There have been more property owners preparing and listing their properties for sale in time for auction prior to the festive season. This is expected in Spring, though if purchasing property one has to be able to navigate through the competition presented by other buyers in the market seeking quality property for investment or to occupy.
Master Advocates have found that there are still good opportunities in Melbourne available to buy property by negotiation prior to auction if the vendor and sales agent have the right motivation and some fair purchase opportunities available to buy at auction also without being forced by competition to pay too much for the property. In most cases properties are still selling at high price levels well above the expected median price compared to prices achieved in recent month’s for comparable sales. The market is not showing signs of price corrections or falls just yet, though buyers in general are starting to take more time to prepare and research options available as well as being more conservative with initial offers. This may be due to changes in Bank Interest rates by the major banks for investors and affordability in general for the average buyer as household income has not really increased with the rate of growth in property prices over the past year.
Some experts in related industries have shared their thoughts and tips in this news issue.
Topics in this issue:
- REIV Weekly Auction & Sales results, Market Snapshot
- Mortgage Lending Tips When Purchasing Property and Latest Industry News
- Common Mistakes In Real Estate Contracts Of Sale And Section 32 Vendors Statements
- Building Inspection Tips
Weekly Auction & Sales Results, Market Snapshot
A clearance rate of 74 per cent was recorded this weekend compared to 72 per cent last weekend and 72 per cent this weekend last year. There were 1080 auctions reported to the REIV today, with 795 selling and 285 being passed in, 125 of those on a vendor bid. Bayside suburbs have attracted strong competition in recent months, with Brighton, Seaford and Dromana topping the list for price growth in the September quarter.
Handy tips when purchasing a property:
- Meet with a Lending Specialist who can tell you how much you can borrow
- Save, save, save your cash. The bigger the deposit, the smaller the loan.
- Aim to borrow less than your maximum to give your room to move
- Lose the credit card. Each $1,000 credit card limit reduces your home loan borrowing power by $4,000
- Don’t procrastinate. You cannot buy capital growth back
- Be mindful of hidden costs. Once you own a house, there are gutters to fix, hot water service to replace etc. Plus the costs of purchasing such as stamp duty and conveyancing. Rule of thumb: allow three months salary as a buffer
- Take out income protection insurance
- Pay your loan fortnightly
- When interest rates drop keep your payments the same
- If you buy a good property, it will always rent out – no matter what!
This week’s Mortgage News Update:
The big four banks have raked in $125 million since August after raising interest rates on investment loans. Collectively, Westpac, Commonwealth Bank, NAB and ANZ added a whopping $2.8 million per day to their already bulging pockets.
Westpac, the nation’s second-biggest lender, this week also jacked up rates on owner occupied loans by 0.2% to 5.68%.
It did this despite the Reserve Bank not having altered rates.
It is expected the RBA may actually cut rates when its board next meets on November 3, Melbourne Cup Day.
… the ANZ has made an estimated $35 million since increasing investor loan rates by 27 basis points in August, CBA $54 million, Westpac $19 million and NAB $17 million.
A LEND – Mortgage Solutions
“arranging loans since 1985”
0419 512 833
Common mistakes in real estate contracts
Buying your first home is incredibly exciting. It can also be a little scary! It’s a big commitment and probably the biggest purchase of your life. So to ensure smooth sailing we’ve compiled a list of common mistakes we see under Contracts of Sale. Our intention is to let you know about these well in advance so you can avoid the pitfalls and enjoy the ride.
Most Common Mistakes:
- Incorrect spelling of names and including middle names
Before you purchase a property it’s important to discuss with your accountant whether you’d like to purchase the property in your own name or whether you’d like a different purchasing vehicle, such as a company.
If you do choose to purchase in your own name it’s crucial to ensure that the name you put down in the Contract of Sale is identical to the name on your identification documents (such as your passport or driver’s licence). If not, a Certificate of Title may be issued in the wrong name which can cause a lot of headaches when you want to sell the property down the track.
Our top tip here is to ensure to include your full legal name under the Contract of sale, including any middle names.
- Failing to disclose easements
In short, easements are rights of third parties to use your property in a particular way. For instance, your property may have an easement over it allowing another land owner to use your driveway in order to access their property.
All easements should be clearly noted under a Contract of Sale. If an easement materially affects the purchaser’s right to use the property then the purchaser is generally entitled to terminate the contract unless the easement has been disclosed under the Contract of Sale.
- Failing to disclose leases
If you’re intending to purchase a property with vacant possession then it will be important to check the Contract of Sale to ensure there are no tenancies on foot.
In most cases properties are sold with vacant possession but in some instances a vendor may fail to disclose tenancies because they assume that they will be able to end the lease prior to settlement. This is of course not always possible.
- Expired finance and building inspection conditions
In many cases where a purchaser is buying a property via a private sale they will take the opportunity to make the contract ‘subject to finance’ or ‘subject to a building inspection’. It’s important however not only to get this wording right, but also to ensure you understand what your obligations, as purchaser, are under these conditions. Often we speak to purchasers who believe that these conditions automatically give the purchaser a right to cancel if they are not met.
In fact, the purchaser is required to make effort to meet these conditions, and if they cannot be met, the purchaser must notify the vendor prior to the expiration period of the condition. So, for example, if the purchaser has 14 days in which to obtain finance, the purchaser must attempt to obtain finance within those 14 days, and if finance cannot be obtained, must inform the vendor that the conditions has not been met within those 14 days.
If the purchaser fails to notify the vendor then they run the risk that the contract becomes unconditional.
- Ineffective Building Inspection Conditions
Unfortunately purchasers often (and incorrectly) assume that inserting a building inspection clause will mean that if the building report shows that the property is not in ‘good condition’ (i.e. leaks, rust etc.) then they will have a right to cancel the contract.
In fact, most building inspection clauses only entitle a purchaser to terminate the contract only if the property is not ‘structurally sound’. In worst-case scenarios this may mean that something as major as a termite infestation may not render the property ‘unsound’, thereby requiring the purchaser to continue with the contract and purchase a property with a very significant termite problem.
The point here is to ensure you hire a lawyer or conveyance early on to negotiate the special conditions under the contract on your behalf. Often it won’t cost you any more money but can save you a lot of money by avoiding costly mistakes.
If you’re thinking about signing a contract of sale and would like a property expert to guide you through the process please contact Mira Stammers on 1300 822 708.
Mira Stammers is the CEO of Legally Yours. Mira has extensive experience in corporate law in both Melbourne and London and regularly advises clients in the areas of corporate and real estate law. Mira has a team of expert lawyers experienced in all areas of law that provide fixed-fee legal advice to clients across Australia. If you’re looking for an expert property lawyer, Mira can help.
CEO | Legally Yours
Building Inspection Tips
Written by Bruce Leighon
Do I have to have a building inspection prior to buying?
The simple answer is no! …but should you?
To tell you the truth of the 250 building and timber pest inspections that I carry out over a year, most houses are not going to collapse the moment you sign a contract. Most inspections uncover a myriad of minor cosmetic or superficial problems, mainly to do with a lack of normal building maintenance, gutters blocked, down pipes not connected, leaks to plumbing, compliance issues around pergolas and the like. These issues can be dealt with by the average handy person. If you know what the problems are.
Some inspections, around 15% comeback with more serious issues, termite infestation, pool fence compliance, re stumping and foundation issues. These issues can be costly to rectify, but the house is still very much a viable home. In this situation, it is important to ask these questions. Am I prepared to take on the financial responsibility for these issues? What will that actually cost to get sorted? Where do I start?
Less than %5 of homes I look at are at the point of no return where it would be best to demolish the house and start again. Let’s hope you don’t have your heart set on this one
Let me share a common scenario with you. This example relates to a flat roof on a house in Berwick that I inspected last week. From the ground the roof was concealed. Now for most people who looked at this house for 15—20 minutes at the open would never have suspected the roof to be in such bad shape, why would it be, the rest of the house presented beautifully. Some unsuspecting buyer will now have a $30k bill to replace the roof, a replacement that will need to be sorted in the next 3-6 months. 30 thousand is a lot of money in anyone’s book, it can make what seemed like a reasonably priced home or investment into a really bad choice, thankfully not for my client this time around.
In the end you need to know what you are getting yourself into. What are you really buying? Give me a call, I’ll tell you in plain easy to understand terms. Don’t get caught out.
Supportive information sources: REIV, A-Lend Mortgage Solutions, Legally Yours and Neighbourhood Building Inspections in association with
Master Advocates – Real Estate Services – published October 2015