Considerations In Buying Your Primary Home Residence
Buying your residential property is often heavily influenced by personal choice and can be an overwhelming experience. Before you head off and sign a purchase contract there are a few considerations you may like to address such as distance to work or schools, public transport etc. Kitchens, bathrooms, bedrooms, decks, storage, yard size and even neighbour’s can be factors in your decision to buy or not. Here are some items to add to your “buying a home checklist”.
Joint Tenants Or Tenants In Common?
Where Property is being Purchased by two or more Buyers, you may own the land as ‘Joint Tenants’ or as ‘Tenants in Common’ or a combination of these where the property is purchased by three or more parties.
As ‘Joint Tenants’, on the death of one of the owners, the property will pass to the survivors. Shares are considered to be equal. As ‘Tenants in Common’, each owner may sell or dispose of their interest, and, on their death, ownership passes to the beneficiaries named in his or her Will. Shares need not be equal.
Generally a home residence will be held as “Joint Tenants”. Sometimes it may be a consideration to hold the property as “Tenant in Common” often where people have a need to deal with their individual assets in his or her Will.
Many jurisdictions have a system of land tax where revenue is obtained by the State or Territory from ‘land rich’ individuals or entities. In Queensland for example, individuals may hold up to $600k of ‘unimproved land value’ (the same valuation used by local councils for rate calculation as determined by the Valuer-General’s Office) before a tax liability is created.
Your combined land holdings including the residential home or primary residence along with any investment properties will be assessed together as one combined amount. Where a property is the residential home of an individual or a beneficiary of a trust holding the property, application for an exemption from land tax on the specific property in Queensland may be made.
Solicitor / Conveyancer
There are many providers of legal and conveyancing services in the market to choose from. Brisbane conveyancing prices will reflect quality and no doubt vary greatly. In Queensland, only a law firm can conduct conveyancing. There are a number of business structures out there where one or more solicitors oversee a number of “namesake” conveyancers that are in reality paralegals or administration staff. In New South Wales, Victoria and South Australia for example, licensed conveyancers can conduct conveyance of properties as well as solicitors. Sufficient enquires should be made to your satisfaction before engaging your conveyancer.
The solicitor or conveyancer will review the contract either before or after your signing subject to when you have engaged them. It makes good sense to see a solicitor first no matter how ‘nice’ the selling agent may seem, remember that the agent is acting for the seller’s interest and not yours. Specific advice on risk or ambiguous wording and detrimental provisions will generally be addressed where relevant. In almost every State or Territory there are specific requirements under legislation to be satisfied without which the contract may be defective. In any event the parties can not contract outside of the relevant legislation that applies.
In the conveyance process the solicitor / conveyancer will conduct various property related searches to your satisfaction. The seller should disclose anything likely to affect the property including proposed resumptions, road widening, contamination, notices issued by council, Heritage listings and so forth. You may or may not be entitled to terminate the contract if the seller has failed to notify you.
Queensland contracts are more of the “buyer beware” concept and the seller is not generally required to provide additional disclosure on the property outside of legislation. New South Wales and Victorian contracts have specific disclosure requirements on the seller.
The property is generally at your risk from the date of the contract (the date when both parties have signed) you should immediately arrange insurance cover as follows :
- Vacant Land – Public Risk (if required)
- House – Building and improvements plus contents cover for carpets and floor coverings, blinds and curtains, wall coverings, fixtures and fittings plus Public Risk
- Unit – Building is usually covered by Body Corporate (on the outside) but you will need to insure contents or obtain landlord insurance where tenanted. A water leak, fire or damage inside your unit will probably not be covered by the Body Corporate insurer.
Where there is a provision for a finance approval date in the contract, generally the Buyer must reasonably take steps to obtain finance. Some contracts will create an obligation on the Buyer to provide evidence of finance rejection in order to terminate the contract pursuant to finance.
In Queensland where finance has not been approved to your satisfaction by the due date, the seller may grant an extension. There is no guarantee that an extension will be granted and the seller has the right to terminate after the expiry of the finance approval date.
New South Wales contracts are unconditional in regards to finance. The Contracts are “exchanged” between the parties once finance has been obtained by the buyer.
Building & Pest Inspection
A contract may have provision for satisfactory building and pest inspection of the property. Confirmation of the Buyer satisfaction is generally required by a due date. Where a structural or pest issue has been identified it is common for the parties to negotiate further before buyer satisfaction is provided.
A major issue of concern is unapproved improvements to a property. This may be sheds, decks, pools etc. You should make enquiries with the local authority to confirm final approval as otherwise you may be liable after the purchase.
The buyer needs to arrange and pay for their own building & pest inspection with a qualified inspector. A quick search or the internet will identify businesses in the area that provide building & pest reports, the agent will usually have a couple of business names too.
Stamp Duty is calculated as a percentage on the contract purchase price. Where individuals are buying a home to reside at as their principal residence, a reduced rate of Duty or a concession may be obtained.
Online buying has become the method of choice for many consumers in today’s market. In a competitive market sellers can benefit from technology giving them access to almost an unlimited audience while getting across a huge range of information at the same time. Many buyers are time poor and if the information provided is not sufficient the buyer will simply move on to the next item of interest.
A report published in late 2011 by the Australian Media and Communications Authority identified that Eighty-eight per cent of Australian household internet users had performed at least one e-commerce activity in the preceding six months.
The process of comparing and contrasting different houses has been made much easier with some sellers posting online videos of properties while giving a voice over of the features and showing footage of the neighborhood. Real Estate agents report up to 80% of enquiries are coming from the internet with 50% of Buyers walking into open inspections with electronic information in their hand by way of tablet or mobile device.
Ultimately many will go and to see a property as you do not get a sense of the area or community over the internet. Likewise commonsense dictates an inspection to ascertain the true condition and location of the property. A real gamble is being taken by those who buy sight unseen in the practical sense not having physically been to a property.
Be wary of comments that can be interpreted in different meanings.
There has been the odd occasion where sellers or agents have made verbal representations about uninterrupted views from a property having full knowledge of a new apartment complex being approved and the building about to commence. Needless to say that when buying, property, especially your primary home residence, everything is relevant to a Buyer, even the wind direction could be a factor.
You may also see something like “photo for illustration purposes only” on an advert for a property. Now if your buying a place in the worst part of town and the photo suggests that it is overlooking a tropical beach – then there is an issue in exactly what the photo is trying to illustrate no matter what disclaimer there is attached.
One of the more common disclaimers methods used is wording that identifies how specific information is given or on how an assumption was made or where information was sourced from in creating an advert. Using this concept there is clarity on how the content is being presented and more often than not there may be a sentence directing consumers to make their own enquiries or investigations.
Contact us for more information or to arrange a consultation.