The Buying Process
The two most common methods of buying a property in Australia are by Private Treaty (an agreed contract negotiated between the buyer and seller) and by public auction.
Buying by Private Treaty
There is a standard contract for the sale of real estate in most states, but they do vary from state to state. The estate agent cannot offer to sell a house to you unless he has a copy of the contract.
You should carefully read this contract, and if there is anything you are unclear about you should refer it to your legal adviser before you sign it.
It is common to specify that the contract is subject to finance being approved to the purchaser by a specified date. If you then find you are unable to obtain a loan for the property in that time you can terminate the contract. If you do not do this the contract becomes “unconditional” after that date.
Queensland contracts usually contain a standard clause advising that a building and/or pest control inspection is to be completed by a specified date. If these inspections reveal any problems you can go back to the vendor and:
- adjust the sale price;
- make the contract conditional on the vendor fixing the problem; or
- terminate the contract.
Other conditions can be added to the contract at the request of either the seller or the purchaser. If you are concerned that the seller has inserted some extra conditions that are unfair to you, you should seek legal advice.
As the buyer, you may wish to insert additional conditions such as “subject to sale of existing property by…”. However, asking for additional conditions such as this may make the contract less favourable for the seller and they may choose not to accept your conditional offer.
It is usual practice for the purchaser to pay a deposit to the real estate agent upon signing the contract. The amount of the deposit varies from state to state, with 10% of purchase price frequently being required. The deposit is held in the estate agent's trust account, and is released upon settlement.
The payment of the deposit to the agent does not mean you have a binding contract. This only occurs after both you and the seller(s) have signed the contract.
Once you have decided to make an offer on a property it is best to get the contract signed as quickly as possible to prevent anyone else coming in with a higher offer. It is therefore wise to inspect the contract conditions (and if necessary obtain legal advice) before making an offer so that you are in a position to quickly sign the contract once a price has been agreed to with the seller.
In some states a “cooling-off period” applies whereby you, as the buyer, can change your mind and not go ahead with the contract provided you notify the seller within the specified time frame. Your statutory rights in relation to cooling-off periods vary from state to state, so make sure you are aware of your rights.
Buying at Auction
If you have not bought at auction before it is strongly advised that you attend another auction before the one at which you intend to bid. At auction, the property is sold unconditionally to the highest bidder (subject to reserve price), and there is no cooling-off period, so you are committed if you make the highest bid. For this reason it is highly advisable to get finance approval before you go to auction.
This is the price (set before the auction) at which the seller is prepared to sell the property. The auctioneer has no authority to sell under the reserve price, and if the reserve price is equalled or bettered the property will be sold to the highest bidder on the fall of the hammer.
Should the reserve price not be met, the person making the highest bid will normally be given the opportunity to purchase at the reserve price (or possibly negotiate a lower price). If this does not result in a sale, the property will go back on the market.
If the property is sold to you as highest bidder (or negotiated with you at the conclusion of the auction) you will be required to sign the sale contract there and then, and pay the required deposit amount (usually 10%).
The contract will be prepared before the auction, and if you are intending to bid at the auction you should ask for a copy of the contract so that you or your legal adviser can carefully check there are no unsuitable conditions.
If you want a building and/or pest inspection completed on the property you will have to ensure this is completed prior to auction. Unfortunately, if you are unsuccessful at auction you will have wasted your money, but you may be taking a considerable risk if you don’t have the inspections carried out.
This can be a nerve-wrecking exercise. You can appoint someone with suitable experience to bid for you.
Introduce yourself to the auctioneer beforehand so he/she knows to look for you during the auction. Find a place to stand where the auctioneer can see you, but where you can also see other bidders.
You can bid by raising your hand or nodding in agreement to the auctioneers call, or you may call out your own price.
Many agents suggest you should bid low and bid often, but this is entirely up to you. If there is only one other bidder, you may try increasing (e.g. doubling or trebling) your next increment in order to frighten them off.
Know your highest price beforehand and don't exceed it!
Buying Before Auction
You can always make an offer to purchase the property before auction. This strategy could result in you paying more or less than what you would have paid at auction. You will never know the answer to that question.
If the agent seems reluctant to take an offer before auction they probably believe there is strong interest in the property. If they are encouraging you to make a prior offer it may mean that interest in the property has been low.
You have to make a judgement on this issue, and always remember that no matter how friendly and helpful the agent is, they are acting in the best interests of the seller, not you.
The settlement date is always specified in the sale contract, although it can be varied by mutual consent of both the seller and purchaser.
The property must be handed over in the same condition as it was on the day of sale. A property inspection is therefore recommended a day or so prior to settlement. You are entitled to do this.
You need to ensure you have sufficient funds available to cover your contribution (i.e. as opposed to the amount you are borrowing) towards settlement. As this is usually required by bank cheque you will need to ensure you have “cleared” funds available for this purpose.
There is no need for you to attend settlement. Your solicitor/conveyancer will usually attend on your behalf.