5 Mistakes to avoid when buying your first home.

Buying your first home can be the most exciting and daunting process you will go through. There are lots of things you need to think about, such as where is my finance coming from, is the building structurally sound, is there anything I’m concerned about, who will be my solicitor/conveyancer, etc.  

Below we have detailed the 5 most common mistakes people make when buying their first home, and tips on how to avoid these.  

1.Signing a contract without a solicitor/conveyancer reviewing it 

Many items go into a contract which many first home buyers are not aware. For example, most people want a building and pest inspection and a finance clause to be included. However, did you know, that on an REIQ contract, if you do not fill out all three sections of the finance clause you don’t have a valid condition for finance on that contract? 

Another major item that people don’t notice on contracts is that most conditions are set from the date of the contract date. That doesn’t mean the day that you, as the buyer, sign the contract. It means the date that both parties have signed (generally the seller signs last). Sometimes, depending on other special conditions that might be included in a contract, a condition might read 7 days from the satisfaction of another condition – such as due diligence. Make sure you know when your due dates are scheduled. 

The third most common mistake found on contracts is the misspelling or lack of full name of the buyer inserted on the contract. If your name is not spelt correctly on a contract, or your middle name is missing, a Deed of Recission and New Contract is required to be drawn up and signed by all parties to make this change. Depending on your legal representation, this will cost you additional fees. As such, check carefully to make sure your name is correct.  

 If you don’t have your solicitor or conveyancer review your contract before you sign it – you are, to an extent, locked into what that contract says. The only way to have it amended it via agreement through the solicitors and any agreement such as this is at the seller’s discretion.

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2. Not attending the building and pest inspection.

Building and Pest inspection reports can look scary; they are usually between 10-20 pages long and detail every single issue the inspector has found with the property. That’s what you are paying them to do – identify all the issues they can find. However, you are generally only able to terminate a contract if there are structural issues, multiple major issues or active pests in the property.   

House-Pest-inspectionMany first home buyers become anxious about their property when they don’t attend the inspection and read the twenty-page list of issues the inspector has found about their dream home.  

We recommend you attend the inspection, walk around with the inspector and they will talk you through/show you the major issues if there are any. Most of the time, they include all the small issues because that’s what you’ve paid them for, and they need to protect their professional name as well. But at the inspection itself, they will give you a very clear verbal determination if there are any issues to worry about 

3. Not highlighting issues/council issues to your solicitor/conveyancer.

Many people think that just because a property has been built – that it has council approval. This is true for most dwellings. However, if you look closely at many properties, especially in Queensland, there isn’t just a dwelling on the property. There may also be a carport, a decka pergola or a pool. All of these items generally require separate council approval and many times they are not obtained by the seller when first built or not finalised by the time they want to sell the property. 

When you look to buy a property, you should give your solicitor/conveyancer a rundown of what is on the property. Remember they haven’t been to the open home, you have. So, let us know if there is a carport that looks like it’s been added onto the property. If there is, we will recommend you include a due diligence clause into the contract so searches can be performed to ensure you are aware of what you are taking on with the purchase.  

4. Not having finances ready before signing a contract.Home-Loan

Finance, especially during the pandemic, can be difficult to have approved. The banks are overrun with applications and working with limited staff. Furthermore, most contracts allow for 14 or 21 days from the contract date for you as the buyer to obtain formal finance approval. Not conditional approval, not verbal approval – but formal finance approval. This means you have to submit your application to the bank, obtain pre-approval, submit more documents, obtain conditional approval and then wait for the bank to issue a formal finance approval. Assuming there is no further information required or no issues the bank needs to discuss with youthis process generally takes between 2-4 weeks from the time you first approach the bank.  

As such, when you start looking for your first home to purchase, make sure you’ve already touched base with your broker/bank and applied for pre-approval. Once you have that, you will have clarity about how much you can legitimately afford as a purchase price and feel content that your approval won’t take as long to come through. 

5. Thinking the purchase price is the total cost of the purchase.

The purchase price is the main cost involved in a purchase. However, it isn’t the only cost. At settlement, your solicitor/conveyancer will perform adjustments for rates, water, body corporate etc. Unless you are due to settle on the first day of a new quarter, adjustments will always need to occur.  

In addition to adjustments, you need to pay legal fees and stamp duty (if your purchase is over $500,000 or you are purchasing vacant land). Additionally, the loan approval that you receive from your bank is not the full amount they will be provided in cash at settlement. For example, your loan amount may be for $400,000. Out of this, the bank will take Lenders Mortgage Insurance (LMI), bank fees, settlement agent fees etc. Meaning that at settlement the bank is really only providing you with $388,000 (*NB this is just an example of expected figures).  

Make sure you have discussed with your bank or broker exactly how much you need to be putting into the purchase and ensure they have taken into account all the additional fees that come with a purchase when providing you with formal finance approval.  

Related Articles: Property Squatters:How to get them off? Now you can track your property online using Transactor.

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Pitfalls to avoid when buying or selling a house

Whether you are a buyer or a seller, a first-home buyer, an investor, or a seasoned household owner, there are many mistakes that people make in conveyancing.  Here are a few of the most common mistakes:

  • using incorrect spelling or informal names on the contract
  • failing to meet contract deadlines
  • failing to obtain searches (as a buyer)
  • failing to include chattels/fixtures in the contract.

Incorrect spelling or use of informal names

For an agent:

  • When drafting a contract, ensure you write down both the seller’s and buyer’s names correctly. Obtain copies of all parties’ government-issued identification (drivers’ licence) so you can check.
  • Ensure you have a copy of the title search for the property you are selling as this will ensure you have recorded the seller’s name exactly as it is depicted on title.
  • Make sure you include all parties to the settlement i.e. multiple buyers must all be correctly listed.

For a buyer or seller:

  • Check that the contract has your name spelt correctly.
  • If you have a middle name, use it.
  • If your name is spelt incorrectly, change it.

Repercussions:

As a buyer or seller, if your name is spelt incorrectly on a contract and you proceed with the contract, your conveyancer will need to have this amended. This can incur extra costs with some fixed-fee conveyancing agreements.

If the buyer’s name is spelt in correctly in a contract and they are obtaining finance, the financier will require the contract to be amended to ensure the name is listed correctly on the contract. Depending on how long both parties take to agree to amend the contract, your finance could be delayed by weeks as a financier cannot progress a loan agreement until the application matches what’s on the contract.

If your incorrect name happens to slip past all these parties, the property will be transferred into the name of the person on the contract. This will not be your legal name and can have significant impacts on your estate should something happen to you. To change a name once it is registered on title, an application to amend needs to be lodged with the Queensland Titles Office. This will incur further costs and can take months to be amended.

The rule is simple: spell check before you sign.

Contract deadlines

The most common deadlines or dates in a residential contract of sale are:

  • cooling off
  • finance
  • building and Pest
  • special conditions
  • settlement.

On a standard Real Estate Institute Queensland (REIQ) contract, most of these conditions have a date within which they need to be met. This can be a certain number of days from the contract date (i.e. 14 days from contract) or have a specific date listed (i.e. 11 July 2019). A settlement date can be written in a few different ways which can be confusing to the parties of the sale.

Cooling off
A cooling-off period is automatically built into all REIQ residential sale contracts. You will find the disclaimer just above the execution panel on your contract. This disclaimer advises that you as a buyer have five business days, following the execution of your contract, to pull out of the contract for any reason.

A termination penalty of 0.25% of the purchase price is required to be paid by the buyer should they pull out under this condition. This is included as a protection for the seller to prevent people signing contracts and pulling out for no reason.

The cooling-off period does not apply to the seller. Once a seller signs the contract, they cannot terminate unless the purchaser is delayed in satisfying one of its conditions detailed under the contract.

Finance, building and pest, and special conditions
The date each of these conditions must be met will be listed on the contract. The most common timing for these conditions is 14 days from the contract date. Buyers should be proactive and start applications to ensure these conditions are satisfied within the specified timeframes.

A finance application with a general bank will take a minimum of seven days to be conditionally approved. However, they can take anywhere between 14 to 21 days to give formal approval. When you start looking to purchase a property, go to your financier or mortgage broker and get conditional approval. Once you are conditionally approved, the formal approval is much easier to obtain and you can become conditionally approved without a contract. The financier will advise you of the maximum amount you are conditionally approved for and you can proceed to look at purchasing houses for that amount and under.

In order to satisfy a finance condition, you need to provide your conveyancer with the following:

  • a copy of the formal approval letter you received from your financier
  • written advice (an email) from you advising you are happy with the offer from that financier and wish to satisfy this condition in the contract.

Your conveyancer must obtain these instructions from you in order to satisfy this condition.

Depending on the size of the property you are purchasing, a building and pest inspection generally takes between one and two hours to complete. Once you sign a contract, you need to call around to obtain quotes and book an inspection as soon as possible.  You should arrange a time for an inspector to attend the property when it is suitable for the sellers to provide access to the property. Liaise with the real estate agent to arrange a suitable day and time.

Once the inspection is done, most inspectors will give you a short verbal run down of the property. They will then forward you a written report.  Be patient as this takes time for them to write up (generally 24 hours following inspection).

It’s important to have this inspection done as soon as possible as issues may arise in the report that you may want to negotiate on.

If you want to negotiate under the building and pest condition on a contract, you need to provide your conveyancer with a copy of the report and detail in writing (email) exactly what the issues are and what you want the seller to do about it. Once they have that information, your conveyancer will contact the agent and the seller’s conveyancer to begin negotiations.

Negotiations can take days or even weeks to resolve and generally take one of two forms: either a price reduction or a request for repairs. If you request a price reduction this means you are willing to accept the property as is, if the seller agrees to reduce the purchase price by an agreed amount. This reduction will then be accounted for at settlement. If you request repairs be done by the seller, they need to undertake these repairs/works prior to settlement and provide you with a copy of the invoices showing the work was completed by suitably qualified tradesperson.

Once you satisfy the building and pest condition, no further negotiations take place. So, you should ensure everything is agreed in writing before your condition date under the contract.

Special conditions can take many forms. They can be for due diligence (generally when you need further information on the property because you are wanting to do something like build), or for when the seller needs to do something prior to settlement (repair something broken or replace something in the property), concurrent settlement (of your sale property) etc. There are many special conditions that can be written into a contract of sale.

You should discuss these with your conveyancer prior to signing a contract containing special conditions to ensure you are aware of their implications during the sale process.

Generally, settlement date is listed in the contract as 30 days from the date of the contract. When it comes time for your contract to settle you need to ensure you are ready.

As a buyer you need to ensure:

  • Your financier is ready to provide funds.
  • Any extra funds you are putting into the purchase are with your financier or conveyancer.

As a seller you need to ensure:

  • Your mortgagor (if any) is ready to release your mortgage on the property.
  • You are packed up as you need to be out of the property by settlement time.
  • You have completed any repairs under negotiations made during the process of the contract.

What happens if you don’t meet a condition by its due date?
This is a question that not many people ask, but all parties involved with a sale contract should. As a purchaser, if you miss a deadline, you give the seller an opportunity to terminate the contract. Under REIQ contracts, a condition is not assumed satisfied simply because the due date has passed. All conditions are due by 5pm on the due date.

If the due date passes and a condition has not been satisfied, then the first email received by either party is taken to have precedence, that is, if the purchaser doesn’t satisfy the building and pest condition by 5pm on the due date, then the seller is within their rights to terminate. If you have your conveyancer send an email at 8:31am the following morning to satisfy, but they already received an email from the seller’s conveyancer terminating the contract prior to this time, the contract will be terminated. If they haven’t received any email, then your satisfaction email is taken to have precedence and the contract is still on foot or valid.

If you are still in negotiations on a condition and the due date is looming, you need to request an extension of that condition prior to 5pm on the due date. Please note that until the seller agrees in writing to that extension, at any time between 5pm on the due date and receipt of that extension agreement, the seller can terminate the contract.

This is why it is extremely important to start on contract conditions immediately after executing the contract. This allows enough time to negotiate, extend and receive a response before the due date.

Searches
As a seller, you don’t need to obtain any searches. It is the purchaser’s responsibility to obtain the searches required to complete settlement. Sometimes you may be asked to provide copies of your latest rates and water searches to assist in a quick settlement.

As a purchaser, there are a couple of standard searches that you need to obtain so your conveyancer can adequately prepare for settlement. Upon your instruction, your conveyancer will order searches. These standard searches include:

  • rates
  • title
  • special water meter read
  • land tax clearance certificate
  • body corporate (if applicable).

There are many other searches you can obtain in addition to the required searches. Depending on what you want to do with the property, you may wish to obtain further searches.

For example, if you want to dig in the yard to build a shed you will most likely need to get a sewerage and drainage search. If you are buying a property with a pool, you’ll want to do a pool register search. If you know there is development in the future that might affect you at the property, you could seek a copy of the Department of Transport and Main Roads search.

A due diligence special condition is inserted as a special condition when there are specific searches that you want to get and if the result is unsatisfactory to you as the purchaser, you may wish to terminate the contract. These generally occurs in sales where the purchaser intends to demolish and rebuild on the property.

In a standard purchase, if you don’t obtain the above standard searches, you are putting yourself at risk of having to pay outstanding fees. These searches advise what has/hasn’t been paid for each service. For example, there might be outstanding land tax payable on a property, but if you as the purchaser don’t obtain the search to find out and subsequently request this amount be paid by the seller at settlement, then you become responsible for paying this amount. This is the same for outstanding rates, water, and body corporate bills.

Chattels/fixtures
The general rule to determine whether an item is a fixture or a chattel is to consider the degree to which that item is affixed to the property. For example, if you must unscrew something which will damage what it is screwed into to remove the item, it is generally considered a fixture.

There is a specific section on an REIQ contract where both the buyer and seller need to write down what will be staying/leaving the property upon settlement.

If you are expecting to take anything as a seller, include it in the contract.

If you are expecting anything to stay as a purchaser, include it in the contract.

The rule is that any fixtures are required to stay with the property and any chattels are required to be taken away following settlement unless specified in the contract.

General examples of fixtures:

  • carpets
  • blinds
  • pool filter
  • solar panels
  • clothesline.

General examples of chattels

  • fridge
  • washing machine
  • pot plants
  • television.

Remember: it all comes down to the degree of affixation. If in doubt, include it in the contract.

These are just some of the common mistakes that agents, buyers and sellers make on a contract of sale/purchase. To avoid these pitfalls, remember that the more information you put into a contract, the safer and easier the transaction will be. If you want to include special conditions, discuss it with your lawyer or conveyancer prior to signing the contract to ensure it gives you the protection you want.

Let us help you avoid these pitfalls
At Cornerstone Law Offices, we are a full-service, general practice law firm. We specialise in Family Law, but also practice in property, crime and traffic, migration and wills and estates. We pride ourselves on providing our clients with the highest quality of service to assist them in any matter they may experience in their lives. We have specialist lawyers in all areas of law, with offices in North Lakes, the Brisbane CBD, Logan and the Gold Coast. We can be contacted on 07 3806 4354 or email info@cornerstonelawoffices.com.au

Changes in GST Withholding rule for Conveyancing.

Buyers and sellers: responsibilities
Recently a GST Withholding rule was added to the tax laws. This new rule changes the responsibilities of sellers and buyers. In the past, the seller (company or individual) was responsible for holding onto the GST amount from the sale of new residential property or potential residential land.  This law does not affect the sale of existing residential properties, commercial properties, or contracts entered into before 1 July 2018.

What’s changed
Previously, the seller had to transfer the GST amount from the final sale price to the Australian Tax Office (ATO). Now, this responsibility has shifted to the buyer.

First, the seller must send a written notice to the buyer:

  • explains the procedure they will follow
  • says whether or not the buyer must withhold a tax amount
  • states the exact amount to be held
  • requests that the buyer chooses the respective option in the contract.

If the seller is a company, it must lodge its Business Activity Statement (BAS) and report its GST liability (if any) in order to claim GST credit.

Once the buyer receives the written notice, the buyer must:

  1. lodge Form 1 (GST Withholding Notification)
  2. lodge Form 2 (GST settlement date confirmation)
  3. pay the GST amount directly to the ATO within the specified time frames.

Form 1 can be lodged at any time between the contract being entered and the date of completion.  Form 2 (GST settlement date confirmation) must be lodged on or before the date of settlement. The GST amount is provided directly to the ATO on the date of settlement after lodging Form 2.

Case study
A seller company sends a notice to a buyer stating that a property will trigger the ‘withholding GST’ rule. The buyer enters a contract for a new $500,000 residential property or potential residential land and provides the seller with a $50,000 deposit. The buyer must then lodge Form 1. The GST amount is 1/11th is on the purchase price. Therefore, the GST withheld by the buyer is $45,454.54 ($500K -* 1/11) up to the date of settlement and directly paid by the buyer to the ATO after lodging Form 2 on the date of settlement. The final cheque amount given to the seller from the buyer would be $404,545.45 ($500k minus the $50,000 deposit and the $45,454.54 GST). The buyer’s solicitor may fill in and lodge the forms only if a signed declaration is provided by the buyer granting consent to the solicitor. The seller company must then complete its BAS and report its GST liability.

Get the right advice
Conveyancers and real estate agents are not able to provide GST advice unless they are a registered Tax or BAS agent. The information contained in this article is a summary of the GST changes. For more detailed information you are encouraged to contact the ATO office or speak to a licensed accountant.

Cornerstone Law Offices can help you with all your legal and property or conveyancing related matters. Call us on 1300 267 637 for an initial complimentary consultation (or contact us by clicking here).

 

Five steps to ensuring a smooth commercial property sale

  1. Review the contract

Commercial property sale: Commercial contracts are usually drafted using the standard Real Estate Institute of Queensland (REIQ) commercial land and buildings contract, but either party can choose to include special conditions within the contract that may alter or replace the standard conditions. It’s important that the contract conditions listed reflect your requirements exactly as you want them, as disputes often arise over contractual terms during the process of selling a commercial property.

  1. Meet your obligations

During the process of a commercial property sale, several steps need to be carried out to ensure you meet your obligations as a seller. Along with organising transfer documentation for your sale, a lawyer can assist in negotiating and confirming reasonable extensions of time requested by the buyers, and let you know when each condition becomes satisfied.

If there is currently a mortgage over your property, the release of the mortgage will need to be arranged with the financial institution. Your lawyer can liaise with your bank to ensure that the required steps are taken to ensure the release of the mortgage is ready for settlement.

  1. Know the adjustable items on your settlement statement

In drafting of the settlement statement, adjustable items such as outgoings and rent will need to be considered as they have an impact on the purchase price.  A commercial property may already have a tenant, so your lawyer can help by doing rental adjustments. Occasionally land tax will also be a consideration, and specific calculations for land tax can depend on clauses in the contract.

  1. Be GST prepared: issuing tax invoices

As a seller of a commercial property, if you are registered for GST you will need to provide the buyer with a GST tax invoice to enable them to claim a credit for GST in the purchase price. Your lawyer can assist with identifying what needs to be listed on the invoice, and provide samples of an appropriate invoice.

  1. Confirm you are ready to settle

Settlement of a commercial property sale can be a stressful time without the support of a lawyer. On the day of settlement, your lawyer will usually obtain the final payout figure on your mortgage from your financial institution and submit final cheque details to the buyer’s solicitor.

How we can help
Our expert lawyers can support you at every step of your commercial property sale. For more information on how we can help you, and for a quote, contact Cornerstone Law Offices on:

Phone: 1300 267 637

info@cornerstonelawoffices.com.au

 

 

 

Four steps to ensuring a smooth commercial property purchase

Purchasing a commercial property is a significant investment decision which carries substantial financial implications for you and your family or your business partners.

As there are several considerations which can affect the outcome of your property purchase, it is best to speak with your lawyer before signing any contract to purchase a commercial property to ensure your interests are protected.

  1. Review the contract

The first step in a business purchase should be to engage a lawyer to ensure your contract is exactly as you want it.  Purchasing a commercial property is a considerable investment, so you will need a lawyer not only for the conveyancing but also for pre-contractual negotiations and review.

Along with assisting in negotiation of terms between you and the seller, your lawyer should review the current terms of the contract to ensure that all clauses benefit you and to avoid unwelcome surprises down the track. The final contract should be an accurate reflection of the deal you have negotiated, and should ensure you are not disadvantaged.

  1. Due diligence: know what you are purchasing

The due diligence stage of purchasing a commercial property is extremely important in ensuring the property is in good condition. Searches often reveal surprising information about commercial properties and can make a significant difference to the contractual terms. To avoid being caught out, your lawyer can carry out several searches on the property for you, such as a company search or a search of the contaminated land register.

  1. GST: find out if you are eligible for exemptions

Before signing the contract, you will need to consider the GST implications on the purchase. When it comes to stamp duty, the amount of you will need to pay may increase if GST is to be paid on the contract, as stamp duty is dependant on the purchase price plus GST. However, there are some exemptions such as the ‘going concern’ exemption, which may apply if the property is a business premises or a tenanted building. We can help you determine if you can save money on GST before you sign the contract, which can make a difference to your overall cash flow.

  1. Tenancies: understand what is in the lease

If you are purchasing a property that already has a tenant, the specific terms of the lease can sometimes have an impact on the commercial viability of the purchase. Once you sign the contract you are bound by any leases disclosed in the contract, so you will need an experienced lawyer to review the terms of the lease and determine the terms of the lease and any obligations you are bound to fulfil.

How we can help

Purchasing a commercial property is likely to be one of the most important investment decisions you make. As experienced lawyers, we can help make the process as smooth as possible for you.  For more information on how we can help you, and for a quote, contact Cornerstone Law Offices on:

Phone: 1300 267 637

info@cornerstonelawoffices.com.au

 

 

 

 

Choosing a Conveyancer

Tips for ensuring your property transactions go as smoothly as possible

Buying a property, either as your own home or as an investment property can be an exciting time. It could be your first home or the dream home you have always wanted. Or are you a property investor looking for rental returns and the potential for significant capital gains in the long term?

If you are selling a property you need to make sure your contracts are drawn up correctly. The sale should also happen smoothly and in the prescribed time. This is particularly important if you are in a situation where the purchase of another property is contingent on the sale of yours.

Whether you are buying or selling a home, an apartment, a vacant block, strata title, commercial real estate or a rural property, it is important to get the best legal conveyancing support at all stages of the transactions.

Here are 6 tips for choosing a conveyancer:

1) Don’t just choose the cheapest. Your property sale might be the single largest financial transaction you ever carry out. And when the purchase of one property is connected to the sale of another, the last thing you need is for something to go wrong with the paperwork. Make sure you choose someone who is highly experienced in the legal aspects of a wide range of property transactions.

2) Don’t be pressured into using your real estate agent’s suggested conveyancer. You have the freedom to choose any conveyancer you like to manage your property transactions. Just because your agent has given you a conveyancer’s contact details, it doesn’t necessarily make them the best conveyancer for your situation.

3) Choose someone local to your area. A local, experienced legal conveyancer can provide insights and local knowledge that someone outside your area cannot.

4) Ask for testimonials. Don’t be afraid to ask for testimonials when you are choosing a conveyancer. If they have done a good job for previous clients, these should be easy to obtain.

5) Costs. Before signing up with a conveyancer, make sure you ask for an itemised list of all costs that are involved. Also, check if they have a fixed price guarantee that covers any other matters that might arise. 

6) Customer service. What was your first impression when you contacted the conveyancer? Were they friendly and helpful? How were you treated when you answered the phone, or when you asked them questions? Were you made to feel welcome? If so, then it’s more likely that your whole conveyancing experience with them will go well too.

We can help

We have extensive experience with conveyancing matters and can offer legal advice in regards to real estate contract law, advice for first home buyers, as well as liaising with financial institutions to ensure everything runs as smoothly as possible.

For more information on how we can help you, and for a quote, contact Cornerstone Law Offices on:

Phone: 1300 267 637

info@cornerstonelawoffices.com.au