanning, mechanical, electronic or otherwise without written permission of MICM.