3257&,7

PORT CITY REAL ESTATE

Copyright © 2012 Peter Fletcher

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AcknowledgementsReal estate is a big industry. There’s lots to know and it’s impossible to know everything about any one subject. As I started planning this book the gaps in my knowledge soon became all too apparent.

Clearly I needed help. And that help arrived in the form of some very generous people.

People like Dianne Seear who’s the license holder at Residential Settlements. Dianne contributed much of the section about the role of the settlement agent. Her attention to detail and knowledge of the settlement process is peerless.

Then there’s Jay Wood who has a deep understanding of the real estate industry. Jay not only provided the special condition clauses found in the Annexure, he provided some fine tuning in other areas where I required some much-needed help.

And then there’s Emily Murphy who was the driving force for getting this project off the ground. Not only is Em a motivator she’s also patient and thorough with her research and abundantly talented as a writer.



About Residential Settlements 6Introduction 7

Part A: Preparing to buy your first home 8Sorting out your finances 9

How much deposit will you need? 9How much will the bank lend you? (Getting pre-approval) 10

Things you'll need to apply for finance 10Budgeting for hidden costs 11Obtaining the First Home Owner Grant 12

Am I eligible? 12How can I apply? 12Saving thousands of government stamp duty 13

Applying for the First Home Owner Rate of Duty 13Decide on property features for better budgeting 14

Market research to help you make the best decision 15Understanding your motivations 15

Buying to maximise your resale potential 15Buying from the heart 16Buying to have a home you can make your own 16

Understanding the property market 17Buying in a buyer’s market 17Buying in a sellers market 17Buying at auction 17

How auction works 17Challenges for first home buyers 18

Buying where price is not disclosed 18

Choosing the right home 20Finding a home 20Inspecting properties like a pro agent 21You've found a home you like, now what? 22

CONTENTS


Part B: Making an offer 23Making an offer 24

Completing the Offer and Acceptance 25Correctly identify yourself 25Tenants-in-Common or Join Tenants? 25Correctly identify the property 25Specify a settlement date 25How much do I offer? 26Adding conditions and warranties to your offer 27

Making your offer subject to finance 27Deciding on the deposit amount 28

When to pay the deposit 28Adding seller warranties 28Specifying property inclusions 28Appointing a settlement agent 29Inspections 29Other conditions 29

Property inspections 30How pre-purchase inspections work 30Who does the inspection? 30When are they carried out? 30Types of building inspections 30

What if I change my mind? 32What if I see two properties I like? 32

Part C: After the sale now what?– 33From purchase to settlement 34

Obtaining formal finance approval 34Fulfilling contractual obligations 35

The settlement process 36Your settlement agent’s role 36The seller’s role 39Settlement date 39

CONTENTS CONT.


About Peter FletcherPeter Fletcher is a digital strategist with extensive experience in the real estate industry.

Since becoming a real estate agent in 1985 with Kalgoorlie agency Brown James & Associates, Peter has worked in nearly every real estate role out there - including sales rep, owner, director, and manager. He's also served on the Real Estate Institute of Western Australia (REIWA) council and has served twice on the board of Professionals WA.

In 1989, Peter bought a run-down real estate business in Victoria Park. During his operation of the company between 1989 to 2006, he transformed it from being a 'nothing' company to a thriving business with over 600 properties under management.

With a total 27 years of real estate industry experience, Peter has a sound understanding of the ins and outs of buying property - leading him to write this book. Now, Peter works as Managing Director of Residential Settlements, overseeing a team of highly experienced conveyancers.


About Residential SettlementsResidential Settlements is a crack team of highly experienced property conveyancers. Our home base is Burslem Drive, Maddington.

We’ve been doing settlements since the late eighties, so as a company we’re pretty old - but really, we’re young at heart.

Although we love our high tech office equipment we’re most in love with a kids creche, a coffee machine and a music box that plays cool music.

We follow systems with military precision. They make the settlement process smooth and easy, like a fine red wine. We love red wine. And we love smooth settlements. Red wine makes us happy, smooth settlements make our customers happy.

Our team are all highly trained property conveyancers. They know their job back to front and inside out. There’s no property question they can’t answer. Try it one day. Go ahead, ask them something curly.

It’s our passion that makes us tick. Passion to be the best we can be, to work harder, serve better and help more. And that’s why we’re the settlement agent that dozens of agents across Western Australia trust with their clients.

They know that we’ll take care of their clients, that we’ll dot every i and cross every t. Our attention to the smallest detail is their peace of mind and it’s yours too.

Call us, even if it’s just for a chat. Or a coffee.


Buying your first home is a big step - in fact, it’s the biggest investment you’ll ever make! Done well, it’ll provide you with a solid financial platform. It’s a platform that will help you into your dream home, give your future kids an education and retire in comfort.

And that’s the ideal, right? Buying a home has other advantages, too:

• Paying off your home loan and improving the property through renovations and home improvements helps build equity.

• Homes appreciate in value over the long term, so your first home is a wise tax-effective investment.

• Owning your home means you can live the way you want to live and not be dictated to by a landlord.

• Part of what you pay in home loan repayments is reducing the amount you owe. That’s a form of forced saving.

• It’s a stable place to live - there are no worries about a landlord demanding you move out when their plans change.

In short, buying your first home is a great idea. But getting things started takes planning and research!

Throughout this guide we’ll cover what you’ll need to know and the steps you’ll need to take to make your first property purchase a great one.

The Ultimate Guide to Buying Your First Home in Western Australia 8

INTRODUCTION


PART A:

PREPARING TO BUY YOUR FIRST HOME


You’ve already decided you can buy a home, so you probably already have a

rough idea of your financial situation.

To really get a feel for how much you can spend, you should:

• Decide how much you can afford to put down as a deposit,

• Find out how much the bank will lend you,

• Account for the extra costs associated with buying a home, and

• Find out about the First Home Owner’s grant and rebate.

These four things will help determine how much you can spend overall. Once you’ve done that, you can get started looking at homes within your price range.

How much deposit will you need?Traditionally, first home buyers have needed to put down a deposit of around

10% of the value of the property they’re buying - but that’s not the case right now.

There are a number of lenders who offer loans to buyers who have limited deposits. Be cautious when choosing one of these loans, however, because:

• loans with smaller deposits usually come at a higher interest rate,

• they’re usually accompanied by expensive mortgage insurance, and

• the more deposit you put down, the less you’ll need to borrow, which means you’ll be paying off your first home sooner.

Rule of thumb: a higher deposit leads to a better housing loan deal.


SORTING OUT YOUR FINANCESGetting your finances sorted is paramount to buying your first home.


How much will the bank lend you?A pre-approval will determine how much the bank is willing to lend you. It’s one of

the greatest assets a home buyer can get.

Pre-approval is a written assessment of your worthiness for a loan. When you seek pre-approval for a home loan, your lender will assess your ability to pay, as well as your credit history, to decide how much they are willing to lend you.

You can make an offer without a pre-approved loan but smart home buyers get one before they make an offer. Really smart home buyers get pre-approval before they even start going to home opens. Here’s why you should, too:

• You get a better choice of properties. When you visit a home open and talk to a real estate agent, letting them know that you have pre-approval is a sure-fire way to get them to take you seriously as a buyer. Once a real estate agent knows you’re serious about buying, they’re likely to call you about potential properties before they’ve even hit the market, giving you a better choice of properties, and potentially cheaper deals.

• You get a better deal. To sellers, pre-approval is almost like a guarantee that the deal they strike with you won’t fall over. Sellers want certainty, because if the buyer they choose can’t get finance, the seller will have to start marketing their property all over again. To them, this certainty is worth money – there’s been plenty of deals where sellers have accepted a lower offer because that buyer had pre-approval and the higher offers didn’t.

• You won’t waste time looking at homes you can’t afford. Getting pre-approval will give you a much better idea of what homes are in your price range. You’ll know in advance which suburbs and properties are too pricey to waste your

time on.

• You won’t have your heart broken. Imagine falling in love with a property and even going so far as to make an offer on it – only to find out at that it’s out of your price range! Save yourself the disappointment of having a deal fall through by knowing in advance what you can (and can’t) afford.

Pro tip: Get pre-approval from your chosen lender. You’ll be glad you did.

Note: Pre-approval is an indication only, and final approval will be needed before settlement. The more comprehensive the lender’s pre-approval checks are, the more likely the amount they indicate will match your loan’s final approval.

» Things you ll need to apply for finance’

• Proof of identity including photographic identity, such as drivers licence and passport.

• Proof of income. This may include group certificates, pay slips and employment contracts.


EXTRA RESOURCES» Mortgage calculator

Most of the major banks and building societies have mortgage calculators and home moving tips on their websites. Notably, RAMS has a comprehensive home loan budget calculator at www.rams.com.au/home-loans.

» Calculate repayments

Many of the major banks have iPhone and Android apps that make calculating repayments a breeze. The Commonwealth Bank’s nifty app is worth a special mention as it includes a section for suburb insights. If that doesn’t do the job check out tapMortgage - a free app that calculates home loan repayments and stamp duty in a flash.


http://itunes.apple.com/au/app/tapmortgage-australia-mortgage/id402187202?mt=8

http://www.google.com/url?q=http://itunes.apple.com/au/app/commbank/id310251202?mt=8&sa=D&sntz=1&usg=AFQjCNEhcOh3DPAih180scEma6qyGsOGPA

http://www.rams.com.au/home-loans/buying-your-first-home/7-steps/deciding-to-buy/#3

http://www.google.com/url?q=http://www.rams.com.au/home-loans/buying-your-first-home/7-steps/deciding-to-buy/#3&sa=D&sntz=1&usg=AFQjCNHQLLYxbXH4IsSicQjHidjiAKG1CA

http://www.google.com/url?q=http://www.rams.com.au/home-loans/buying-your-first-home/7-steps/deciding-to-buy/#3&sa=D&sntz=1&usg=AFQjCNHQLLYxbXH4IsSicQjHidjiAKG1CA

Budgeting for hidden costsThe deposit and monthly loan repayments are obvious costs of buying a home, but

there’s a few other costs that aren’t fully known until later in the buying process. Don’t let these catch you off guard!

Include the following costs in your budget:

» Government feesThese are typically included in the quote your settlement agent will give you. They include:

• Stamp duty (also called Transfer Duty) - all homebuyers must pay a hefty stamp duty tax to the State Government. The good news? You can apply for this to be waived if you’re a first home buyer buying a home with a value of $500 000 or less. See p.13 for more info.

• Registration fee - registering the transfer with Landgate to transfer the property into your name comes with a fee upwards of $160.

• Enquiry fees - to ensure rates are up to date and the property isn’t subject to any orders or requisitions your conveyancer will contact the local shire, Water Corporation, WA Planning Commission and State Revenue - all of whom charge enquiry fees.

Each property transaction is different, and your settlement agent can provide you with a written estimate of the amount of these fees before the settlement process begins.

» Legal feesIf you need advice on filling out the Offer and Acceptance contract, or you have a disagreement with the seller, you may need to consult a lawyer.

» Conveyancing feesConveyancing fees. You’ll need a conveyancer (or ‘settlement agent’) to transfer you ownership of

the property and take care of all associated processes. See p.36 for more info on the settlement process.

» Property valuation feesYour lender will require a valuation of the property to make sure that what you’re paying for the property is a close match to its market value. Each bank charges a different amount and your banker or mortgage broker will provide you with an estimate of all bank fees including the valuation fee.

» Termite and building inspection costsWhen writing up an Offer and Acceptance form, you’ll probably want to include a clause requiring a timber pest and building inspection be carried out (more on that on p.29 and p.30). Be sure to set aside money to pay for these inspections.

» Council and water ratesEvery July, shire councils charge homeowners an annual amount (commonly called rates) for garbage collection and maintenance of local infrastructure (such as footpaths and playing fields). At the same time, homeowners must pay water rates to the Water Corporation for water supply and waste disposal. Because rates are paid a year in advance, buyers often need to refund the seller for rates paid for the period after your property settles. It’s a key part of the settlement process, and your settlement agent will advise you about this in more detail.

» Other All other costs associated with moving home, including insurance (eg. title, contents, and building insurance), connection of utilities, a strata enquiry fee (usually about $110) if applicable, and moving costs.

Do these seem like a lot of costs? Don’t be too daunted - go through the list one-by-one and estimate how much each one will cost you. The exercise will help you a lot and reduce the chance of under-budgeting.

The Ultimate Guide to Buying Your First Home in Western Australia 12 PORT CITY REAL ESTATE

Obtaining the First Home Owner Grant

The First Home Owner grant (FHOG) is a one-off payment from the Government of

WA of $7000. It’s designed to help first home buyers purchase or build a principal place of residence, and it’s well worth applying for if you think you’re eligible.

» Am I eligible?You’re probably eligible for the grant if:

• You’re a first home buyer planning to live in the property, and

• You’re buying a home under $750,000 (or under $1mil if you’re north of the 26th parallel)

But technically, there’s a long list of criteria that you must adhere to to be eligible. As outlined on the State Treasury website, these are:

• Each applicant must be a natural person (i.e. not a company or trust),

• Each applicant must be 18 years of age or over at the commencement date of the eligible transaction,

• At least one of the applicants must be an Australian citizen or permanent resident at the commencement date of the eligible transaction,

• Each applicant and/or their spouse cannot have previously received a FHOG under this scheme,

• Each applicant and/or their spouse cannot have owned residential property anywhere in Australia before 1 July 2000,

• Each applicant and/or their spouse cannot have previously owned residential property anywhere in Australia on or after 1 July 2000 and occupied that property as a place of residence before 1 July 2004,

• Each applicant and/or their spouse cannot have previously owned residential property anywhere in Australia on or after 1 July 2000 and occupied that

property as a place of residence for a continuous period of at least six months that began on or after 1 July 2004,

• Each applicant must occupy the home being purchased or built as their principal place of residence for a continuous period of at least six months, commencing within twelve months of completion of the eligible transaction,

• Each applicant must have entered into an eligible transaction on or after 1 July 2000. An eligible transaction is defined under section 14 of the First Home Owner Grant Act 2000, but is generally a contract for the purchase or construction of a home, or commencement of construction of a home as an owner builder, and

• For eligible transactions commencing on or after 1 January 2010, the total value of the home must not exceed the cap amount. The cap amount is: $750,000 if the property is located south of the 26th parallel of South Latitude (a circle of latitude running between Kalbarri and Denham), or $1,000,000 if located north of the 26th parallel of South Latitude.

The FHOG is not available for:

• vacant land,• business premises,• holiday homes, or• renovations to existing residences.

Applications for the grant can only be made once a contract to buy or build has been signed and dated by all parties to the contract.

The grant application must be completed within 12 months of settlement of your transaction.


http://www.finance.wa.gov.au/cms/uploadedFiles/_State_Revenue/FHOG/FHOG_Fact_Sheet.pdf

» How can I apply?To apply for the grant, you’ll need to lodge an application form to the Office of State Revenue. You can either:

1. Fill out the application form from www.finance.gov.au and lodge in with the Office of State Revenue yourself, or

2. Have your lender (provided they are an Approved Agent) process the grant application as part of the loan process.

It’s a requirement to live in the property after settlement, although the rules allow for variations as a result of circumstances that are out of your control. If you believe that you can’t fulfil all of the requirements to live in the property it’s important to seek the written approval of the Commissioner. Failure to make application for a variation in a timely manner could mean you’ll be required to repay the full amount of the grant plus penalties of up to $20,000.

Most first home buyers use the first home buyers grant as a significant part of their deposit. It also comes in handy to help pay for bank fees and other moving costs.

» Saving thousands on government stamp dutyHome buyers usually have to pay a significant amount of money as stamp duty – however, the government reduces the amount of this fee for first home buyers purchasing a home with a value of $500 000 or less.

For first home buyers purchasing vacant land, the fee is waived for properties up to $300 000 and is at a reduced rate between $300,001 - $400,000.

Applying for the First Home Owner Rate of Duty:

If you’d like to apply for the first home owner rate of duty or a refund of any duty already paid, complete the Office of State Revenue’s standard application form. This can be lodged either through the Office of State Revenue or through most financial institutions.

The first home owner rate of duty is connected with eligibility for the first home owners grant, so it’s important to advise the Office of State Revenue of any changes to your circumstances that may lead you to being ineligible for the grant and therefore the reduced duty rates.


http://www.finance.wa.gov.au/cms/uploadedFiles/_State_Revenue/Duties/Forms/First_Home_Owner_rate_of_duty_for_purchased_property_or_gifted_land_form.pdf

http://www.finance.wa.gov.au/cms/uploadedFiles/_State_Revenue/Duties/Forms/First_Home_Owner_rate_of_duty_for_purchased_property_or_gifted_land_form.pdf

Decide on property features for better budgeting

Okay, so you’ve worked out what you can afford to spend, and whether the

government can help you. But what kind of property are you going to spend it on?

Now's the time to decide which aspects of a home are most important to you (and which aren’t), so you can look at potential homes with a clear idea of what you’re searching for.

Pro tip: Knowing exactly which features of a home you do and don't want has the added benefit of cutting unnecessary costs.

Consider how important, or unimportant, features such as the following are to you:

1. Size. Many first home buyers are attracted to large family homes that remind them of the homes they grew up in. But large homes are expensive, and it’s important to consider how much space you actually need - do you have (or are planning to have) a large family, or will the home only house one or two people? Are you willing to sacrifice house size in return for the smaller energy and maintenance bills associated with a smaller home? Remember, your first home is just that: your first. There’s plenty of time to upgrade to a bigger home later.

• Outdoor space. For some people, a big backyard is a must. For others, a large lawn and leafy gardens are just another source of maintenance costs. Consider where you stand on outdoor space.

• Luxuries. Pools and spas look great at home opens, but consider whether they’ll be an unnecessary extra cost, or a part of your everyday lifestyle.

• Location. Proximity to good schools, parks, and shopping centres can often drive up the asking price of a home. Decide on which location is most suited to your lifestyle.

By deciding which costly features of a home aren’t important to you and buying according to those priorities, you’ll avoid the temptation of unnecessary features that will have you paying more. You'll also save yourself a lot of time, because you'll be able to narrow down your property search to fewer properties.

But before you go buying the tiniest, shabbiest home you can find, don’t forget that every feature of a home contributes in some way to a home’s resale value, too. More on this on the next page.


To prevent yourself from making a costly mistake, you should:

• Know your motivations as a buyer,• Learn as much as you can about the

real estate market,• Research the suburbs you’re interested

in and keep track of what other properties have sold for,

• Understand your financing options, and

• Get clued up on the government’s first home owner grant and other incentives - see p.12.

Understanding your motivationsWhy are you looking to buy a home? Answer that question, and you’ll be able

to make a much better property choice. Here, I’ll look at some of the key reasons people buy their first home - and what you should look for based on those motivations.

Of course, you may have multiple motivations for buying a home. Whether you fit into one of these categories or not, deciding exactly what you want in a home will make the home-buying process a lot clearer.

» Buying to maximise your resale potentialYou’re probably not going to live in your new home for the rest of your life, and your first home may be a key stepping stone to owning even better property in the future. That’s why it’s important to consider the resale potential of the property you’re about to buy. Not all properties are equal!

The primary factor in maximising your resale potential is location. Suburbs and streets that are likely to perform well have:

• Close proximity to the ocean, or a river,

• Views of the ocean, a river or lake,• Proximity to the city,• Views of parks, lakes or golf courses,• Good suburb amenities like shopping,

transport, parks and ovals, and• Good quality shops.

If you’re looking for a sound investment, you need to choose the best location your budget you can afford.

You’ll also need to consider the general quality of the home. Is it in good condition? The condition of a home is not necessarily dictated by age - a new home may be poorly built and an old home may be sturdy and well-maintained - or vice versa.


MARKET RESEARCH TO HELP YOU MAKE THE BEST DECISIONResearch is the key to making wise real estate decisions, so arm yourself with knowledge.


» Buying from the heartWhile choosing a home based on resale value is a sound investment strategy, your first priority may not be resale. You may have a good reason to live in an area - for example, being close to a family member who needs care. If this is the case, you’ll have specific must-haves for your new home. These may include:

• Proximity to a certain location,• Proximity to public transport, or• The number of bedrooms.

» Buying to have a home you can make your ownLet’s face it, renting isn’t always fun. There’s the constant inspections and prying eyes of the landlord and the agent. Then there’s the restrictions on the way you decorate the place and what you hang on the walls. None of this is fun for a tenant.

A home of your own changes all of that. In your own home you can dig a hole, plant a tree, build a wall or paint your bedroom whatever colour you want - and no-one’s going to tell you that you can’t!

So what do you want in a home that you can make your own?

• A great kitchen?• Room for garden?• Something you can easily renovate?

Decide this, and you’ll find it easier to evaluate each home you look at.


Understanding the property marketTo give yourself the best chance of making great real estate decisions it’s important to

understand how the property market works.

In this section I’ll explain the different types of markets and what they mean to your buying strategy. I’ll also explain the different sales methods used by agents and how to use these to your advantage as a buyer.

» Buying in a buyer's marketA buyers market is how we describe a time when there are many more properties for sale than active buyers. In this kind of market, there’s typically a lot of choice across all sectors of the market. Home open traffic is slow except where the property is listed cheaply compared to other similar properties.

In a buyers market you’ll have plenty of time to make a decision. Competing against other offers is rare. A buyers’ market allows you time to do your research thoroughly. Sellers are more likely to accept a low offer and are usually hesitant to counter-offer unless your offer is exceedingly low.

Pro tip: The key to doing well in a buyers’ market is to take your time. Be prepared to wait and don’t be rushed into making a decision.

» Buying in a seller's marketA sellers’ market is much more difficult for a buyer. Usually there are few properties to choose from. Those that do suit, are well presented and are priced reasonably often attract multiple offers, many of which are over the asking price.

It’s often tempting to wait and ride the market out when this happens. The hope is that demand will settle down and prices will eventually fall. This rarely happens - but it occasionally has in

the past, especially between 2007-2011 where property values fell. In some cases the falls were quite significant.

In most cases though, demand eventually slows temporarily and then settles into long term patterns that produce moderate property price growth.

To try to wait out a sellers’ market in the hope of a fall in property prices is risky. If it happens, great, but if the market keeps moving a first time buyer can find themselves priced out of the market.

Buying well in a sellers’ market is all about being prepared and acting fast.

Pro tip: Have your finance pre-approved and be prepared to act at a moment’s notice. Even waiting for a day can be too slow in a fast-moving property market.

» Buying at auctionBuying at auction can be a daunting experience for even the most experienced buyer. For first home buyers, it’s even more so.

An auction is the process of selling a property to bidders, the highest of which gets to buy the property. The price must exceed any reserve price set by the seller.

How auction works:

On auction day bids are made by prospective purchasers, each one higher than the previous. Once the reserve price is reached the auctioneer will announce that ‘the property is on the market’. This means that the person with the highest bid when the auction completes is the winner.

The seller is permitted to bid for the property themselves. These are called Vendor or Seller’s


Bids. The seller usually reserves the right to 10 Seller’s Bids up to and including the reserve price. Usually these bids are announced as a Seller’s Bid.

When auction is completed, the winning buyer signs the formal contract. Most auction contracts specify a deposit amount to be paid on ‘the fall of the hammer’ with the balance of the purchase price payable usually within 20 days.

If the auction doesn’t reach the reserve set by the seller the auctioneer will usually enter into negotiations with the highest bidder. If these negotiations fail the property is placed onto the open market.

Challenges for first home buyers:

Most auctions require the payment of a 10 percent deposit. That in itself can be tough for a first time buyer. But the challenges for first home buyers don’t end there.

The real problem is that you’re required to bid unconditionally. In other words you can’t make your offer subject to finance or a building inspection.

This is dangerous territory for most first home buyers.

Pro tip: You should only bid at auction if you are 100 percent certain the bank will give you finance at settlement. If there’s any doubt at all, don’t bid. Although you risk missing the property, you remove the risk of losing your deposit if the bank decline your finance application at the last minute.

There is an alternative, though: you could let the agent know that you want to bid, but can only do so on the basis of your bid being subject to finance. As a result of this the seller may agree to allow the auction to proceed on the basis of yourself and other buyers bidding subject to finance.

This modified form of the usual auction terms is becoming more popular and gives you another option.

To win at auction it’s important that you have a clearly defined auction day strategy. Know what the property is worth to you and what you’re willing to bid to, and be prepared to stick to your guns. You should also be clear about the condition of the property. Ask to see copies of timber pest and structural reports prior to auction day.

Buying at auction has its rewards. Because auction day can be intimidating sometimes you have less, not more, competition. When that happens the price reflects the lack of competition. In other words: it can be a great way to pick up a bargain.

» Buying where the price is not disclosedSelling a property without a price is one of the most common trends in property marketing today. The strategy is designed to get you to make an emotional commitment to the property first and a rational decision about price second.

Here’s how it works:

The price on a property is maximised when two or more buyers are in competition. When both want the property, they compete against each other instead of the vendor. The best way to win is to make a higher offer. And the person with the highest offer usually wins.

That’s the appeal of auction. But the problem with auctions is that the terms and conditions of sale must be the same for everyone. In short, it lacks flexibility - denying some buyers the


opportunity to participate, which reduces the amount of competition and potentially costs the seller.

Enter no-price marketing.

In reality, the agents usually offer some form of property price guide, e.g:

• “Price by negotiation: $390 - 410 000.” This means that the seller is prepared to negotiate in a range between those figures, or

• “Buyers over [$ amount].” This means that the property is suited for buyers who have more than that amount to spend.

For example, they may tell you that the seller is seeking offers over $450 000. If you’re like most buyers, you’d take that as an indication that the owner would be happy with an offer close to, but higher than, $450 000. Of course this would seem like a bargain to you as other similar properties are being advertised for $500 000. Naturally you’d be keen to make an offer to secure this dream home.

You make an offer and the agent then tells you that they’ll be in touch. Sure enough, they are - but not with the news that you were hoping for. Another offer has come in from another buyer!

The agent then tells you to make your highest and best offer. How much you ask? Well the agent’s not in a position to disclose how much the other offer is but, they say, if you want to secure the property you’ll need to make an all out effort and show that effort on the offer.

You increase your offer. And wait.

Of course the agent is saying exactly the same thing to the other buyer or buyers. Both are trying to outbid each other but neither know how much the other offer is so in effect you’re outbidding yourself.

Through all of this the seller hasn’t had to

disclose their hand once.

What, then, is the best strategy for working with price by negotiation sales? The answer is to play your own game and doing that means being well prepared.

Buyers need to research how much a property is worth before entering the negotiation. Using research tools such RP Data’s Suburb Sales Report or Landgate’s Sales View report buyers can form a clear idea of how much a property is worth in the current market.

Once you’re clear about how much a home is worth, you can then formulate a negotiation strategy around achieving a purchase at or below that price.


This is an exciting time, but it’s also wise to remember that property is a serious

investment.

Finding a homeMost home buyers start their search online. Here’s the sites you’ll probably

want to use:

• reiwa.com : A strong focus on Western Australian real estate. A cool search engine on the homepage that allows you to use common language search terms. Also features plenty of property research articles and excellent suburb growth and census data.

• domain.com.au : Neat and clean, but doesn’t contain everything for sale in WA.

• realestate.com.au : The biggest of the real estate sites, although finding the agent’s phone number can be difficult.

What the big websites don’t have is private sales. Private sales can be found on Gumtree or in the real estate section of The West or Sunday Times. Few people bother to advertise in newspapers midweek.

Agents’ for sale signs are another handy way to unearth a hidden gem. Combined with the

use of a mobile phone app, they make searching for properties in your favourite suburb a snap.

Some of the best apps for real searches include:

• reiwa.com You’re Home : Defaults to current location search then displays properties as kites that “fly” in to show the location of properties for sale. Easy to use filters to help narrow your search and a straightforward Favourites function.

• domain.com : Allows you to find properties in a suburb. Become a Domain member and save shortlists of properties that are synced with domain.com.au. Very fast, and includes a moving checklist.

• realestate.com.au : Allows property search based on your current location, which is a handy feature if you’re looking in a suburb you’re not familiar with. Nice interface with plenty of properties to choose from.


CHOOSING THE RIGHT HOMEOnce you ve decided how much you can spend and what you re looking for’ ’ in a home, you can begin the search for your new home.


http://itunes.apple.com/au/app/realestate.com.au-australias/id404667893?mt=8

http://itunes.apple.com/app/domain.com.au-real-estate/id319908646?mt=8

http://itunes.apple.com/au/app/reiwa-youre-home/id451914322?mt=8

http://realestate.com.au/

http://domain.com.au/

http://reiwa.com.au/Research/Pages/Perth-suburb-profiles.aspx?profile=suburb

http://reiwa.com.au/Research/Pages/Perth-suburb-profiles.aspx?profile=suburb

http://reiwa.com/

In addition to these, most of the major real estate franchise and marketing groups have iPhone apps that display their own listings. It can be frustrating flicking between apps and most people settle for a single app that does the job.

Pro tip: Building a close relationship with a local agent is another powerful strategy to find a great buy.

Often agents have a list of ‘hot’ buyers that receive advanced notification of the latest listings. In many cases people on these lists are given an opportunity to inspect the latest listings during a mid-week, pre-launch.

This is good news for homebuyers on the list, because it means having a head start on other buyers. Being able to negotiate with the owner without competing with other offers can save you thousands, especially in a seller’s market.

Inspecting properties like a pro agent

As your start to narrow your selection you’ll want to be a little more systematic. There are

simple ways to do this.

• Start by taking notes of properties as you go. Using a digital camera, take a photo of the letterbox and front of the home. This will remind you of the street number and what the home looked like from the street.

Consider using the Home Tracker iPhone app by Brandon Christenen. It’s a paid app that allows you to create a record for each property you view. You can then attach a photo, rate the property and add it to a map.

• Make a note of the key features and price of each property. You’ll want to record the number of bedrooms, bathrooms, roof and wall construction and price.

• Make a point of remembering the colour of the carpets or floor coverings. If you recall that one detail the whole home will come back to you.

• Be polite to the agent. Agents can be a great source of market intelligence so it makes sense to develop a solid rapport with people who can help you achieve your goals.

• If asked, provide your contact details. You want to be easy for the agent to contact about potential properties!

• Be prepared to remove your shoes at the front door. There may be a number of reasons the agent will ask you to do this including respect for the current tenant or owner’s religion or the protection of polished floor boards.


You've found a home you like, now what?

Getting answers to your questions: It’s important to be clear about what you want

to know about the property. Ask specific questions of the agent and demand specific answers. Don’t be afraid to ask for supporting documents that support the answer provided by the agent.

There are a range of questions you might want to ask, including:

• Who lives next door?• Why are the owners selling? • Has the property been affected by any

recent crime?• How old is the plumbing and wiring? • Are there any extensions or modifications

that don’t have council approval? • Is this a strata titled property? If so, how

much are the strata levies? Are there any bylaws that affect the use of the property?

• What encumbrances are on the title? More specifically, are there any easements, restrictive covenants or rights-of-way that will restrict what I can do with the property?

• If there’s a pool or spa on the property, does it have council approval?


PART B:

MAKING AN OFFER


Once you've found your ideal home, it's time to make an offer on the property.

In most cases the offer is completed by the real estate agent. It makes sense,

though, for you to understand the process beforehand. In this section I’ll explain how to complete the offer and give you an idea of some of the more important clauses you’ll need to include.

To do this, you need to fill out a Contract for the Sale of Land or Strata Title by Offer and Acceptance (often referred to simply as the Offer and Acceptance or O&A), which details:

• How much you’re going to offer,• Who is buying and who is selling the

property,• When the property will change

ownership (the settlement date), • What the details of the property are,

including the title particulars, and• Warranties and conditions that serve

to protect the interests of both the buyer and the seller.

Once both parties agree to all of the terms and conditions on the Offer and Acceptance it becomes a legally binding contract. At this point both parties are required to fulfil all of their obligations within the timeframes specified in the various clauses.

Pro tip: Treat your offer as if it’s a binding contract, because if the seller accepts your offer straight away, it will be.

Once all of the conditions are either satisfied or met the contract becomes unconditional and you’re then committed to buying the home. It's important to write up your offer correctly so that the contract only becomes unconditional once you know that this is the home for you.


MAKING AN OFFER


Completing the Offer and Acceptance

Every detail about the sale of the home should be detailed on the Offer and

Acceptance. Leave something off, and there’s no guarantee that your purchase will go as planned. Follow this general guide to minimise the chance of missing a vital part of the contract:

» Correctly identify yourself It may sound simple but it’s important to include all your names, as they appear on your passport, on the O&A. These names will be used later to prepare the all-important transfer of land and, if they’re wrong, it could (and often does) delay settlement.

Writing your own name might seem easy enough, but both buyers and sellers regularly forget the following:

• Your legal name must be written in full, and any middle names must be included,

• Your name must be spelt correctly!, and

• If more than one person is buying the house (joint tenants or tenants-in-common), all names must be included.

» Tenants-in-Common or Joint Tenants?If you’re sharing ownership of the property with someone else, make the right choice about whether you will be Joint Tenants or Tenants-in-Common.

There’s a couple of differences between Joint Tenants and Tenants-in-Common:

• Tenants-in-Common can sell their share of the property on to someone else, but Joint Tenants can't – the property must be sold as a whole.

• Tenants-in-Common can leave their share of the property to someone in their will, but if a Joint Tenant passes away their

share automatically transfers to the other party/parties on the title.

» Correctly identify the propertyIt’s important to correctly identify the property you’re buying and not just rely on the street address. Be sure to include the Title particulars, which include:

• The Lot number,

• Volume and folio number, and

• The plan number or strata plan number.

Your agents will know these details and should ensure they're included, but it doesn't hurt to double-check.

If the property is a newly created subdivision (say if you’re buying a block that’s been subdivided off the back of an existing home) include a plan that clearly shows what you’re buying. Guessing the street address can lead to the transfer of the wrong property. You don’t want that!

» Specify a settlement dateThe settlement date (technically just called ‘settlement’) is the date on which your property transaction is completed and ownership of the property is transferred to you.

Buyers and sellers alike are generally eager to have settlement completed as soon as possible, but it’s important to allow a suitable amount of time for settlement to be completed. If you hit complications and miss the date, you may be forced to pay expensive penalty interest for a delayed settlement.

Settlement generally takes about 45 days, but you’ll need to allow extra time for settlement if:

• The seller is overseas. New identity check regulation means the seller will need to travel to an Australian consulate to sign the contract and other documents in front of a consular official. That may take extra time. The seller is also required


to deal with original documents only, so time will be required for the documents to be posted between countries.

• There’s a tenant in the property. If they’re on a periodic lease, the seller will need to give them 30 clear days notice that they need to leave. Most offers on properties with a periodic tenancy in place specify a settlement date of 35 days from finance approval. If the tenants are on a fixed-term lease, you’ll need to wait for the lease to expire before you can move in.

• There’s a caveat on the Title. Encumbrances, such as caveats, may take negotiation to remove.

• There’s a mortgage on the property. The seller will need time to discharge this. A lot of banks are based in the Eastern states and this can cause significant delays in performing what is a simple operation.

• Your contract includes inspection clauses. If your offer is subject to a timber pest, electrical or structural inspection, it’s important to allow extra time to organise these and have them conducted. If you don’t allow enough time and you miss the deadline as a result, the benefit of the clauses is often waived! That could leave you owning a home with a structural defect.

• Your finances are complicated. If you’re self employed, a business owner, you require a guarantor, or your finances are complicated in some other way, you may need to allow extra time for you and your lender to organise finance.

Note: While it's important to allow sufficient time for settlement, setting the settlement date too far into the future may deter the seller from accepting your offer.

Pro tip: When specifying a settlement date, try to stick a balance between your needs and those of the owner, who wants to move.

Take these factors into account, and speak to your real estate agent about your unique circumstances that may influence your ability to meet settlement date.

» How much do I offer? The amount you offer is dependant on the research you’ve done to this point. Remember what you’ve learnt about the current housing market. Focus on your game, and not the price being asked by the seller.

You should consider the likelihood that the seller may make a counter-offer. If you’re prepared to pay more than your initial offer, then take this into account with your initial offer amount.

Negotiating a price can be an emotional time, and there’s always the risk that another buyer will make a better offer during your negotiations – but it’s important to keep a level head. Giving into pressure and offering more than you can afford is not worth the financial hardship later.

While you won’t get a lower price if you don’t ask for it, an offer that’s too low may annoy the seller and make them averse to dealing with you. Hostility does not make for a productive negotiation.

Instead, make a reasonable offer, one that is based on a realistic assessment of what the property is worth. If it’s lower than the asking price, justify your offer with market information or honestly point out the flaws that make you reluctant to offer more.


» Adding conditions and warranties to your offerYou’ll want to add some conditions to your offer so that you’re only obligated to complete the transaction if the deal suits your circumstances. Below, I’ll explain some of the most common terms and conditions that you’ll probably want to include on your offer.

Making your offer subject to finance

Most first home buyers will need to get finance to help buy their first home. If you need to get finance, it’s important to make your offer subject to you obtaining finance approval. The standard O&A is designed with just this in mind. In fact, most of the offer is taken up with a finance clause that sets out the finer details.

Even if you’ve obtained a pre-approval, it’s still important to make your offer subject to finance. There are good reasons to do this: the bank’s pre-approval is always subject to a whole bunch of conditions. These include a satisfactory property valuation, final credit checks and mortgage insurance.

If you’re getting finance to purchase the property always make your offer subject to finance, even if you have a pre-approval or your broker has told you you’re a sure thing.

When making your offer you’ll need to nominate a lender. If you’re tossing up between banks it may be tempting to write TBA in the section that asks you to nominate your lender.

Don’t!

Why? Part of the finance clause requires you to make your best endeavours to obtain a loan through your nominated lender. If you haven’t specified anyone then the seller can always question if you’ve done that, and that may hold up the return of your deposit if you’re unsuccessful in obtaining finance approval.

You’ll also need to nominate the latest date for

finance approval. Even if you’ve obtained a pre-approval you’ll still need to allow plenty of time. It’s amazing how much time is lost in this crucial stage through the most simple of delays. Allow a little extra time if the property is tenanted to allow the property manager to arrange a time for the bank’s valuer to go through the property.

Although agents often like to keep the period for finance approval to 14 days (it will make your offer look better to the seller) in reality 21 days is a far more realistic option.

There are a couple of ways to write the date for finance approval on the offer. The simplest is to simply nominate a date. The other is to write it as “21 days from acceptance.” This is the most often used option as it takes into account that there may be a delay in getting final acceptance on your offer. After all, it may take several days to agree to all the terms and conditions. The seller may be overseas or on holidays and it may be hard to contact them.

It’s common for negotiations to last several days.

Finally you’ll be asked to nominate a loan amount. Sometimes homebuyers take this as the agent prying into their business - but it’s not. The O&A requires you to nominate an amount of the loan.

Pro tip: This is not a time for bravado and under quoting the amount you’ll require.

Make a reasonable estimate for the total amount of the loan you’ll need to complete the purchase and write that number on the offer.

This is important - the finance clause creates an obligation for you to apply and make a good attempt at getting a loan for the amount specified on the offer. If you apply for a loan that’s more than the amount that’s nominated on the offer and your application is declined the sellers may think you deliberately tried to have your loan


declined to get out of the contract.

If that happens they can legitimately ask for proof that you applied for a smaller loan. If you can’t do that they’re within their rights to retain your deposit. The reason for doing this is simple. If you went into the bank and asked for a loan of $500 the bank would probably say yes. If you asked for a loan of $500 000 the answer may be different.

» Deciding on the deposit amountSellers generally require a deposit to show that you’re serious about buying the property.

Look at it from the owner’s perspective. A $500 deposit creates only a small incentive for a buyer to not pull out on a contract. A $5000 deposit is a different story.

The size of the deposit should reflect:

• The amount of cash you have available at the time of making the offer,

• The purchase price - a $2000 deposit may be enough on a $200 000 property but not on a place worth $500 000, and

• Competition from other offers - an offer that’s the same as other offers but has a larger deposit will usually win the day because it demonstrates a commitment to proceed with the purchase - sellers like that.

When to pay the deposit

The deposit clause on the O&A allows for the deposit to be paid in two instalments i.e. an initial payment on signing of the offer and the balance at some predetermined number of days later. Most buyers try to avoid paying the deposit up front for fear that the agent will run off with their money or the owner will keep it even if the offer isn’t accepted.

But this can’t and doesn’t happen. In practice any deposit paid up front is refunded in full and without deduction if the offer isn’t accepted. And unless you’re dealing with owner direct, they

never get their hands on it - it is held by the agent.

Paying an initial deposit of (say $500 or $1000) makes your offer look much more genuine and real. It shows the seller that you’ve done your research and are prepared to proceed with the contract if your offer is accepted. That makes the agent’s job easier and it more likely that your offer will be accepted.

» Adding seller warrantiesThere are a number of clauses you will want to include on the O&A that will act as a promise or undertaking that the vendor will do a particular thing before or at settlement. The most common of these is a warranty that all gas, electrical and plumbing appliances be in good working order at settlement.

The effect of this clause is that the vendor must ensure that everything mentioned in the clause is working at settlement - if something’s not working, this gives you firm legal ground to chase the issues up after settlement.

A typical vendor warranty clause can be found in Appendix A (p.45).

» Specifying property inclusionsIt’s important to stipulate what chattels - that is, any piece of property other than real estate - you want to be included with your purchase of the property.

Buyers may assume that certain chattels are included in the sale of the home, but that’s a dangerous move. The seller is entitled to take items such as above-ground pools, swingsets, barbecues, light fittings, and dishwashers with them.

Here’s a common list of items that are worth writing on the offer as inclusions:

• Swing sets

• Cubby houses


• Wood heaters

• Curtains, blinds and pelmets (grouped together they’re called window treatments)

• Pool filtration and cleaning equipment

• Dishwashers

Basically, anything that’s not bolted to a wall or concreted into the ground should be considered a chattel and included in the relevant section of the O&A.

» Appointing a settlement agentTo help you with the detailed and tedious process of transferring ownership of the property from the owner’s name to your name your name you’ll need to appoint a suitably qualified settlement agent. You can specify which settlement agent you wish to appoint on your O&A.

To carry on the business of a settlement agent, a person must either be licensed as a settlement agent or be a qualified legal practitioner. All settlement agents must be managed by a person in bona fide control. This person must have the necessary qualifications to run a settlement agency in Western Australia.

Settlement agents must have professional indemnity insurance, maintain an annually audited trust account and participate in a set number of professional training days each year.

Your settlement agent (also called a conveyancer) will complete the transaction for you according to the terms on the contract. For a smooth settlement, you'll need a friendly settlement agent who knows their stuff, and asks the right questions to minimise the chance of delays or extra costs throughout settlement.

There’s more about what a settlement agent does on p.36.

» InspectionsMost offers include conditions that the purchaser must be satisfied with multiple property inspections. There’s a range of different inspections you can choose to include on your offer - see the next section (p.30) for detailed information on the most popular.

To enable you to have the inspections carried out after the offer has been accepted and finance approved, you’ll need to make the offer subject to a clause or clauses that allow you to terminate the contract should the property contain significant defects.

» Other conditionsOther conditions that you may want to include on your offer include:

• Stipulation that the seller must see to various property repairs before settlement,

• Stipulation that the seller must remove items from the property e.g. car bodies, spare tyres, broken down white goods. (Don’t assume the seller intends to remove them. If they don’t they can be expensive to dispose of.),

• A clause that makes your offer subject to you obtaining the First Home Buyer Grant, and

• A clause that makes your offer subject to you receiving funding for your purchase from another source e.g. inheritance or the sale of a car, boat or other major asset.


Property inspectionsYou need to make sure your new home will serve you well - that’s where property

inspections come in. Nominating which inspections will be undertaken is part of making an offer (see the previous section, p.29).

In days gone by, first homebuyers typically took Mum, Dad and Uncle Bill to check out the new place. They’d run an eye over the roof, jump up and down on the floorboards and peer under the house to check for white ants or wood rot.

Although Mum and Dad are still a great source of advice and inspiration Uncle Bill is often replaced by a team of qualified advisors. These advisors have clearly defined roles to check out different aspects of a home and make sure there are no hidden surprises - in other words, they conduct inspections.

So just what inspections are available for first home buyers? What follows is a list of the most important inspections that will give you the greatest peace of mind.

» How pre-purchase inspections workPre-purchase inspections are a series of inspections aimed at:

• Confirming that the home represents great value, and

• Eliminating any nasty surprises.

There are a number of property inspections that are available. Each inspection is designed to check specific aspects of a home and show you exactly what you’re buying.

Regardless of the type of the inspection the inspector should provide you with a written report that includes:

• The date and time of the inspection,

• The inspector’s name,

• The property address,

• Your name (so you know it was prepared

just for you),

• Photographs of structural and other defects, and

• A summary of items requiring attention.

» Who does the inspection?Pre-purchase inspections should be conducted by someone suitably qualified to do the inspection. Commonly, inspections are carried out by registered builders, structural engineers, plumbers and electricians.

» When are they carried out?Most inspections are carried out after the offer is accepted - this ensures the buyer doesn’t spend money on checking a home only to find out the seller is going to accept someone else’s offer. Usually, inspections aren’t done until finance is approved, for similar reasons.

» Types of building inspectionsThere are a number of types of building inspections that you can choose to include as a special condition on the Offer and Acceptance contract. Each serve to reveal property faults or defects.

For the purpose of making an offer it’s important to select the building inspection that’s right for your purposes. When you add conditions to an offer, the building inspections you choose and order need to match the clause on the O&A. If they don’t match you can lose some, if not all, of the benefits contained in the offer clause.

Ideally, these inspections should be paid for by you. An inspector paid for by the seller will be working in their best interests, and any warranties may not continue past settlement date. While you’ll need to spend money to get these inspections carried out, it’s well worth knowing about any potential problems up-front, rather than having to pay for them out of your own pocket later.


Structural inspections

A structural inspection only examines those elements of the home that might affect the structural integrity of the property, and usually ignores maintenance items such as flaking paintwork and leaking gutters.

Structural inspections give you a degree of peace of mind knowing that the property you buy doesn’t contain any hidden structural defects. These kinds of defects can become a nightmare as they’re often expensive to repair and may involve significant inconvenience during the rectification process. Wording of a standard clause for a building inspection can be found in Appendix A (p.45).

Maintenance inspections

Maintenance inspections cover those items that require ongoing attention. They might include loose fittings, gutters that require replacement and paintwork that might soon require a touch-up.

Electrical Inspections

Aging electrical wiring is often a cause of unexpected maintenance expense. Because it’s hidden from view, faulty wiring is easy to overlook. An electrical inspection is a wise investment.

Electrical inspections should only be performed by suitably qualified electricians. These inspections usually comment on the serviceability of the wiring, power points and light fittings.

Plumbing Inspections

As with electrical appliances, plumbing is often hidden and can produce some nasty surprises. Unlike wiring, though, plumbing is harder to test and detect any potential problems. That said, a qualified plumber will be able to tell you how old the plumbing is and how long you could expect it to last.

Comprehensive building inspection

These reports contain observations about both structural and maintenance elements. In some cases the company providing the report will have access to qualified plumbers and electricians and therefore can include these aspects on their report. These reports are popular with homebuyers because they take less time to organise and arrange.

Timber pest inspections

Each year termites cause millions of dollars worth of damage to homes across Australia. And they’re not alone in their quest to destroy! Other pests are also at work attempting to destroy foundations, roof timbers and bathroom cabinets. Most timber pest inspections today also include a visual check for termites, wood decay fungi, and wood borers. The wording of a typical timber pest inspection clause can be found in Appendix A.

Note: timber pest inspections can only be made on what is visible. For areas that are out of sight, such as sub-floor areas, trapdoors may need to be cut and this could be an issue with the seller.


What if I change my mind?An offer isn’t a contract until the seller’s agent has communicated that the owner has

accepted, in writing, all of the terms and conditions of your offer. That means you’re completely free to change your mind and withdraw your offer at any point before then.

And buyers often have genuine reasons to change their minds. They might receive some sort of unwelcome personal news or a better, more appealing property may come up.

If this happens to you, call your agent immediately and advise them you wish to withdraw your offer. The agent has no option but to advise the owner accordingly and refund any deposit you’ve paid immediately.

What if I see two properties I like?Sometimes, especially in a buyers’ market, more than one property will fit your budget

and selection criteria perfectly. What do you do when this happens?

Some buyers treat making an offer on a property like job applications. They make offers on multiple properties and proceed only with the one that suits them best. This is dangerous practice.

Why?

What can happen is that two offers could be accepted on different properties simultaneously creating an obligation to apply for finance on both properties. This could create legal issues around whether you used your best endeavours to obtain the finance and therefore might give rise to a claim by the seller over your deposit.

Pro tip: Negotiate with just one property at a time.

If you want to speed up the seller’s decision-making process you may want to place a clause on the offer giving the offer a deadline for acceptance. By doing this, you’re letting the agent and seller know that you’re keen to negotiate but have other options you want to explore if they’re not keen to act quickly.


PART C:

AFTER THE SALE... NOW WHAT?


Although finding your first home is usually lots of fun, the hard work really begins once the seller accepts your offer.

Along with physically moving there’s plenty to organise before settlement date.

The next section will explain the settlement process, help you identify the best settlement agent for your needs, and highlight some of the many tasks that need to be done to make sure your settlement takes place on time.

Obtaining formal finance approvalAlthough you’ve done the hard work of obtaining a pre-approved loan there’s

still plenty of work to do before a final, unconditional loan approval is obtained:

First, send a copy of the accepted offer to your lender or mortgage broker. You’ll need to provide them with the contact details of the agent from whom you purchased the property. With this they will arrange for a property valuation from a licensed valuer.

While waiting for the valuation result the bank will conduct their final checks on your credit. It’s important not to do anything that will change your financial circumstances in the period between the acceptance of your offer and settlement. To do so is to place your loan approval at risk.

Once the valuation is in the banks will do their final checks making sure that your loan-

to-valuation ratio is in order. If it is the bank will issue you with a formal, unconditional loan approval.

As soon as you have this, get a copy to both the real estate and settlement agent. In practice just giving one to the agent is usually enough, but it’s good to be on the safe side. When the unconditional loan approval is received the agent will notify the seller and this will mark as complete the Subject to Finance clause on your offer. It’s a major step.


FROM PURCHASE TO SETTLEMENT


Fulfilling contractual obligationsBut even with your finance approved there’s still lots of work to do. If your offer is

subject to a structural, building, electrical or plumbing report you’ll need to get these done quickly.

It’s important to remember that the contractor you intend using may well have other jobs pending. There may be tenants in the property who are required to be given the correct notice period before anyone is allowed through the property. Each of these factors may take precious days out of the time allocated on the O&A to have the inspection completed.

Often buyers fail to take into account these factors. The result can be - and often is - buyers losing the benefit of the relevant clause on the offer. And that can get expensive, particularly if you later find out there are undiscovered building defects that need repairing.

Pro tip: Once finance is approved, act quickly to fulfil your remaining contractual obligations.


Once the seller agrees on the terms you specified in the Offer and Acceptance, the settlement process begins.

“

Settlement involves a number of parties including yourself, the seller, your bank

and the real estate agents. It’s the job of a conveyancer to coordinate the whole process.

While individuals can legally attempt to settle their own property, the Department of Commerce cautions against it:

“Unless you are a suitably qualified lawyer, it would be very unwise to try to carry out the settlement of your own property. It's a complex and time consuming business, with many traps for the unwary.”

For this reason, most people use the services of a settlement agent to perform the work of conveyancing.

Your settlement agent's roleYour settlement agent plays a vital role in the settlement process. The settlement

agent transfers ownership of the property by changing the Certificate of Title from the seller’s name to your name. Settlement is more complex than this, however, and the settlement agent also:

• Ensures the property on the O&A is the correct property you intend to purchase,

• Makes sure that you’re aware of any encumbrances on the title (these include restrictive covenants, easements and notifications),

• Ensures you complete all conditions of the contract in a timely manner,

• Liaises with your lending institution to ensure finance progresses in a timely manner and your lender is in a position to settle on the due date,

• Ensures no outstanding orders have been placed on the property by government departments,

• Ensures your finances are all available for settlement date and ensure the seller’s agent collects the correct amount on behalf of the seller,


THE SETTLEMENT PROCESS


• Ensures correct documentation is prepared and signed by yourself,

• Ensures stamp duty (if applicable) is paid in the timeframes specified by State Revenue,

• Adjusts shire & water rates and ensure they are all paid up to date at the time of settlement (your conveyancer also adjusts Land Tax and Strata Levies if applicable),

• Attends settlement, and

• Ensures the property is transferred into your name after settlement.

Here’s the specific steps your settlement agent will take to complete the settlement process:

1. Once they've received the original copy of the contract from your real estate agent, your settlement agent will:

◦ Assess any potential risks to you. For example, there may not be enough time allowed between the finance approval date and the proposed settlement date. This can be particularly problematic if you’re planning a vacation during this time.

◦ Disclose any potential conflict of interest. These may arise during the course of a settlement especially where the conveyancer is acting for both the buyer and the seller or where the real estate agent has a financial interest in the settlement agent.

2. Send you an Authority to Act form that, once signed, will allow them to conduct the conveyancing process on your behalf,

3. Follow up special conditions of the contract. This is especially useful if you’ve added building and timber pest inspection clauses to your contract. Missing the dates for those clauses often mean losing their benefit altogether.

4. Once the contract becomes unconditional your conveyancer will:

• Examine the title search to:

• Identify the existence of limitations on the title such as easements and rights-of-way (encumbrances such as these may restrict your use of the property and it’s best to know about them up front),

• Identify other encumbrances such as a mortgages and caveats that will need to be removed prior to settlement,

• Ensure there are no outstanding water or council rates amounts owing on the property (this is especially important when you’re buying a property off someone that may have had a reason to defer the payment of their rates due to financial hardship),

• Check for any outstanding special government levies (these might include underground power levies or amounts payable on outstanding local government work orders),

• Ensure there are no outstanding strata levies, if applicable, and

• Make sure you get the First Home Owner rate of duty.

• Prepare all unconditional documentation:

• Transfer of Land - this document sets out the property being transferred by identifying the title, any encumbrances to stay on the title after settlement (ie. restrictive covenant), the seller’s name/s, sale price, buyer/s names, buyer’s address after settlement and buyer’s tenancy (if more than one party). Both parties are required to sign the document and have their signatures witnessed by an independent person over the age of 18. It is important the transfer is


prepared and signed correctly as it is the document lodged with Landgate to effect the settlement.

• Identification of Certificate of Title - this document includes a copy of the title and plan showing the property you are purchasing, this ensures that the correct property is transferred to you.

• Identification of Encumbrance/s - this document will include a copy of any encumbrances on the title, this is important as encumbrances have the ability to affect your plans for the property.

• Stamp Duty Application form - the conveyancer will assess what (if any) reduction you are entitled to for stamp duty and will send the appropriate form to you for signing ie. First Home Owners Rate or Residential Rate.

• Authority to Proceed to Settlement - this document gives your conveyancer permission to finalise settlement on your behalf. You generally hold onto this form and send to your settlement agent once you’ve completed your final inspection and are happy with everything

• Submit an Electronic Advice of Sale (EAS) to advise the Water Corporation, Office of State Revenue and Local Government Authorities of the impending settlement.

• Send you an amended settlement statement once the adjustment of rates have been attended to and ensure all government fees are calculated correctly

• Ensure your Offer & Acceptance and Transfer of Land is lodged and/or stamped prior to settlement

• Prepare for settlement by ensuring everyone will be ready on the date, and arrange a suitable time for settlement to

occur with all parties

• Ensure the correct amount will be handed over at settlement and order cheques from your lending institution.

• Attend settlement on your behalf and ensure all documents are correct and handed over to the party who will hold security after settlement.

• Send your final settlement statement and original stamped O&A following settlement being effected.

• Ensure the title is in your name and all details are correct (4-6 weeks after settlement).

Your settlement agent should advise you of any actions required at each step of the settlement process. This will include:

• Paying the agreed deposit to the real estate agent on or before the due date (there are serious legal consequences in not doing this),

• Completing documentation - the Appointment to Act, Transfer of Land, identification of the property,

• Organising your home loan approval with your lender and signing mortgage documents, and

• Carrying out inspections and other actions specified in the special conditions on the Offer and Acceptance.


The seller's roleThe seller will usually have their own settlement agent who takes care of their side

of the transaction. A settlement agent can, with the consent of both the buyer and seller, act for both parties.

Your settlement agent will communicate with the seller’s settlement agent to ensure the appropriate documents are completed and signed by all relevant parties.

All of the involved parties - your settlement agent, the seller, the seller’s settlement agent, yourself, or your lender - have the potential to delay settlement through errors. A delayed settlement can result in you being required to pay penalty interest for every day settlement is delayed. It can get expensive and is worth avoiding.

However, a good settlement agent will act professionally and communicate effectively to minimise the chance of settlement being delayed.

Settlement dateSettlement date is the day you finalise your property purchase.

In Western Australia, settlement must occur within two kilometres of the Perth CBD. A representative from each party’s settlement agency and their lenders, meet at the buyer’s lender’s CBD office to conduct final settlement of the property. This will include:

• Checking that the property on the Certificate of Title matches that listed on the Transfer of Land, and

• The exchange of money for the Title.

The representative from your settlement agent will oversee the process and bring the relevant documents and funds.

Congratulations – you've just bought a home.


Buying a home is a big process - but there’s no need to stress.

I’ve outlined each step of the homebuying process in great detail, but while it may look complex in this book, the good news is you’ll have professionals to help you all along the way.

The seller’s real estate agent will advise you of the seller’s situation and help you write up an Offer and Acceptance.

If you have a buyer’s agent, they’ll help you negotiate a price and write an Offer and Acceptance that works in your best interests.

Your lending institution will walk you through the process of applying for finance.

Your settlement agent will work hard to get your property transaction finished on your behalf, and will let you know what actions you need to take to help make it happen.

And of course, you have this Ultimate First Home Buyer’s Guide. Get informed using the information and advice in this book (and do some of your own research on the current state of the property market) and you’ll be well-set to begin the process of buying your first home.

If you need more help, talk to a real estate agent, seek advice from experienced friends and family, or leaf through this book again to brush up on some pro tips.

If you plan your finances, do careful research, and decide exactly what you want in your first home, chances are your home buying experience will be a rewarding one.


CONCLUSION


Certificate of Title - A record of all current information relevant to a parcel of land, including current ownership details.

A Certificate of Title Contains:

• Volume / Folio details,

• Lot and Plan details,

• Current legal owner/s, and

• Any registered encumbrances (including caveats).

Chattels - Any property other than real estate, that isn't fixed to the property. Chattels may include light fittings, dishwashers, curtains, and cubby houses.

Conveyancer - An individual who carries out settlement on behalf of a buyer or seller. Usually, conveyancers work as part of a settlement agency.

Deposit - An amount of money paid into a trust account to demonstrate you're serious about buying a property. Traditionally, this has been 10% of the purchase price, but the amount of the deposit can be negotiated with the seller or your lender.

Easement - A right to use a piece of land held by anyone other than the land owner; or a right to prevent the land owner from using their land in a particular way. For example, the Water Corporation may have an easement allowing them to do maintenance on pipes running underneath part of your land; or your neighbour may have an easement allowing them to drive across your land to access theirs.

Electronic Advice of Sale (EAS) - An electronic document submitted by the settlement agent to advise the Water Corporation, Office of State Revenue, Western Australian Planning Commission, Landgate and Local Government Authorities of the impending settlement.

Encumbrance - Any hindrance to the use or transfer of land. This includes things like easements, restrictive covernants, mortgages, caveats, and leases. Addressing encumbrances is one of the tasks of a conveyancer.

Equity - The difference between how much your property is worth and how much you owe on it. If you have a $400 000 home and you owe $100 000, for example, you have $300 000 in equity. Equity can often be used as security for a loan.


GLOSSARY


Joint tenants - Two or more people buying property together as a whole. Joint tenants can not sell or leave their share of the property to someone else - it must be transferred as a whole.

Land tax - An annual tax paid by land owners. It is payable only on vacant land or if you own more than one property, and the amount of tax paid depends on a valuation of the property.

Mortgage - A loan given by a lender in exchange for land. In other words, the lender pays for a property for you, then holds that property until you repay the debt. If you fail to repay the debt in a certain time frame, the lender is entitled to sell the land.

Offer and Acceptance - The Contract for the Sale of Land or Strata Title by Offer and Acceptance is a document defining the terms of a property transaction. When the buyer first writes up the contract, it's an Offer. When the seller accepts that Offer, it becomes a legally binding contract.

Orders and requisitions - Something a governing body has instructed a land owner to do. For example, local councils may order a person to demolish a building, to repair a building, to fence land, or to control the flow of water across land.

Settlement - The transfer of the Title, with the resulting adjustments. In this book, settlement may refer to:

1. The process of transferring ownership of land, as carried out by the settlement agent, or

2. The actual date when the property transaction is completed and money is exchanged for land.

Settlement agent - An agency appointed by buyers or sellers to carry out settlement.

Shire council - The local government responsible for your area of Western Australia. They are responsible for providing community facilities (such as parks and libraries) and local services

(such as waste disposal), and are financed by land tax.

Stamp duty - A levy enforced on land buyers by the state government. First home owners can apply for this to be waived (see page 21).

Strata levy - A regular levy that owners of strata-titled properties must pay the strata company. The money is used for things like upkeep of common property, taxes, and repairs.

Strata Title - A Title that is part of a strata plan. Stratas are owned by multiple owners, with shared parts of the land known as common property. Strata titles are often used for units and townhouses, which require shared facilities such as a common driveway.

Tenants in common - Two or more people buying property together. Tenants in common can sell their share of the property, or pass it on to someone else in their will.

Title particulars - The legal description of a piece of land - including the lot number, volume and folio number, and the plan/strata plan number.

Transfer of land - A document registering the transfer of land. It identifies the title, any encumbrances to remain on the title, the seller and buyers names, the sales price, and the buyer/s address after settlement. This document is lodged with Landgate, and is vital to settlement.

Vendor warranty - A term of the Offer and Acceptance specifying that the vendor promises electrical, plumbing, and gas fixtures and fittings will be at good working order at settlement. Unlike conditions, a warranty is not essential to the contract being fulfilled.


Sample Building Inspection Report clause

Annexure ‘ ‘Building Inspection ReportProperty situated at _________________Between ________________________ as Buyerand __________________________ as Seller

This offer is subject to a registered builder, building surveyor, architect or structural engineer, nominated by the buyer, inspection the dwelling on the property, at the buyer’s expense, within 7 days of written finance approval or acceptance date whichever is the latest date.

Should the buyer receive a written report from the registered builder, architect or structural engineer, certifying that the dwelling on the property is not structurally sound and submit this written report to the sellers agent within 4 days of their inspection, and should teh seller be unable to remedy or rectify such structural defect, than failing any other murually acceptable arrangement, the buyer may within 2 days, terminate the contract. Any deposit shall be refunded to the buyer in full. If the buyer does not terminate the contract within the specified time, then they shall be deemed to have waived the benefit of this clause.

If the buyer fails to obtain the written report within the specified time, the buyer agrees that they shall be deemed to have waived the benefit of the Building Inspection Report without further notice from either party and shall accept the dwelling in the condition as at the date of this offer.

Source: Jay Wood, pfr.com.au


APPENDIX A


Sample Timber Pest Inspection Report clause

Property situated at _____________________Between _________________________ as Buyerand _____________________________ as Seller

This contract is conditional upon a Timber Pest inspection report being obtained within 7 days of written finance approval or acceptance date whichever is the later date, by and at the expense of the buyer, from a licensed pest control operator certifying that an inspection to Australian Standard AS 4349.3 Inspection Buildings-Timber Pest Inspections has been performed.

If the report discloses live timber pests or damage to the main dwelling and the seller is unable or unwilling to remedy or rectify such activity or damage, then failing any other mutually acceptable arrangement, the buyer may at any time within 2 days of receipt of the report, give notice in writing terminating the contract, whereupon the Contract will be at an end and all deposit monies paid shall be returned to the buyer. If the buyer does not terminate the Contract within the time specified, then the buyer shall be deemed to have waived the benefit of this clause.

If the buyer fails to obtain the written report within the specified time, the buyer agrees that they shall be deemed to have waived the benefit of the Timber Pest Inspection Report and without further notice from either party shall accept the dwelling in the condition as at the date of this offer.


Sample Seller warranty

The seller warrants that all electrical, plumbing & gas fixtures and fittings, including all swimming pool, spa and/or reticulation included in the sale shall be in working order at the date of settlement.



Settlement AgentFor any questions about the settlement process speak with:

Residential Settlements08-9459 0044www.residentialsettlements.com.autwitter.com/ressettsfacebook.com/residentialsettlements

Real Estate AgentsKelmscott First National2860 Albany Highway, Kelmscott9495 1212 kelmscottfn.com.au

Murdoch Jones Realty194 Anstey Road, Forrestdale 9397 0671

pfr.com.auSuite E, 439-441 Albany HighwayVictoria Park 9470 7444pfr.com.au

Professionals Armadale19/193 Jull Street, Armadale93992122armadalerealestate.com.au

Professionals Property Plus Canning ValeShop 29 Cnr Ranford/Nicholson Rds Canning Vale 9455 5000 ppre.net

Professionals Property Plus ThornlieSuite 21 Forest Lakes S/C, Forest Lakes Drive, Thornlie 9459 9000ppre.net Prowest Riverton175 High Road, Willetton 94575733prowest.com.au

Western Town and Country York100 Avon Terrace, York9641 2412westerntownandcountry.com.au


FURTHER RESOURCES


http://www.westerntownandcountry.com.au/

http://prowest.com.au/

http://www.ppre.net/

http://www.ppre.net/

http://armadalerealestate.com.au/

http://pfr.com.au/

http://www.kelmscottfn.com.au/

https://www.facebook.com/residentialsettlements

https://twitter.com/#!/ressetts

http://www.residentialsettlements.com.au/

Government DepartmentsLandgatePhone: 9273 7373http://www.landgate.wa.gov.au/corporate.nsf

Office of State RevenuePhone: 9262 1400http://www.finance.wa.gov.au/cms/section.aspx?id=209

Department of Commerce (Consumer Protection) Phone: 1300 30 40 54http://www.commerce.wa.gov.au/consumerProtection


http://www.commerce.wa.gov.au/consumerProtection/

http://www.finance.wa.gov.au/cms/section.aspx?id=209

http://www.landgate.wa.gov.au/corporate.nsf

Documents

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