The buying process

The buying process can be a long, drawn-out affair. In simple terms, the four major steps you should familiarise yourself with are the deposit, contract, conveyancing and settlement. And of course if you have any questions along the way, simply contact our Home Loan specialists.

1. The deposit

For a private treaty sale you are normally required to pay a holding deposit of between $500 and $1,000. If you are buying at auction you are required to pay a deposit (usually 10% of the purchase price) on the spot.

For a private treaty sale, paying a holding deposit does not mean that the agent or seller holds the property exclusively for you. They may show the property to other people who are interested and even exchange contracts with someone else if they can get a better deal. If this happens, or you change your mind, the holding deposit is refundable.

Purchasers of residential property have the added safety net of consumer protection laws under the Trade Practices Act and the various Fair Trading Acts. For example, if a vendor uses false advertising to promote a property, the purchaser can seek a court order to cancel the contract and get their deposit back, or they can claim damages.

2. The contract

The vendor or seller must have the contract of sale prepared and available for inspection before offering a property for sale. The contract of sale usually includes:

• A zoning certificate from the local council
• A sewerage diagram
• A copy of the title to the property as recorded in the local land titles office
• Copies of documents outlining other registered interests over the property

When the buyer and the vendor each sign their copy of the contract for sale, they hand a copy to each other. This is what is referred to as an 'exchange of contracts'. If you learn after exchange that the seller's information is incorrect, or if the seller does not attach the disclosure information, you may be entitled to withdraw from the contract. If this happens, your solicitor or conveyancer will advise you on the specifics.

Gazumping happens when a seller accepts your offer to buy a property but exchanges contracts with someone else who makes a higher offer. This is more likely to happen in a rapidly rising market. If you are concerned this may happen, you should exchange contracts as quickly as possible. However, always talk to your solicitor or conveyancer before exchanging contracts.

You'll need to arrange for home or investment home insurance upon exchanging contracts, and contents insurance from the time you move in. Your lender will be able to easily organise this for you through the bank. If you're purchasing a home unit, you'll also need to obtain a Certificate of Currency from the body corporate's insurer to make sure the property is adequately covered.

Cooling-off Period 

After the exchange of contracts in a private treaty sale, there may be a legal cooling off period. During this time you may be able to change your mind and withdraw from the contract. However, you may lose your deposit. You should check with your solicitor or conveyancer about whether a cooling-off period applies to your contract before exchanging contracts. The length of cooling-off period varies from state to state.

Be warned, there is no cooling-off period for contracts exchanged following a successful auction bid.

3. Conveyancing

Conveyancing is simply the legal transfer of property from the seller to the buyer. There are three ways conveyancing can be carried out:

• Through a solicitor
• Through a licensed conveyancer
• Do it yourself

Solicitors and licensed conveyancers are required to hold professional indemnity insurance and fidelity cover, which protects you from any mistakes they make. A solicitor charges a fee calculated on the property purchase price, the type of title and the mortgage.

Disbursements are additional to the solicitor's fee. They are likely to include items like photocopying and the cost of making enquiries, obtaining searches and obtaining other certificates.

Your legal adviser and conveyancer

Having the right help and advice is essential when it comes to buying a property. Taking on the services of a solicitor or conveyancer will ensure that you avoid any unwanted debts or pitfalls. It is your legal adviser or conveyancer's job to:

• Make sure all rates and taxes are paid when the property is transferred to you
• Check heritage orders
• Ascertain whether or not the property has money owing on it. E.g. is the property mortgaged?
• Verify the vendor is legally entitled to sell the property

What you need to arrange

Some of the documents you may need to present on the day are:

• A building certificate to show compliance with council ordinances
• A surveyor's report
• Certificates regarding zoning, land tax and mine subsidence

You should also consider some of the expenses that add up. Stamp Duty will probably be your largest expense after your loan, but there could also be:

• Council and water rates
• Title search fees
• Registration fees for the transfer of land
• Registration fees on your mortgage

4. Settlement

This is when the buyer pays the balance of the purchase price and takes ownership of the property. Final settlement varies between States and Territories but normally takes place up to six weeks after the exchange of contracts. The title deeds (if any) will be handed over to your lender, or to you if you purchased the property without borrowing. Finally, the keys are handed over to you.

Normally you would move in only after settlement. However, if you need to move into your home earlier, you can approach the seller for early possession 'under licence'. This usually involves an agreed payment of rent. If you anticipate this possibility, talk it over with the seller and your solicitor or conveyancer as early as possible to avoid disappointment.

 

Next step-by-step: Home buying costs

 

Important Information

• The issuer and insurer of Home Insurance is Commonwealth Insurance Lmited (CIL) ABN 96 067 524 216 AFSL 235030 and the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 is an arranger of the insurance. CIL is a wholly owned but non-guaranteed subsidiary of Commonwealth Bank of Australia. The Commonwealth Bank of Australia and its subsidiaries (excluding CIL) do not guarantee the obligations or performance of CIL or the products they offer. PDSs issued by CIL for Home Insurance are available on request. You should consider the relevant PDS in making any decision about the product