So what is the typical property purchasing process in Australia? and what does it look like?
**Warning long read – may contain traces of boring!! ? ** 🙄
You’ve made the decision to purchase your own slice of Australian Real Estate. Sincerely congratulations, now let this topsy-turvy roller coaster begin….
Many argue this point but first you must find out how much you can borrow. The reason for this is there is no reason to put sooo much effort in looking online, attending all those open homes etc. Just to find out you simply cannot afford to purchase what you have fallen in love with.
There really are only a couple of options here in Australia; they are 1/Engage with a Mortgage Broker or 2/Go directly to the bank. Both have pros and cons, more on this in another section but for now they both will give you a great indication on exactly how much you can A) borrow B) comfortably repay. I really urge you to have an in-depth conversation about the repayments side of things as the type of rate (variable or fixed) can play hugely in your day to day budget and can even quite easily lead to financial stress with worst case scenario; forcing you to sell your slice of the Australian dream.
They will issue you what’s known in the industry as a “Formal Letter of Approval” which simply states how much you can borrow and will last up to 90 days from date of issue before your circumstances will need to be re-looked at and the process starts again.
Whilst you are talking to your chosen lending institution you will also need to research what ownership structure is right for you. Again talk to your lender and tax accountant as there are multiple ownership structures to consider. The most common structures are: Tenants in Common, Joint Tenants and held with in a Trust with individuals being the beneficiaries.
- Joint Tenants – Owning a property by two or more parties held via equal shares. If one person dies then their share of the property will pass onto the remaining joint tenant. Creating a “Right of Survivorship”.
- Tenants In Common – Owning a property by two or more parties held via equal shares. If one person dies then their share of the property will pass onto the deceased parties will. Therefore there is not “Right of Survivorship” in a tenancy in common.
- Held with in a Trust – This usually is when you own predominantly multiple properties as investments and can be owned by one or multiple beneficiaries or even company owned within the trust. The trust (depending on type of Trust) can then distribute any income to those beneficiaries. The advantage of using a trust is that any income received will be taxed at a flat rate of 30% instead of your marginal tax rate. *Note although it’s a very basic rundown of a trust this is the very principle of a SMSF (Self-Managed Superannuation Fund) and as simple as it may sound there can be quite extraordinary costs involved in administration and running of Trusts. But this is just to bring to attention what is available out there and again you should always consult with your accountant as to what is the best ownership structure for your situation.
Next you’re ready for the fun part: Research what suburbs/areas you would like to live in. When doing so take into consideration transport, location to work/schools/family/friends and anything that is important to you. You will be surprised by adding even just another 15-20 minute commute (one way) onto your day this will have an impact on your overall day and lifestyle in general.
…Before you start throwing rotten fruit at me I hear you, I hear you! Ben you want to pay the extra $$$’s for me to get that little bit closer? Now I’m not saying to put the dream of owning your own property on hold. I’m simply saying that an option perhaps could be; being closer to better public transport. This maybe a better option for you? Again this will be more a personal decision and one that you alone will need to weigh up (insert sigh of relief here).
You will also need to decide what your needs are in a property. This will determine if you are going to buy established, new, land, house, townhouse, villa or even an apartment. Again add a hand full of personal preference and add a dash of supply as the suburbs of choice may dictate what you can buy.
Now that you’ve established how much you can borrow, what location you want to buy in and what type of property to purchase you need to consider the actual sales process that suits your needs. For example if you are going to purchase via Auction or Private Treaty? If you are going to do your own legal work or have a Solicitor/Conveyancer deal with the transfer of Real Estate into your own or entity’s name. For further information refer “What is a Conveyancer/Solicitor and what do they Do?”
Congratulations on getting this far! – Looking back it has taken quite a bit of effort but the fun continues: searching for the right home or property. Don’t forget to download “The Property Buyers Guide” App now to help at the open house inspections. It will enable you to not only remember what features were in each property but guide you as to what questions to ask. Also the research needed to make an informed decision before buying.
Now many agents will be talking to you about compromising! And the old “I really don’t think your budget will allow for that”. So a great exercise to find your “Non Negotiables” is simple write down your top 10 (or more if needed) “must haves” down the left hand side of the page with a tally column running down the right hand side of the page next to it. Now read #1 vs. #2 must haves and place a mark next to the one that takes priority. Next #1 vs. #3 etc. and repeat until you clearly have a Top 5.
This will give you a clear indication on what is ultimately your true “Must Haves” and not just “Nice to Haves” – these then form a basis of what you should be looking for in a property. A pre-filled form can be found further within this website for your ease: “My Wish List vs. Absolute Must Haves”
By now you have had many ups and downs throughout your journey… Let’s meet a new emotion; uncertainty and fear with the “offer” process. Just like many of you the fear of the unknown will take hold here. Which is exactly what the Real Estate Agent will take advantage of (insert evil laugh here). Unless you have hired a Buyer’s Agent see “What is a Buyer’s Agent? And should I engage one?” Then the negotiation process will be completely up to you.
The buying and negotiation is a personal journey and there is really no right way to negotiate. Some start extremely low and work their way to a mutual price pint. Others will go the whole hog and then there’s the purchasers that “simply can’t live without the property”! They usually out bid everyone simply to secure the house of their dreams. The only advice is that only you know your budget, you alone will have to live with the repayments so the purchase must fit within what you feel comfortable with!
Now what? You have successfully negotiated to buy the property and the dreaded paperwork follows….I think I’d rather poke my eye out with a fork….
Here you will need to organise any building/pest inspections, pay the deposit and of course liaise with your solicitor/conveyancer (unless doing yourself), realtor and lending institution. It really is as simple as filling in all the paperwork. Especially as the loan side of things have been taken care of already and simply waiting until settlement…..now the arduous wait begins… which will seem like a life time!! (Insert sigh here)
The Settlement Process: By now all the paperwork has been submitted and a formal approval has been given. Meaning that the contract is bound by both parties and the property will be officially yours. Woot Woot!!
There are a few things you will want to get organised prior to the big day, besides the obligatory “packing of the boxes” and the endless pursuit of “How did I get soo much stuff”. You will need to organise the transfer of all utilities, changing all mailing addresses and organising insurances. Click here for the “Change of Address Cheat Sheet”.
Also a little industry insight – be warned that your solicitor/conveyancer will be your best friend when it comes to the actual settlement day, if something goes wrong or settlement gets delayed for some reason…ever wondered why agents make a majority of settlements on a Friday and it happens to be their one day off.… hmmmm a thought to ponder…
OMG!!! ? There’s seriously not enough emoji’s to portray my excitement!! ? The big moment has arrived…..eeek I could pee my pants!! What are you doing here? Go get the keys to your new place and on behalf of everyone here at Simply Altruism we sincerely wish you all the best and hope you enjoy your new property!
Don’t forget to visit our “Tips & Blog” page for further information on all things Real Estate! And why not download the FREE “The Property Buyers Guide App” while you’re at it 😉