Conveyancing – Key Steps in Buying a Property
Are you buying your first home, selling a house, or perhaps buying a property for the second, third or fourth time? Whichever situation you’re in, it’s likely to be a stressful time, with multiple things to consider from contracts, to home loans, to insurance. No doubt it can be a little overwhelming. That’s why we’ve mapped out the process and key steps in buying a property so you can navigate it with more ease. If you have any questions about how to buy a house, please don’t hesitate to get in touch with Ezra Legal’s experienced conveyancers.
Buying a house can generally take anywhere between three months to six months – maybe even longer. There are many dependencies such as whether you are selling an existing property, the number of homes currently on the market that suit your specifications and making other arrangements like finance (if you require a mortgage over your new property).
1. Get the right support and assistance in place
Bearing all this in mind, whether this is your first purchase or your second investment property, you will need a good support team on your side. To make buying a property less stressful, you’ll want to find a reliable conveyancer, a mortgage lender (or mortgage broker to help you find a lender), and a building and pest inspector to assist you with your due diligence.
2. Agree on your budget and determine how much you can borrow
Unless you’re paying cash for your home, you’re going to be borrowing money to pay for it. There’s a bit of number crunching to do during this step in buying a house, so you will need to decide whether you’ll engage a mortgage or loan broker, or go directly to a mortgage lender such as a bank.
Whatever you decide, you’ll need to have a good idea of your borrowing capacity. This will depend on the size of the deposit you’ve saved, your income and your spending habits. You can also take a look at the government grants that are available to help you with your deposit and purchase. Don’t forget to consider the other hidden costs of buying a house, like stamp duty, transfer of title and conveyancing costs.
Then it’s just a matter of choosing the best lender for you. Make sure you look at the interest rates and decide whether you want to do a fixed term or variable loan.
Before you see your lender or mortgage broker, gather all of the information you might need. This will include your bank statements, two months of pay slips, your savings and investments, proof of any other income and outgoings for at least a few months so that they are able to establish your ability to repay your loan.
Make sure you also have information about any credit you have such as store cards, buy now, pay later services, credit cards or any personal loans you might have.
It’s a good idea to have done some research into the area and the type of property you wish to buy so that you have a realistic idea of what you will need to borrow.
The time it takes to approve a loan application will vary between financial institutions. It could take between four to six weeks from submitting the application to your lender, to reaching settlement at property. So make sure you apply early and try to get pre-approval before you make an offer.
3. Determine if you’re eligible for a Homebuyer Grant or other forms of Relief in South Australia
At any time there are typically a number of home buyer grants, relief and stimulus packages available in South Australia for eligible individuals buying a property. The key ones are:
First Home Owners Grant
Provided by the SA State Government, the First Home Owners Grant is a $15,000 non-taxable grant toward the purchase or construction of a new residential property. It is aimed at:
- First home buyers with a contract to purchase new residential property or build a new home – house, flat, unit, townhouse or apartment.
- New residential property up to a market value of $575,000. Not for established homes.
- Must be principal place of residence for 6 continuous months starting within 12 months of either:
- signing the contract to purchase, or
- date construction completed.
- Must not have owned a residential property prior to 1-Jul-2000.
- Must not have owned a residential property in Australia on or after 1-Jul-2000 and occupied it continuously for 6 months or more.
There are many financial institutions that have been authorised as Approved Agents to process applications. If you are obtaining finance through one of these financial institutions, you may apply directly through them.
HomeStart Starter Loan
An initiative of the 2019 South Australia State Budget and supported by the Affordable Housing Fund, the HomeStart Starter Loan is a secondary loan taken out with a primary HomeStart loan to help cover the upfront costs for buying or building a home.
The HomeStart Starter Loan has a five-year term, with no repayments required or interest charged during those five years. At the end of the five years, if the HomeStart Starter Loan is not paid in full, it will be reviewed and may be transferred to your primary loan balance, which may increase your loan term. Depending on circumstances, all or part of the HomeStart Starter Loan may be extended by HomeStart.
The HomeStart Starter Loan can provide up to $10,000 toward the upfront costs associated with buying or building a home with HomeStart. No interest is charged for 5 years and no repayments are required for 5 years. It is aimed at those who:
- Qualify for a primary HomeStart loan.
- Have a net household income of less than $65,000 for singles and $90,000 for couples.
- Not own another property.
- Have enough funds to cover the deposit, but not enough for the remaining upfront costs like Stamp Duty.
4. Start looking for a property
Once you have an idea of what you can afford, the exciting part starts. Searching for your home can become a bit of an obsession, so look forward to plenty of online searching, attending open inspections and maybe even bidding at an auction. Good luck with it all!
And if you’re worried about bidding at auction, you can always ask someone to do it on your behalf. Some people choose to appoint a buyer’s agent. This is someone to whom you pay a fee in return for them searching, evaluating and negotiating on your behalf.
5. Make an offer
So you’ve found your dream home, and now you’re ready to make an offer! The real estate agent will give you the form to fill out and then you simply email or text them a copy.
6. Sign the contract
If the vendor accepts your offer, the real estate agent will draft up a contract and send it over to you to review and sign. If you haven’t engaged a conveyancer already, this is a great time to speak to one.
Make sure you carefully read through the contract. If finance is not approved at the time the contract is signed or you are not a cash buyer, a finance condition (stating that the contract is ‘conditional’ on, or ‘subject to’ the purchaser being lent a specific minimum loan amount) is included in the contract as a measure to safeguard the buyer.
By having a contract of sale drawn up with a ‘Subject to Finance’ clause included, it enables the purchaser to withdraw from the contract if they are unable to obtain the necessary finance to purchase the property.
Then if you’re happy with the contract, sign across the dotted line.
Remember: as soon as you sign a contract, immediately arrange insurance over the property.
7. The Form 1
As soon as the contract is signed, the sales agent will serve you a Form 1. A Form 1 is a heavy duty document and it is actually a statement that is required under Section 7 of the Land and Business (Sale and Conveyancing) Act 1994.
It should contain a lot of information including details about:
- Who is buying and selling the property.
- What ‘cooling off’ rights you have as the buyer
- Details of any matters that might affect the property, such as encumbrances, mortgages, etc.
You may also come across the following terms:
- Restrictive Covenant. This relates to any conditions that stop you developing the property in certain ways.
- Easement. These can include agreements or rights of a neighbour to use a part of your property to access their own.
- Leases and tenancy agreements. These documents relate directly to occupancy of the property.
- Development. The Form 1 document should inform you of anything relating to the Development Act such as building approvals, land management agreements with the local council, etc.
- Strata and Community Titles. If you are buying a unit, even a self-managed one, the Form 1 should outline any fees, certificate of currency for insurance, etc.
8. Cooling off period
Once you’ve been served with the Form 1, your two day ‘cooling off’ period begins. If you haven’t already organised it, this is when you can arrange for a building and pest inspection. This will give you some assurance around any concerns that you might have about the property.
At the expiration of your two day ‘cooling off’ period (*if applicable), you need to pay the agreed deposit amount into the agent’s trust account in accordance with the contract.
*Buying at auction
If you buy at auction, there is no cooling off period so you’ll need to do your due diligence before auction day. Sometimes there is a building inspection or pest inspection provided – it is up to you as to whether you are happy with that or you prefer to do your own.
9. Waiting for finance to be approved
Now the cooling off period is over, it’s time to wait for your finance to be approved (if you have ‘Subject to Finance’ in your contract). Once finance has been approved by the lending institution or bank, notification will be given in writing to the purchaser, conveyancer and agent they are purchasing the property through.
Once this happens, finance has “officially” been approved and the contract becomes unconditional – meaning that the purchaser can no longer rely upon the finance condition and must proceed with the purchase (subject to any other conditions being included).
10. Settlement statement
Prior to settlement, you will receive a Settlement Statement from your conveyancer. Check it carefully and if you have any queries, telephone your conveyancer immediately. Ensure that you pay the amount requested on your settlement statement to your conveyancer’s office.
11. Arrange your connections
In the days preceding settlement, arrange for gas, electricity and the landline to be transferred to your name or connected in your name at your new property.
12. Settlement day
It’s time to get the keys to your brand new home and start to move in. Once you move in, you’ll also need to make arrangements for contents insurance.
At Ezra Legal, we have the knowledge, systems and expertise that you’ll need as you prepare for the official transfer of your new place into your own name. We deal with Residential, Commercial, Leasing, Subdivisions, Family transfers, Deceased Estates and more. We keep you updated throughout the journey from the start until finish, liaising with all parties to ensure that everything happens as smoothly as possible.
For more information and expert advice, ask to speak to one of our lawyers at Ezra Legal on (08) 8231 6100 or email firstname.lastname@example.org
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