When Melbourne couple Alex Ellis Friedl and Emily Pickett bought their first home, they didn't expect the process to be so stressful.
The couple, both in their 30s, were regularly outbid by investors and spent hours each week on real estate websites. When they finally had an offer accepted, they found out the property had major problems.
"When we had a building and pest inspection done, it failed that miserably, so we pulled out of the contract," Alex says.
The home they ended up buying had a different issue: after the contracts were signed, the vendor got cold feet.
"They were in a position where they needed to sell the house, but they didn't want to – and they had a hard time letting go," Alex says.
"Just before our settlement, they wanted to pull out of the contract, but it wasn't something we were interested in doing. So, we said, 'No, we're still going through'. It worked out well in end."
It was an unusual situation that made an already stressful time even more difficult.
It's also a reminder of the thorny issues that can arise when buying a property. If you’re looking to buy yourself, here are some important things to keep in mind.
What to do before you make an offer for a property
Emma Burns is the manager of a conveyancing firm based in Melbourne/Naarm. She was hired by Alex and Emily during their hunt for a home.
Conveyancer Emma Burns says it's important to carefully review contracts and other important documents.
She says it's important to have a clear understanding of your borrowing capacity before making an offer.
"Some buyers come in with an idea of what they want, and they have a generous deposit, but they don't [factor in] the interest and the lender's mortgage insurance," she says.
It's also important to have the contract and other important legal documents reviewed. While some people opt for DIY conveyancing, most buyers hire a conveyancer or other legal practitioner.
"Our job is to manage the legal process of transferring the process. We also support the buyer with the contract documents," Ms Burns says.
A conveyancer will review the contract and other documents, such as the vendor statement, and highlight any potential issues or obligations for the buyer, she adds.
Making an offer for a property
Once you have your finance in order and have reviewed the contract documents, you're ready to make an offer to the agent or vendor.
Here are some important things to be aware of:
Buyers typically pay a deposit at the time they make an offer.
In Victoria, there is no set amount for deposits, but buyers usually pay 10 per cent of the property's purchase price. The amount may be different in other states and territories.
Many buyers will make offers subject to conditions — the most common being finance approval and building and pest inspections.
Ms Burns says finance clauses typically have a 14–21-day time limit in Victoria, while building and pest inspection clauses usually have a 10–14-day limit. That said, it's not uncommon to negotiate longer time frames.
Keep in mind that building and pest inspection clauses are typically worded to protect buyers against major defects and major pest infestations.
If an inspection uncovers a minor issue that is easily fixed, you may not be able to exit the contract using these clauses.
In Alex and Emily's case, the property they didn't buy was found to have evidence of termites, water damage and drainage issues. This was grounds for them to exit the contract without losing their deposit.
"There was another house we were interested in buying … and we bought a building and pest inspection. It costs us $300–$400, and just reading that report, we decided against bidding on this particular house," Alex says.
Buyers may also include other conditions in the contract, for example to ensure that pools, sheds or other additions to the property are compliant with regulations.
"That can be something you can make your offer subject to — [for example] compliance certificates being provided before settlement," Ms Burns says.
Alex and Emily used a broker to help arrange their financing, which they found helpful.
"There were a lot of forms to send to the broker, as the bank needed all our information. But as soon as that was done, it was quite simple," Alex says.
What to know about cooling-off periods when buying a property
Private sales negotiated between buyers and sellers (and/or their agents) are typically subject to a cooling-off period. If you change your mind during the cooling-off period, you can exit the contract by paying a small penalty.
In Victoria, where Alex and Emily live, the cooling-off period is three clear business days and can be exercised by giving notice in writing to the seller or their agent.
Buyers are then entitled to a full refund of any money paid, less $100 or 0.2 per cent of the purchase price, whichever is greater. The rules will be different in other states and territories.
Keep in mind that if you buy a property in a public auction, the cooling-off period won't apply. Sometimes, this extends to buying a property shortly before or after an auction.
The rules around cooling-off periods vary, so it's a good idea to check your state or territory's fair trading or real estate institute websites.
Why it's important to manage your emotions when buying property
For most of us, our home will be the largest purchase of our lives. With so much on the line, it's understandable that it can be an emotional time.
Ms Burns says it's important to treat buying a home like a business transaction and avoid being swayed by agents who use sales tactics.
"I understand that people can become quite attached when they're looking for their forever home," she says.
"But at the end of the day … I try to encourage [buyers] to take the emotion out of it, think about it logically and make sure that the whole offer is right for you."
Source: ABC News
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