Five things to consider when purchasing a residential property

When it comes to buying a property, it’s fair to say it’s going to be one of the biggest purchases you ever make.

It’s one of the most complex, too. Contracts of Sale and Section 32 Statements can be a challenge, but they don’t have to be difficult. With a lawyer providing guidance each step of the way, you’ll know exactly what your rights and obligations are.

In this article, Robertson Hyetts Lawyer Kayla Kristensen shares five key things to consider when buying a property:

  1. The total cost

When you buy a property, you need to consider the total cost of the transaction and not just the purchase price. Other associated costs you should research when buying a home include:

  • Stamp duty
  • Transfer of land fees
  • Legal fees
  • Land tax
  • Building and/or pest inspections
  • Connecting services such as electricity, sewerage and water
  • Bank fees if you are obtaining finance for the purchase, including loan application fees and potentially lenders mortgage insurance
  • Outgoings, such as council rates, water rates and owner’s corporation fees, which will be adjusted at settlement.

You can check if you are entitled to any concessions on stamp duty, which may include:

  • A waiver of up to 50 per cent on residential purchases in Victoria with a dutiable value of up to $1 million for any contracts entered into between 25 November 2020 and 1 July 2021
  • The Principal Place of Residence (PPR) concession which applies to purchases where the property is valued up to $550,000 and you intend to live in the property for at least 12 months, commencing within 12 months of settlement
  • The First Home Owner duty exemption or concession which apply if you are purchasing your first property and you will live there for at least 12 months, commencing within 12 months of settlement. If your home has a dutiable value of $600,000 or less, you may be entitled to the first home buyer duty exemption and for any property valued between $600,001 and $750,000, you may be entitled to a first home duty concession.
  1. Whether you want the Contract to be conditional

Consider whether you want any conditions included in the Contract before agreeing to sign. Often Contracts are conditional on purchaser’s obtaining:

  • finance approval by a certain date (usually 14 to 21 days from signing the Contract). If you are unable to obtain finance by the approval date, then you may be able to terminate the Contract by providing written notice to the vendor and any monies paid, such as a deposit, must be refunded to you
  • a satisfactory building inspection report. If the building report identifies any major structural defects, then you may be able to terminate the Contract within 14 days of the parties signing the Contract by serving written notice on the vendor and any monies you have paid under the Contract must be refunded to you
  • a satisfactory pest report. If the pest report identifies any current major pest infestation that affects the structure of a building on the land, then you may be able terminate the Contract by providing written notice to the vendor and any monies you have paid under the Contract must be refunded to you.
  1. Insurance

As the purchaser of a property, it is important that you have adequate insurance protection for the building and improvements on the land. Once the Contract has been signed by you and the vendor, and is exchanged, it becomes legally binding and in broad terms, the insurable risk passes to you. This means that you should arrange your own insurance for the property.

In most Contracts, it remains the vendor’s responsibility to hand the property over at settlement in the same condition as at the date of the Contract, fair wear and tear excepted, and you may be able to withdraw from the Contract should the property be substantially destroyed or damaged before settlement. However, if the property has been damaged, you may want the option of proceeding to settlement relying on your own insurance to repair the damage, rather than being forced to end the Contract.

  1. Measure the boundaries

You should always carry out a careful inspection of the property boundaries as soon as possible to confirm that they match those on the title and that all fences are in the right place.

You do not want to realise after settlement that the fences are in the wrong place, and you are at risk of losing part of your land to an adverse possession claim by one of your neighbours.

You should also consider taking out title insurance over the property, which can offer you protection in circumstances where there are any defects in the title that you weren’t aware of before you entered into the Contract.

  1. What happens if you’re not ready to settle?

If you are not able to settle on the settlement date in the Contract, for example because you do not have the required funds available, then the vendor will be entitled to charge you penalty interest for each day that settlement is delayed by you.

The vendor may also serve you with a default notice giving you 14 days to complete the settlement, after which time the vendor may rescind (or withdraw from) the Contract, keep your deposit and recover any loss on the re-sale of the property from you.

Because of this, it is very important that you make sure you have the funds that are required to settle available at settlement, and that your lender (if you are obtaining finance for the purchase) is ready to settle on the settlement date.

If you are looking at purchasing a property, or require advice on purchasing a property or a Contract, Robertson Hyetts is here to help. Please call our friendly property lawyer, Kayla Kristensen, in our Bendigo office on (03) 5434 6666 or our Castlemaine office on (03) 5472 1588 for a no obligation chat.