The purchase process…help

G’day Peachy,
You would get a pre-approval and then buy a property. After buying the property, you have the option of organising the finance or building/pest inspections.
The sequence depends on whether you are expecting any issues with the finance and/or inspections.
If you believe you will struggle to get the finance then organise the finance approval first. When finance approval is obtained, organise the building and pest inspections. That way you are not spending hundreds of dollars on inspections.
If you believe there may be some issues from building/pest inspections, then oragnise that before finance approval. That way you are not spending hundreds of dollars on loan application fees, bank valuations, etc.
Either way, you would spend one lot of money but all that is to safeguard your investment.
Lastly, the purchase becomes unconditional only when all “subject to” clauses have been ticked off. You get the colling off period after the purchase has become unconditional.
Hope this helps.
Sanjiv

“There is no passion to be found playing small – in settling for a life that is less than the one you are capable of living.” – Nelson Mandela

Hi Peach,
I am in NSW and am a real estate agent, so here’s what usually happens!

1. Get your pre-approval before you do anything, you need to know what the maximum is you can spend. (Don’t offer over this figure). Find a conveyancer/solicitor that you are comfortable with. Trying to find someone later on when you are in a hurry when you want to buy something could mean that you make a hasty decision.

2. Once you have your pre approval, start looking at all the properties on the market that may be interested in buying (ie if you are looking to buy a 2 bedroom unit, look at ALL the 2 br units that are on the market in the area that you want to purchase in – regardless of the listing price. What it is listed for and what the vendor is prepared to sell for are 2 completely different things!

3. Ask the agents LOTS of questions. eg. What are the strata levies (and does it include the sinking fund?). How long has it been on the market? Why is the owner selling? What is the minimum they will take for the unit? – Don’t expect a good agent to tell you the answers to these questions (I wouldn’t) as the agent is working for the vendor, not the purchaser, but there are some agents that WILL reveal this type of information, so it’s worth asking. Ask the same questions for every property that you inspect and take notes on what they say. Also ask the agent if there is anything about the property that they feel would affect the resale price when you go to sell. This is important. If the agent knows anything, they must disclose this now, but most agents won’t volunteer the information unless you ask. (Examples could be dodgy neighbours, structural problems in the building etc)

4. Spend at least 2-3 weekends looking around before you do anything else. By the time that time is up, you will know a LOT more than when you started and when you do finally make a decision, it is likely that you will make an informed decision, not an emotional one.

5. Try and find 2 or 3 that you like, not just one, it makes it easier for you to walk away from your number 1 choice if the vendor won’t budge on price. It also gives you some power with the agent/vendor if they think that you may walk away and are not too emotionally involved! Don’t be afraid to make a stupid offer on a property that is way above your budget. You don’t know the reason why the vendor is selling and you could just be in the right place at the right time. Often the only reason why a property hasn’t sold is that it priced too high, not that there is anything wrong with it. I bought a property once that had been on the market for ages where the vendors were being greedy and asking too much. Everyone knew it was overpriced, but everyone else just walked out shaking their heads, I made a stupid low offer and they said yes! Don’t worry if the agent says NO. The more times you offer, the more comfortable you will get with the whole process.

6. Make an offer on your number 1 choice before you spend any money on pest and building inspections and formal unconditional approval. It’s difficult to advise someone who has never bought before HOW / WHAT to offer as each situation is different, but if you are more emotional than your partner, let him do the negotiating or vice versa.

7. Always offer lower than what you are prepared to pay. Don’t let the agent know your full financial situation, they will use it against you (remember, they are working for the vendor and have a legal obligation to get the highest price they can for the property!). Don’t negotiate too quickly, take it slowly, it is hard, but remember, the vendor is just as anxious as you (mostly you can get away with this in this market – when the market was booming, you did have to move a lot quicker), although if you see a property that has just come onto the market and it is obvious that it is underpriced, don’t delay for too long because if you realise that it is good value, so will everyone else.

8. Once you have settled on a figure, either ask the agent to fax the contract through to your solicitor straight away or collect a copy of the contract yourself and take it to the agent to view. DO NOT SIGN ANYTHING UNTIL YOUR SOLICITOR HAS SEEN THE CONTRACT FIRST. It will take the solicitor 5 minutes to read through the contract and give you the go ahead to sign.

9. Organise your pest and building inspection (this is important, even if you are buying a unit and it’s NOT a waste of money). DO NOT let the agent organise the inspections for you or recommend someone (unfortunately, there are some dodgy agents out there, that will suggest a ‘not so good’ inspector). If you don’t know any inspectors yourself, ask your solicitor/conveyancer for some names (if they won’t recommend any – and sometimes they won’t, ring around to some of the other agents in the area (not the one you are buying from) and ask them who they would use. You can generally organise a pest and building inspection within 24 hours. Whenever I buy property, this is the first phone call I make and I do not sign the contracts – even on a 5 day cooling off until I have a verbal result from the inspector. (I also suggest that you be there when the inspection is being done – regardless of what the agent/inspector says, it’s amazing what you can pick up. When you exchange contracts on a 5 day cooling off, you will forfeit your .25% deposit regardless of the reason why you pull out. It won’t matter if the property is full of termites, you will still forfeit your deposit, so get your inspections done first. If everything is OK with your solicitor and the inspection, NOW you can sign your life away! This can be done with either the agent or the solicitor/conveyancer. The only exception to this would be if you knew that there was someone else who wanted to buy the property just as much as you do, if this is the case and you are prepared to lose your .25% deposit if it all goes pear shaped, then go for it.

10. Your solicitor will now be organising a strata search report (if the property is a strata property which most units and townhouses are) and you now need to ask the agent to send a ‘completed copy of the front page of the contract’ to your broker or bank (whoever you got your pre-approval from) as they will need to move on the formal unconditional approval. This will usually happen in the 5 working[exhappy] days, but in the event that it isn’t, you can ask the agent for an extension of the cooling off (blaming the banks). This is quite common and so long as you assure your agent that everything else is OK (pest and building inspection/strata search etc,) there should be no problem.

11. In NSW, you are not likely to get any ‘subject to’ clauses put into the contract that you prevent you from losing your .25% deposit. As an agent, I would NOT be recommending to my vendor that they take the property off the market only to risk the sale falling over later on because the purchaser couldn’t get their finance or they weren’t happy with the inspections. That’s why it’s important to get yourself organised beforehand and believe me, it will give you power when you can tell the agent that you are pre-approved. The only possibility of the approval not coming through once you have pre-approval is if the valuation (which is done if you are borrowing more than 80% of the purchase price) comes in less than purchase price. This is rare, although it has happened and when it does, sometimes you can renegotiate the purchase price.

I hope all this helps, if you have any more questions, I’m happy to answer them for you.
Linda

That was a great reply Linda.

Still I would recommend to everybody to put a ‘get out clause’ into the contract.

Even if it costs you .25% of the purchase price. On a $400,000.00 property that is $1,000.00. Really nothing if something bad shows up after you signed the contract and you realise that in spite of all your due dilligence you made a mistake.

Good Luck Peach

Hi Linda and Peach,

I must admit that I am not quite up to date with the NSW rules. But depending on how you word your get out clause, you may be able to buy yourself some time. I have five standard get out clauses (I normally only use one at a time):

Amount Offered: $ 220,000.00
Terms: $ 1,000.00 deposit and balance in 30 days.

Subject to the following conditions:

– The purchaser’s attorney’s approval as to title, encumbrances, liens, easements, and other regulatory inpositions that may relate to the above property, such approval to be given in writing by the purchaser’s attorney to the seller’s attorney by no later than 5:00pm on the 20th working day after the signing of this contract.

– Receiving all rental and other documentation to the purchaser’s satisfaction within 14 days of signing the sale contract.

– Financial approval by purchaser’s financial institution within 21 days of signing the sale contract.

– The satisfactory building inspectiong by a purchaser approved building inspector withing 14 days upon acceptance of this offer.

– A surveyor inspecting the property to the purchaser’s satisfication within 21 days of signing of sales contract.

This offer is valid until …../2007 at 12:00 pm. Banking of the attached cheque will be deeped acceptance of this offer.