Buying A Home
This will usually be the singular most important decision in a person's life if you disregard marriage. I have seen too many clients get into
trouble because they did not consider carefully their actions prior to signing contracts to buy a home or for that matter a commercial property. Very often the
chances of getting into trouble can be minimised if legal advice was obtained prior to signing the contract to purchase the property. Some things to consider or be
aware of:
Possible method of sale:
Private treaty is the most common way to buy. It includes both...
Buying through a real estate agent; and buying directly from the owner.
The latter is known as a private sale as the seller does not engage an agent. Instead, the seller
negotiates directly with potential buyers.
In both cases the agent or owner will try to "sell" you the property, emphasising its benefits and
minimising its faults. You should never be rushed, pushed or persuaded to sign an offer to purchase without putting a lot of thought into the contract. You should
always take your time and ask all questions necessary to ensure that you are happy with the property. Do not hesitate to ask to look at the property for as many times
as you need to feel sure of what you are doing. It is a good idea to take notes while viewing the property.
Auction
Most auctions for sale of property are subject to a reserve price. A reserve price is the lowest amount
the seller is prepared to accept for the property; the reserve price however is not made available to the purchasers. An auctioneer or agent is not bound to accept
the highest bid if this is below the reserve price or accept any bid until the fall of the hammer.
WARNING
You should always have your finance formally approved and clearly understand any conditions imposed by the
lending body before attending the auction. On the fall of the hammer and exchange of contracts you are legally bound to purchase the property. You should remember
your finance limit at all times so that you do not bid above your limit.
You should obtain a copy of the contract and any certificates well in advance and have your solicitor or
legal representative check the terms and conditions.
Make sure you understand exactly what is included in the sale. It is advisable to check what fittings are
to be included in the sale. It may be wise to pay an expert for a pre-purchase property inspection and a pest inspection to ensure the property is structurally sound
and free of pests.
Sometimes, it may also be worth it to have a valuation done on the property if you are unsure of an
appropriate price for the area. You may be able to establish a realistic estimate value by analysing recent sales information in newspapers or local estate agents'
notices.
If you are successful at the auction as the final bidder you will be required to pay the deposit (usually
10% of the purchase price) on the spot. These moneys are handed over to the agent immediately on signing the contracts. There are certain acceptable ways of having
these moneys available (you should check with the agent prior to auction).
Very Important Note:
Once a contract or an unconditional offer to purchase is signed, there is no backing out. There is no such
thing as a cooling off period. One of the best way to give yourself a way out of a contract is to make the contract subject to a condition eg. finance. Therefore it
is important that you seek legal advice on the conditions that should be included in any contract or offer to purchase prior to signing. However, when bidding at an
auction, you are usually unable to place any conditions on the purchase.
What Happens After The Contract Or The Offer To Purchase Is Signed?
The transfer of property ownership from the seller's name to the buyer's name is called "conveyancing" OR
in Western Australia, "settlement".
You may choose one of the following options for carrying out the conveyancing procedure:
If you engage a solicitor or settlement agent it is advisable to choose one who will act solely in your
interest and not also act for the seller. Very often the selling agent persuades the buyer to use a settlement agent recommended by the selling agent. Be aware that
the settlement agent thus appointed may not be independent. It is also important to know that most law firms are now unwilling to act for the vendor and the purchaser
because of potential conflict of interests situations.
Solicitors
All solicitors carry professional indemnity insurance and contribute to a fidelity fund. Solicitors charge
a negotiable fee with disbursements usually charged separately.
Disbursements are the miscellaneous fees and charges incurred during the conveyancing process. These
include search fees charged by Government authorities. Sometimes you may arrange with a solicitor not to charge for preparing the Contract of Sale and for advising on
the mortgage document on the understanding that the settlement will be performed by the solicitors.
Settlement agents
Settlement agents specialise in conveyancing only. They charge a negotiable fee with disbursements usually
charged separately. All licensed settlement agents also carry professional indemnity insurance and are covered by fidelity insurance. Settlement agent's fees are
usually lower than solicitor's fees.
Do it yourself
If you do your own conveyancing, all responsibility is your own if you make a mistake. Although
conveyancing is fairly routine there are potential pitfalls which a solicitor or settlement agent is less likely to fall into. The professional indemnity and fidelity
cover is an important security for a purchaser to consider.
What happens at Settlement
Settlement is the completion of the transaction. A date is arranged by both parties and your lender for
settlement. This usually takes place at the offices of the buyer's lending body. Representatives of the seller and the purchaser attend, together with a
representative from the lending bodies of the seller.
Prior to settlement the buyer's settlement agent or lawyers will calculate, "adjustments" such as taxes,
council and water rates already paid in advance by the seller for the current rating period. This payment will be calculated from the date of settlement. Land tax is
payable in total by the seller and may be adjusted if provided for in the contract.
Your solicitor or settlement agent will have received a transfer form signed by the buyer and the seller
together with the title deed, and the lender will arrange for the Land Titles Office to register the transfer and the mortgage on title. The title documents and
mortgage will be held by the lending body until the term of the mortgage is completed.
The buyer pays the stamp duty on the mortgage as well as on the contract.
You are responsible for insuring the property from settlement. You should arrange this before settlement
whether or not it was a requirement of your lender.
The key to the property is handed over 24 hours after settlement or you can pick it up from the estate
agent 24 hours after settlement.
Interesting fact: In the olden days in England, for settlement to be effective, the seller had to grab a
handful of the soil from the property being sold and physically hand the soil over to the buyer on site.
Tan and Tan are pleased to act for either Vendors or Purchasers in any purchase or sale of properties
whether residential or commercial.
Tan and Tan have always acted on settlements and charged on normal settlement agent's rates so that they
are competitive against settlement agents. In addition we are happy to draft the contract of purchase or sale on behalf of our clients.
Do feel free to give us a call if you have any queries.
To Cut A Long Story Short...
We were once instructed by a client who came to see us after he had signed a contract to purchase a
residential home. More and more buyers are now finding that they have to check that all structural alterations in the home are authorised by council.
As it turned out, this particular home our client was buying had an illegal patio.
Our client was able to cancel the contract and get his deposit back. However, he had legal expenses that
could not be recovered against the seller economically. It is now common for all offers to state that the purchase is subject to a satisfactory council report within
10 or 14 days so that you know what you are buying. If the council indicates there is a problem, you should cancel the deal or re-negotiate.
Moral Of The Story
Ask your real estate agent to let your solicitor have a look at the offer to purchase before you sign the
document.
On The Light Side:
Four surgeons were chatting during a tea break:
Surgeon 1:
"I love operating on accountants, because when I open them up, everything inside is numbered."
Surgeon 2:
"I love operating on electricians, because everything inside is colour-coded."
Surgeon 3:
"Well, I love operating on librarians, because everything inside is in alphabetical order."
Surgeon 4:
"I love operating on lawyers, because they're heartless, gutless, spineless and their heads and arses are
interchangeable."
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