If you are entering the property market for the first time as a home-owner, congratulations. This is going to be one of the biggest financial decisions you will ever make in your lifetime, especially in Sydney where property prices are labelled as “crazy”. So don’t throw caution to the wind, we are here to guide you through some of the key steps that you should undertake before signing a Contract for the Sale of Land (“Contract”).
You should personally inspect the property at an open-house viewing to ensure that you get a general feel for the overall quality, appearance and features of the property.
It is recommended that you check for the following during the open house inspection:
- any signs of dampness or mould on the wall or ceilings, especially along the skirting boards;
- any wall cracks, sagging ceilings or buckling walls;
- the general state of the roof, guttering and drain pipes;
- if applicable, lift up the carpet and check for rotting floorboards or dampness;
- that the taps and toilet cistern are working fine;
- any rust or damage to the pipes under the sinks;
- whether all the light switches function properly and the circuitry age based on the fuse box;
- if there is significant noise coming from surrounding areas (such as neighbouring lots or major roads nearby). We suggest that you walk around different parts of the property to check for neighbourhood noise;
- if there are any strong smells coming into the property.
Pre-purchase inspection reports
Generally a Contract contains a special condition which states that the purchaser buys the property with its apparent and latent defects. In other words: buyers beware. So as the purchaser you must satisfy yourself as to the state of the property.
It is strongly recommended that a purchaser should obtain the following pre-purchase reports before signing a Contract.
I have seen some purchasers obtain the following pre-purchase reports during the cooling off period. The downside to this option is that if you decide to rescind the contract before the expiration of the cooling off period due to any problems regarding the property uncovered by the pre-purchase reports, you must forfeit 0.25% of the purchase price to the vendor.
- Building inspection report: This report is a written account of the property’s condition. It will include any significant building defects or problems such as rising damp, movement in the walls (cracking), safety hazards or a faulty roof. A building inspection report is usually prepared by a licensed builder, surveyor or an architect.
- Strata report: If you are buying a strata scheme property, then this report will tell you whether the place you are buying into has well maintained amenities. Sometimes you will find that some strata buildings have fiscal mismanagement, legal litigation on foot, disharmony amongst neighbours or high strata levies. You can easily employ a specialist strata investigator to carry out this exercise on your behalf.
- Pest report: A pest report will identify the presence of any wood-destroying insects, such as termites or borers. This report is generally recommended if the property is located where such insects are a known problem.
- Survey report: The main function of a survey report is to disclose whether or not the requirements of the local government legislation have been complied with. It also helps purchasers to ascertain whether or not any building, fence or other structure on the property encroaches on adjoining land or vice versa. This report is more suited to a Torrens Title property.
Getting the experts involved
- Solicitors: Once you have obtained the above reports, don’t forget to consult a solicitor on your rights and obligations under the Contract. Signing and exchanging the Contract without being fully informed of the standard and special conditions in the Contract can have profound long-term consequences on your finances and your overall quality of life. It is vital that you have a solicitor who can guide you through the conveyancing process.
- Finance brokers or mortgage lenders: Always ensure that your finances are in order before exchanging the Contract. This is because as soon as the Contracts are exchanged you will be required to pay the deposit to the vendor’s agent (usually the real estate agent). Then on the day of completion, you will be required to pay the balance of the purchase price (subject to any adjustments for land tax, council, water and sewerage rates) and stamp duty. If the sale does not complete within the specified time due to your delay, the vendor can terminate the Contract, keep your deposit and may sue you for loss and damages.
Buying a property is an exciting and wonderful thing, but don’t let the process overwhelm you and definitely don’t let the real estate buzz words such as “oversized windows”, “charming” or “light-filled” deceive you. Do your due diligence, conduct research and ask questions if you are unsure. These steps will ensure that you can sign your Contract with confidence and enjoy your castle in the long-run.
The information contained in this article is not legal advice. This article is intended to provide general information in summary form only. You should not rely on the content of this article as legal advice. If you would like advice specific to you and your situation, please contact us.