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Voiceover: This podcast is for education and entertainment purposes. It's not financial advice and doesn't take into account your objectives, financial situation or needs. You should consider if the information in this podcast is appropriate for you and contact a professional financial adviser. If you are seeking financial advice.
Alan: Hello and welcome back to the Teachers Mutual Bank Bringing It Home podcast series, where we take you through the home buying process step by step from getting home loan ready to the home loan application process right through to home sweet home.
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Alan: I'm Alan from Teachers Mutual Bank. And joining me for the final time today is Financial wellness and certified money coach Betsy. But his greatest wish is that every Australian enjoys financial well-being. She believes the more skill and knowledge we have around money, the better choices we make to live a happy, independent life. Across her extensive career in financial services that she's helped hundreds of people to realise their dream of becoming home owners and investors.
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Alan: Hi, Betsy. It's great to have you with us again.
Betsy: Hi, Alan. I can't believe this is our final episode already.
Alan: I can't believe that just flying through today, we're looking at the home buying process from making an offer to sale and settlement. But before we get started, we'd like to acknowledge the traditional custodians of country throughout Australia and their connections to land, sea and community.
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Alan: We pay our respects to their elders, past and present, and extend that respect to all Aboriginal and Torres Strait Islander peoples. Well, Betsy, we've come a long way since starting this journey, haven't we? We've talked about getting loan ready, applying for a loan. Searching for the right property. And now at the pointy end, it's important for listeners to know what to expect going into the actual buying process.
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Betsy: I couldn't agree more. I mean, like buying your own home. It's a big life milestone. It's exciting. But I can tell you from personal experience, it can also be a bit of emotional rollercoaster, too, especially when you're like bidding at auction. But if you know what to expect during the buying process and what your different options are along the way, you can feel more prepared and empowered and confident when it comes to navigating the process.
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Alan: Okay, let's kick things off by talking about the who's who of the home buying process and what roles they might play along the way.
Betsy: Yes, You're going to meet a lot of people along the way. So you'll need to know people and not your parents or your mate who works in property, although these people can be wonderful people who can support you.
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Betsy: But the first one is the real estate agent. Now, like they're your kind of go to person. The go between connecting the person who is selling the home and yourself. They're your go to person to speak to about house inspections. The seller's price expectations, as well as other houses for sale in the area. And if you need a contract review as well.
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Betsy: Now, keep in mind they're acting for the seller's and they'll be trying to get the best price and the best outcome for the seller.
Alan: Yeah, look, I think I listen, most of our listeners will be familiar with real estate agents, but the capital, there's a couple of other people who play an important role in the sales process as well.
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Betsy: Yes, there is. So there's the second person that you'll want to have in your in your corner is your solicitor or conveyancer. Now you can use either a solicitor or conveyancer to help you buy your home. Both are qualified to handle the transfer of real estate from one person to another. What they'll do is they'll navigate the legal documentation as well as that settlement process.
00:03:22:07 - 00:03:45:14
Betsy: They'll review and exchange contracts, read your contract of sale for any hidden clauses. They'll perform property searches such as property title searches, strata searches and survey plan searches. They'll also arrange the settlement with all the parties involved.
Alan: All right. And that brings us now to number three.
Betsy: Yes, the building and pest inspectors. So quick question for your listeners.
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Betsy: Would you buy a car without taking it for a test drive?
Alan: Probably not.
Betsy: Probably not. No, No, you probably wouldn't. The property you might want like might from the outside look fine, but a number of problems that aren't visible to the naked eye, including major structural issues, might be lingering underneath. So we talk about this in our last episode, but I just want to emphasise its importance here.
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Betsy: Building and pest inspectors check for any issues in the building's structure or whether there's any pests in the house or the unit. And if you're buying a house, a pre-purchase pest and building inspection is essential. If you're buying a strata unit, get a strata inspection report done as well.
Alan: Okay. So now we've got a better idea of the main players in the process.
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Alan: So let's take a look at the different ways you can buy a property and the key steps involved.
Betsy: Yes, I'm going to keep it simple and just focus on two of the main ways you can buy and sell residential property. The first is either by private treaty or the second by going to auction. So private treaty, that's like a property that's up for sale.
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Betsy: There's usually, but not always an advertised price. That means if you find the right property and you're ready to buy, you can make an offer. But remember, acceptance of your offer isn't legally binding, which means other prospective buyers could also come in and make an offer too.
Alan: So if I'm looking at a property at the moment, but it's actually up for auction.
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Betsy: Yes, that's the second way. So if a property is going to auction, you usually have to wait until the auction day to bid. Not always, but usually some sellers will be open to a pre-auction offer, which means not every property will actually make it to auction if that offer is accepted prior to the auction date. So this is where you want to check in with your real estate.
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Betsy: Who's selling the property to find out? Is this an auction? Is that something that open to? The main thing to remember with auctions is whoever makes the winning bid is legally obliged to buy the property. And we'll get into that in more detail in a second.
Alan: Look, I've seen some of those shows on television and some of those auctions can get pretty intense.
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Alan: So there's a lot at stake when you when you're at an auction.
Betsy: Yeah, they're the really exciting ones we always see on the news and they can be really nerve wracking and it can move really quickly, which is why it really helps to know what to expect.
Alan: Alright, so saying be alert but not alarmed. Exactly so. And most importantly, be informed on how the process works.
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Alan: Correct. So let's take a deeper dive into exactly what buyers need to know about buying a property listed for sale.
Betsy: Yes. Okay. Well, let's start with a little pop quiz, shall we? So yes or no more properties are sold by auction than by private sale in Australia. What do you think, Alan?
Alan: I'd say no.
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Betsy: So the answer is no. Most of them are sold by private sale across Australia. So we see a lot of coverage about those hated auctions across all communication channels. And yes, it's because they're so exciting but actually overwhelmed across all markets. Most properties are still offered for private sale in Australia rather than going through that auction process. Okay.
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Alan: Can you take us through it?
Betsy: Yeah. Okay. So we say you found a property that ticks all your boxes, and unlike an auction, you usually know what the asking price is. So with all this in mind, you can make an offer. Now, to make an offer, you usually have to go via the real estate agent. And then that kind of kicks off this negotiation process.
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Betsy: So when making an offer, base your offer based on your budget, location, property, condition and the urgency of the owner to sell, all of that should feed into the offer that you make. So what I suggest is looking at recent sales of within the area for similar properties, which can be a good indicator of what's the market value.
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Betsy: Also, if a property has been listed for a long time, that might be an indication that it's potentially overpriced or that there's some sort of issue with the property. So don't be afraid to put in an offer that's below the asking price, especially if you feel the price is too high based on similar properties. Now, this is a very hot tip, so I hope everyone's listening.
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Betsy: Always remember your upper budget limit and stick to it. This is where it helps to have that pre-approval in place. Now the agent will relay all offers to the sellers who will reject and accept or make counter offers.
Alan: All right, so a counter offer. Can you talk us through how that works? Fits in what options our listeners have if a seller comes back with a counter offer?
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Betsy: Yeah, well, basically it's a bit more heart stopping than haggling for the best deal on a second hand car, but it's not actually that different. You're just negotiating on the price. So say the property you want is advertised for 720,000, but you've offered 695,000. The owner then comes back and says 710,000. A couple of things to remember. If you are getting into this sort of counter offer negotiation, number one, the ball is always in your court and you are very much welcome to say no.
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Betsy: And of course, stick to the original offer. You don't have to come back with a counter offer. Number two, keep in mind that if you can't go higher, the seller may revisit your offer if they don't get any better office. And then on the flipside, obviously, it would be disappointing to lose the property to someone else for an amount that you would have been happy to pay.
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Betsy: So it can help not to be too inflexible when negotiating. It's a really fine art. Also, you need to be aware that other buyers may be putting in offers at the same time as you, which might drive up the price and could mean you miss out on the property if they've got deeper pockets than you do. And to be honest, this is all just part and parcel of the process.
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Alan: Sounds like you need a bit of a balance there. But let's be optimistic and let's just say offer's been accepted.
Betsy: Yes. So your offers been accepted, but don't pop the cork on the bubbles just yet. Remember, having your offer accepted doesn't mean the property is yours. The seller can continue to accept offers from other buyers, and if they accept an offer from a higher offer from another buyer, that means you've been gazumped.
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Alan: And how can our listeners give themselves the best chance of success?
Betsy: Well, it's important to act quickly and make sure your finances are in order. You've done the building inspection and your solicitor and conveyancer has studied the contract. Ideally, you'll have pre-approval and if you haven't had a listing already, please make sure you tune in to episode three, where we take you through the home loan application process.
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Betsy: Now, coming back to it, once your offer has been accepted, a holding deposit, which is usually about 10%, needs to be paid, you can generally use a personal check or a bank check to do this. So if part of the contract deposit is coming from your home loan, so for example, your lender is using lender's mortgage insurance and you have less than 10% as a deposit, you may need to use a deposit guarantee.
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Betsy: So that's something that you want to talk to your lender or broker about in advance.
Alan: Okay. So as always, it comes back to being prepared and getting your ducks in a row ahead of time because it isn't finalised until a contract is on. But both parties and exchange and that your full deposit is paid.
Betsy: That's right.
Alan: And let's say we do sign the contract and pay our deposit and then have a change of heart the next day.
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Alan: It's not a case of too bad, so sad or it is.
Betsy: No, thankfully. I mean, it does vary from state to state, but typically there's something called a cooling off period and it's usually about 5 to 10 business days. And during this time you can change your mind or walk away from the agreement. But if you do, you will usually have to pay the vendor, the person selling the home a termination fee, which is typically around 0.25% of that purchase price.
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Alan: All right. So we've just walked through buying a property through private sale. And that's some great tips, Betsy. But talk us through now how the sale process process works at auction.
Betsy: You need to be really prepared for auction. So if you're buying at auction, you need to ensure you have your pre-approval in place and that all the legal work and inspections have been completed prior to the auction.
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Betsy: Also ensure a clear price guide is available for the auction that you're planning to attend. If your bid is successful, you're actually obliged to go through with the purchase. And there's no cooling off period, no changing your mind. If you're the successful bidder at an auction, you need to pay the deposit immediately. Auctions can be stressful, so consider actually hiring a professional to do the bidding for you and then let them know what your bidding price is and whether you or someone else is bidding for you.
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Betsy: Please stick to your price limit. It can be very helpful to take a trusted friend or like a family member with you to make sure you stick to your agreed budget limit because it is so easy to get swept up in the emotion and the excitement of it all. And what also can be helpful is to attend another auction prior, obviously not participating in the bidding process, but attend it so that you get an understanding of how the process operates.
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Alan: So is there anything else that our listeners would need to be aware of?
Betsy: Yes, one more thing, which is not every property's sells at auction. So what happens is the seller sets a minimum price that they expect to achieve and this is called the reserve price. And if it doesn't reach that reserve price, it's not sold at auction.
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Betsy: The property is passed in, so to speak. If yours was the highest bid though, you get first crack at then negotiating with the seller after the auction.
Alan: So let's now say that we've been successful, we've signed on the dotted line, we've paid our deposit, we've exchanged contracts. So let's talk our listeners through what happens between sold and actually moving it.
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Betsy: Yeah, it's still not time to crack the bubbles just yet, but it is coming. So settlement covers the legal process of transferring the ownership of the property from the seller into your name. This process begins when you and the seller exchange signed copies of the contract and you've paid your deposit should I say. Your solicitor inconvenience?
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Betsy: I will conduct various property searches and prepare all the necessary legal documents. They'll also be working out the settlement amounts, stamp duty, plus any first home buyers entitlements that you might be eligible for.
Alan: So the timeframe for settlement, they can vary. Yeah, they can vary.
Betsy: Settlement periods can vary depending on state what state you're living in. So they'll vary from state to state typically at six weeks.
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Betsy: But again, it can vary. Usually the seller and buyer will negotiate their preferred settlement period and generally the contract of sale will require the seller to deliver the property to you in the same condition it was on the day of sale. So it's a good idea to ensure your contract allows for something like a final inspection just before settlement.
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Betsy: But once it's settled, the keys are yours. And now? Now it's time to break out the bubbles and celebrate in your own special way.
Alan: Well, that's a great note to finish on. But before we sign off, give us your top tips for navigating the sales process.
Betsy: okay. I would say a good tip for first home buyers especially is attending a few open homes.
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Betsy: It's a really great way to build up your knowledge of the housing market in the area, and it will give you a bit more confidence when it comes time to making that first offer on a property. And also I would say make sure you check out all the other home buying resources on our website. There's some really great stuff there.
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Betsy: What I recommend is downloading first home buyers and each my home guides both a really useful resources that cover a lot of the things that we've spoken about in the podcast, but in more detail. There's also some really handy property inspections and moving checklist as well as a bunch of tools and calculators that you can use to help kind of crunch the numbers on your home life.
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Alan: That's awesome. And thanks always, Betsy, for your insights. It's been fantastic and for guiding our listeners through the home buying journey from start to finish. It's been really great to have you with us.
Betsy: Thank you for having me. And I wish all of our listeners well on their home buying journey. And thank you to all our listeners for joining us.
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Alan: We really hope you've enjoyed our Bringing It Home podcast series. Hopefully you're feeling more informed and confident when it comes to navigating your home, buying journey. And remember, if you have any questions about the home buying process, you want to speak with one of our home lending specialists, please give us a call or make a booking on our website to speak with a lending specialist at a time and a place that suits you, including after hours at your place of work, at home or via video.
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Alan: Thanks again for listening to our Bringing It Home podcast. If you enjoyed the series or missed any of our earlier episodes, you can catch up or just really listen at any time. Share the love with a friend or check our website for more home buying, help and resources. Until next time, Happy home buying and good luck.
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