5 Things to Consider when Purchasing a Residential Property
If you are in the market to purchase a residential property, either as a first home buyer, or experienced within the property market, it is important to have a clear understanding of the process of the transaction, from putting an offer in writing to the Vendor, signing a contract and up to settlement. The following information may be a helpful reference to avoid stress and anxiety, in what should be an exciting venture.
- Talk to your Mortgage Broker/Bank
It is important that you consider speaking to a mortgage broker, or your bank if you will be applying for a mortgage. A mortgage broker will be able to shop around on your behalf, finding a mortgage that suits your needs. As solicitors, we are prohibited from providing financial advice, so it is imperative you seek this independently. Whilst you are looking at properties, it is important that you are aware of an estimated figure you may borrow. This ensures that you will have confidence in signing a contract, knowing it is within your means and been able to avoid terminating the contract down the track.
- Inspect the Property
Prior to signing the contract, it is imperative that you inspect the property several times to avoid any nasty surprises. The real estate agent will facilitate this, and it is important to ask questions in relation to property and area, to satisfy any queries you may otherwise have. At this point, it is useful to note any fixtures and fittings that you may wish to be included in the transaction, for instance, a dishwasher or pool equipment. Fixtures and fittings to be included in the transaction, can be negotiated between the buyers and the sellers through the real estate agent, and can be recorded in the contract, to ensure proper delivery at the time of settlement.
- Insurance
Confusion often arises as to who is responsible for insurance between signing the contract and leading up to settlement. Following signing a contract, the liability to provide insurance over the property usually shifts to the buyer, as of 5:00 pm the following business day after the date of the contract. The seller may have the right to revoke any insurance they have over the property at this point, however, it is usually recommended that they retain any insurance, to avoid any loss, should an event occur. If the buyer chooses not to obtain insurance, and an incident occurs, the loss felt may, in certain circumstances be covered if the seller has retained their insurance. It is highly recommended that a buyer does not rely on the fact that the sellers may retain their insurance, as in some cases, this will not constitute appropriate coverage in the event of damage to the property. In certain occasions, the buyer will still be enforced to take over possession of the property where damage has occurred during an incident, which has not rendered the property unliveable, but has still cause substantial damage, for example fire or vandalism.
- Special Conditions
Special conditions enable the variation of the REIQ (Real Estate Institute of Queensland) Contract’s standard conditions by mutual agreement. Special conditions must be agreed to by both the buyer and the seller and are recorded in the contract. Certain special conditions that are common, are inclusive of the provision that the contract be conditional upon finance, a satisfactory building and pest report or that the contract may be subject to the sale of an existing property of the buyer. Special conditions usually must be met by 5:00 pm of the nominated due date within the contract. Extensions for special conditions may be requested but are granted at the seller’s discretion. We strongly suggest you consult ourselves on the drafting of any special conditions prior to signing a contract.
- Termination
Should the property not be for you, or an unsatisfactory result of a condition occur, termination of the contract can be done so by either the seller or the buyer in several circumstances. Where the contract is terminated within the cooling off period (five days following the date the contract is signed), a termination penalty may be imposed. The buyer is at risk of losing 0.25% of the purchase price of the property, which is usually the initial deposit that has been paid. Termination may also occur where special conditions are not met in a satisfactory manner. It is important that the seller be made aware of any unsatisfactory results of conditions by the due date as to avoid the buyer been in default of the contract and at risk of a claim for damages and specific performance. Make sure you are certain of your purchase before signing the contract as there may be significant financial penalties for terminating.
If you require a contract to be drawn, reviewed, or assistance in the conveyance of your transaction we invite you to contact our conveyancing team for further discussions. We offer competitive fixed fee costs in relation to standard residential conveyancing matters.
February 2019
