The Contract Process
Purchasing residential real estate can be a very exciting process. However, it can also be confusing if you have never bought a property before, or haven't purchased for some time. You may already be aware, different agencies usually have different sets of rules and standards, so we would like to inform you of the buying process through Affinity Property.
Property owners receive all types of interest – some genuine, some not. Some people submit offers to test the possibility of a sale but do not actually stay true with their offer. This can lead to frustration and concern for the owners as they try and assess who is actually a genuine buyer.
If you wish to purchase one of our properties being offered for sale, you should follow the steps outlined below. This will enable you to put forward your strongest purchasing proposition to the agent which in turn will give you the very best opportunity to secure the property.
Please note that we take the selling process very seriously. Any offers communicated verbally or by letter, fax or email are considered nothing more than indications of interest. All offers must be signed up on a Contract of Sale that is prepared and presented to the vendor. An initial deposit of $1,000 also needs to be paid when the contract offer is submitted. If the vendor accepts the offer, a further deposit for 5% of the purchase price (less the initial $1,000 deposit) will need to be paid when the contract becomes unconditional.
STEP 1 – SAVING TOWARDS BUYING YOUR HOME
Boost your confidence and your home loan know-how with the following five tips:
- Plan your budget. This will help you understand how much you can afford on repayments and other costs. It needs to be a long term workable budget that also has a little bit of room for fun or you’ll never stick to it.
- Know your limitations. Once you have worked through a budget then this should be easy. Don’t buy what you cannot afford. Your first home doesn’t need to be your dream home. Knowing how much you can spend will give you comfort when you are chatting with real estate agents and other professionals.
- Deposit, deposit, deposit. Save the biggest deposit that you can put together. Firstly, it shows a lender that you can save and not waste money but it can also save you a lot of money in fees from the bank.
- Consumer debt/excess debt. Try and minimise your credit cards and personal loans before you buy your home. That being said it’s not always possible to do. It’s then important to look at whether it’s better to pay off your loans first or what your next steps can and should be.
- Are you entitled? Make sure you receive all that you can from the government in regards to any incentives. Make sure you are fully informed and know what is available to you.
STEP 2 – COMPLETE LETTER OF CONTRACT OFFER INCLUDING YOUR FULL DETAILS
If you decide to make an offer, we will ask you to complete a Letter of Contract Offer or go straight to a written contract of sale. These documents include the following details that will be presented to the vendor:
- Actual purchase price you will pay for the property
- Confirmation that you’ve paid the initial deposit of $1,000
- Settlement period you require or that the vendor has stipulated
- Name of your chosen solicitor or conveyancer
- Name of your bank or financial lending institution
- Any special conditions or requests you may have so that we can inform the vendor.
STEP 3 - CONFIRM THE TIMEFRAME AVAILABLE TO CARRY OUT ANY INVESTIGATIONS
Find out if the property has a deadline on it, such as auction or other offers from interested parties.
STEP 4 – DECIDE IF YOU ARE GOING TO OBTAIN BUILDING & PEST INSPECTION
Before you purchase any property, you may feel the need to arrange a Building & Pest Report from a qualified inspector. Please note that this report is a complete list of defects of the property, and it can be very different from the feature brochure that you receive from a real estate agent! In some instances people are shocked with the report they receive on the property, and most times misinterpret the report.
We have spoken to many reputable building & pest inspectors to learn more about the process. What we discovered is there is quite a bit of concern over the inspection process, particularly from sellers who feel that finding a problem could be a deal breaker in the sale of their home. But contrary to this, many building & pest inspectors have told us there is absolutely no need to panic, as everything is fixable. Knowing about any issues allows both the buyer and the seller to take control and have them fixed.
We recommend all buyers should arrange a building & pest inspection, to ensure you have full disclosure about the property you are buying. As they say, 'forewarned is forearmed'.
STEP 5 – NOTIFY YOUR LENDING INSTITUTION OF YOUR PURCHASE ADDRESS & DETAILS
A pre-approval of finance from your bank or lending institution needs to be in place before safely proceeding with your property purchase, however many banks will approve you in principle (pre-approval) yet may require a valuation. This is normal practice of lending institutions, and serves as confirmation of the agreed sale price.
With an auction property, it is highly unlikely that an offer ‘subject to finance’ will be considered as the standard marketing campaign is quite short and the vendor cannot be expected to halt their advertising and open for inspections whilst waiting for the offer to become unconditional.
STEP 6 – MEET WITH THE AGENT AND PROVIDE ALL DETAILS FOR SIGN OFF WITH THE VENDOR
Once agreement on price, settlement, conditions, etc has been reached and the vendor has signed the Contract of Sale, the agent will make arrangements to provide you with one of these signed contracts. Only when an exchange of contracts has been completed can the sale proceed and the property is removed from the market.
BUYING AT AUCTION
If you are intending to buy at public auction, all the above-mentioned must be in place. Auction day is final. If you turn up and bid and you are the highest bidder past the reserve, on-the-market price, you are the instant owner awaiting settlement of the property. There is no cooling-off period three business days either side of the advertised auction date.
EXPRESSIONS OF INTEREST SALE
“Expressions of Interest Sale” is a very structured and tailored 4 - 6 week process with a nominated date as to when all offers are submitted to the Vendor. Properties can be sold prior to the Closing Date but the offer and terms would need to be at a level that would motivate the Vendor to sell prior.
If the property is to be sold prior buyers will be contacted and given a 24 hour window to also make an offer but all offers are kept private and confidential.
When all offers are in each buyer will be informed as to how many offers have been submitted (no price disclosed) and given one final opportunity to further improve their offer before the Vendor accepts.
If all offers are being presented at the closing date each buyer once again will be given an opportunity to increase their offer. This process is called a 3 phase negotiation.
Preparation is the key. Understand the steps of sale and have everything in place is imperative to reaching your property goals. Whether you are considering purchasing this property or another in the near future and require advice, feel free to contact us with any questions you may have.