Buying process in Victoria.

[Compleks]

Sorry, I know this has been done a million times. I just spent the last hour going over old threads, but would like to consolidate and confirm the process in my own mind.

1- Pre approval.
Find a mortgage broker and determine borrowing power. Get pre-approval on loan.

Do you get pre approval up to a maximum amount? Say my borrowing capacity is $350k, the bank will pre approve a loan up to that amount, even if I'm only planning to spend $300k?
I take it that pre approval comes with conditions on where and what properties you can buy?
If I find something I like, do I then have to go back to the lender with the details on the property to double check that they will lend on said property (before making an offer)?

2- Research / Search.
Find the right property for my strategy.
Do you guys use a buyers agent or specific real estate agent?
Is it fine to search online through real-estate/and/domain.com.au? Then contact the agent directly using the details provided.

3- Inspect.
Inspect properties in the area and properties you might consider making an offer on.

4- Offer.
Make an offer. How is this done? Verbally? Written?
Is this just a basic offer on price, or do I include any clauses at this stage?
How negotiable are the prices listed online? Is it like selling a used car where most people put up an ideal price expecting to negotiate a bit?

5- Acceptance/Contracts (or rejection)
If accepted at this stage the vendor will send me the contract? I need to have the contract looked over by a solicitor and/or conveyancer?
What is the difference between the two?
Include any clauses for pending finance approval, building inspection, pest inspection, anything else?
Sign everything and exchange contracts with vendor.
Pay 10% deposit at this stage?

6- Cooling off period.
Have all building/pest inspections carried out and finalise finance. Conveyancing of land and property. Or would I have this done before signing the contract?

7- Pre settlement inspection.
Just to make sure the property has not been changed/damaged during the settlement period.

7.5- misc.
I should also have sourced a property manager and have informed them of when settlement is due so they can start searching for a tenant?
Also should be organising gas/water/electricity be turned on at settlement date or just before.

8- Settlement.
Handing over of the deeds, keys etc...

8.5- Insurance.
What insurances do I need?
Just read that I may be better off buying insurance as soon as contracts are exchanged.

9- Stamp duty.
Due 30 days after settlement?

***
I know there is a ridiculous amount of question marks up there. I just want to make sure I have the right process in mind.
Also, does anyone know roughly how much you can expect to pay for legal advice (solicitor/conveyancer) and inspections (building/pest) during this process?

Thanks for tolerating all my questions.

 

[Peter_Tersteeg]

Some comments to your questions:

1. Pre-approval: Best to get a pre-approval at the upper limit for what you're anticipating. You can always borrow less. Pre-approvals have plenty of conditions, but the main one will be a property that is acceptable to the lender. This usually means a valuation at the purchase price. If it's an out of the ordinary property it's not a bad idea to check with the lender or broker prior to making the offer. Note that not all instances require a pre-approval, sometimes it's a waste of time or can actually do damange. Look to your broker for more specific advice on this.

2. Research / Search: Some people will use a buyers agent. Very few people work with a specific sales agent, but if you're buying a few properties in an area you do tend to get to know some agents which can be an advantage.

4. Offer: In most cases, you'll offer verbally and if the agent feels the offer has a chance of being accepted, they'll ask you to fill in a contract which forms the basis of a 'written offer'. Insert any clauses/special conditions at this point.

5. When the vendor counter signs the offer it's accepted. If they want to make a counter offer, they'll cross out your price, sign the contract and when you initial the new price you've accepted the counter offer. Usually this doesn't occur as counter offers are done verbally and only the final agreed price is written and initialled by everyone. You're usually expected to put down a deposit, but 10% is entirely negotiable. The date when the deposit is made is also negotiable.

6. Cooling off: Contracts have a 3 day cooling off period where you can exit with minimal penalties without a reason. Building & pest inspections are written in as special conditionals with their own dates. Finance clauses are a separate section.

7.5. Misc: Prior to settlement it's worth doing things like organising quotes or negotiating to have a property manager go through the property. You want to get everything lined up so you can get any improvements done and a tenant in there asap. Utilities are the teants problem.

8.5. Insurance: Do it before settlement. You'll need to organise your insurance once finance is approved as the bank will require a copy of the insurance certificate before settlement. It's also good to have in the event that something happens to the property and the vendor doesn't have it insurred.

9. Stamp Duty: The bank collects the stamp duty at settlement and pays it on your behalf. Some lenders will credit your loan with the stamp duty amount in the meantime to save you a little interest.


The main difference between most states and NSW is that the contracts aren't signed in NSW until all special conditions have been met. The contract immediately becomes unconditional at exchange in NSW. Elsewhere you exchange conditional contracts which go unconditial later. QLD has plenty of legal quirks but the overall process is essentially the same.

In any state, the process is basically this:

1. Get your ducks in a row with professional advice. Start with finance, but it's also useful to get a conveyancer before purchasing. It can often pay to get advice from an accountant for guidance to ownership structure prior to purchasing.
2. Research a lot. Go to plenty of inspections and auctions.
3. Research some more.
4. Then research again.
5. Make an offer when you find the right property(s).
6. Call the broker/lender as soon as an offer is accepted. Also get the contract to your conveyancer so they can check it out.
7. Let the financier and conveyancer guide you through the steps to settlement.
8. Act quickly when they give you things to sign or ask you for information.
9. Wait for settlement.
10. Pick up the keys, pop the bubbly.

 

[vaughan]

The main difference between most states and NSW is that the contracts aren't signed in NSW until all special conditions have been met. The contract immediately becomes unconditional at exchange in NSW.

In NSW the typical "subject to finance" or "subject to inspection" clauses are not used because you get a 5 day cooling-off period when you are expected to do your inspections, checks and get finance sorted. This period can be extended by negotiation with the vendor. Buyer pays a 0.25% deposit (usually a couple of hundred dollars) which is not refunded if they exercise their option to withdraw.

I've found that I usually verbally get an offer accepted, then do my building inspections and get the solicitor started on the contract and searches. By the time the contracts are signed and exchanged all the ducks should be in a row and the cooling-off period is just the time where the solicitor waits for the title searches to come back and be clear.

Note that the cooling-off period is for the buyer, not the seller, and that once the contract has gone unconditional, the buyer is locked into the purchase. Strictly speaking there is no "get out" of the contract for the buyer. Many people think they'll just forfeit their deposit but in fact the seller can also recover the difference in sale price if the property is subsequently sold for a lesser value. This could be many thousand of dollars more than the deposit paid. Buyers of off-the-plan properties can get hit with this when the property value drops between exchange and settlement and they cannot get the finance they need to complete. They lose their deposit plus pay more.

 

[BMan]

how can you get finance sorted in 5 days?

 

[Aaron_C]

Victoria's sale of land process is far more orderly than NSW. Only one contract, signed and bound, floating around. Not 10 contracts with 10 different purchasers since no one has exchanged. NSW's system is very, very chaotic imo.

 

[Compleks]

Thanks guys. Good to have a bit of a clue what to expect when the time comes.

Could anyone estimate the costs of a solicitor/conveyancer and building/pest inspections etc... during the settlement period?

Cheers

 

[matto_]

B&P generally around 500-600 (depending on how much detail you are after).

 

[Robstar]

Conveyancing cost me about a grand recently which came out at settlement...

 

[Peter_Tersteeg]

how can you get finance sorted in 5 days?

It's possible, but generally unlikely. Budget 2 weeks at the moment and it'll probably be okay but be preapred to extend to 3 weeks.

Could anyone estimate the costs of a solicitor/conveyancer and building/pest inspections etc... during the settlement period?

In Victoria $800 to $1,000 is common for conveyancing. NSW tends to be more expensive.

B&P can vary but put aside $500 and you'll be in the ballpark.