The Big Purchase

How do you purchase or even make an offer on a property that you’d love to buy? What is the difference between an auction and a private treaty sale? What’s with the deposit?

On this page we take about some of the things you need to consider when you are ready to negotiate the purchase in a property. You’ll need to liaise with a few people at this stage, such as us, to organise your finance, the real estate agent selling the property and your solicitor/conveyancer.

Download the Neomoney Big Property Purchase Check list.   This form will help you list all the required features per property you inspect

Buying Property through a Private Treaty

The most common way for purchasing a property is a Private Treaty sale for it to change hands from seller to buyer. This involves a real estate agent, or with property for sale by owner, the owner themselves, setting an asking price. The property is put on the market and a buyer is sought. The price is often negotiable.

When you have found a house to buy or bid on, you may want to notify us and solicitor or conveyancer first to make sure everything is in order and they are on hand to help you once you successfully make an offer.

How to make an offer

Upon buying a property, you make an offer to the real estate agent, who then talks to the property vendor (Seller). There is usually some negotiating of price, and if both parties are happy with a price, a contract of sale is signed by both the vendor (Seller) and the purchaser (Buyer). This is called exchanging contracts and is when you pay a deposit. Beware of Gazumping it is not until you have exchanged contracts that the property is yours.

With private treaty sales there is a legislative cooling-off period after the contracts have been exchanged (unless the period has been waived at the election of both parties). This means that the purchaser can change their mind and decide not to go ahead with the purchase. The purchaser must inform the seller in writing, and the deposit will be returned. However, the vendor may be entitled to retain 0.25% of the purchaser’s deposit. This may vary depending on the type of purchase, the contract and the state/territory you are in.

Termination of a Contract under the five-business day cooling-off provision

If a buyer terminates a Contract of Sale at any time during the stipulated five-business day period, they will have to pay the seller 0.25% of the property price on the Contract. There is no additional GST payable on this amount.

If the buyer has elected to waive the cooling off period provision they will not incur any cost and consequently cannot terminate a Contract.

Pest and Building Inspection Reports

Inspecting a property

Buyers can make their Contract of Sale conditional on the basis of a satisfactory building and pest inspection report from a licensed professional .(Both Archicentre and the Housing Industry Association (HIA), among others, provide an inspection service. For a fee, they inspect and report on the state of the property, including the structural condition, damp and termites).

Inspections should be made at the advertised times or by appointment with the real estate agent.
You may consider having a property inspected by a builder or architect to assess whether there are any defects that might affect your decision to buy. This is particularly relevant if large-scale renovation or extensions are planned.

Buying Property at Auction

An auction is when prospective buyers come together and bid on a property, with the highest bidder being successful, subject to the bid exceeding the seller’s reserve price. Auctions can be very emotional, and it is important not to get swept away by the exciting atmosphere and offer more than you can afford.

Auction Registration

In some states, to bid at auction you must first register with the agent selling the property  and obtain a bidder’s number. You will need to show some form of identification e.g. a driver’s license. When the auction begins, you must display your bidder number each time you make a bid.

How the auction starts

The auction will begin at the allocated time with the auctioneer welcoming people, and announcing that he or she will start the auction. Some details about the property will be read out such as the address and some of the key features of the property. The auctioneer will then ask for an opening bid. The vendor may make a vendor bid to get the ball rolling.

How to bid at Auction

Once the auction is in progress you can make a bid at any time, either verbally or non-verbally, by raising your hand or nodding your head (and displaying your bidder number, if applicable in your state or territory).

The auctioneer normally informs people of the increments that you can bid on. At the beginning it’s not unusual for bidding to be made in $10,000, or sometimes $20,000 increments. When you feel like slowing the increments down, you can offer an increase of $5,000 or less (e.g. $1,000). However, the agent can ask that bids be kept at $5,000 increments, but if bidding stalls, they may accept $1,000 and even $500 increments.

What happens when bidding stalls?

When bidding stalls, the auctioneer consults with the vendor to ask if the reserve price has been reached. The auctioneer will then announce either that “the property is now on the market” or that it has not reached its reserve.

If it is ‘on the market’ bidding continues until it stalls. The auctioneer will then solicit final bids, repeating the highest bid. If there are no further bids he or she will say “Going , going, gone” or “Going once, going twice, going three times, sold!” and bring down his or her hammer (or hand) on the word “gone” or “sold”.  The property is then sold to the highest bidder.

When bidding does not reach the owner’s reserve price the property is not sold. The house is then considered to be passed in. If the house is passed in, the highest bidder usually has first opportunity to negotiate with the seller and the agent.

What happens if your bid is successful?

As the successful bidder, you will be required to sign the contract and pay a deposit on the spot, usually 10 percent (however, you can negotiate with the seller to put down a smaller deposit prior to the auction).

So don’t forget to take along a cheque book, deposit bond or some other means of payment. It’s best to check with the real estate agent before you attend an auction as to what form of payment is required on the day.

Auctions automatically waive any cooling-off period. So be aware that once you sign the contract, if you do not continue with the purchase, you will lose your deposit. You may also be liable to the vendor for the deficit realised on the sale of the property within 12 months of the auction and reasonable costs associated with that sale, or you may be sued by the vendor for breach of contract.

REI Agents

It is important for consumers to be aware that not all real estate agents are REI accredited agencies. The REI accredited agency logo is displayed in the front window of accredited agencies and serves as a visual safeguard to help consumers make informed and confident choices.

For a list of REI accredited agencies in your local area visit www.reia.com.au or call 02 6282 4277.

 

I’m ready to apply.

If you find that you fit one of the above medical professions and require further information, please contact us on 07 3315 0381 or send us an email.