Please see below the first of a series of publications which cover crucial tips and suggestions to help clients through the mire of conveyancing.
If you follow the A-Z of Property Tips you are much more likely to avoid the common traps that turn the purchase or sale of your home or investment property into a nightmare and will be much better informed when you speak with your property solicitor about your transaction.
A is for Adjustments
Most people think that when they buy a property that they pay their deposit upon signing the contract and that they pay the balance at settlement. It is important to know what the “balance” is. This balance includes adjustments for council rates, water rates (and usage), owners corporation fees (if purchasing a unit, apartment or house that contains what is referred to as “common property”), land tax (if applicable) and mortgage discharge fees. The purpose of adjustments is to ensure that the buyer and seller share these costs fairly and in proportion to the period in which they will have owned the property for the applicable rate or cost period.
The key tip is that a lot of buyers, when doing their sums on how much they need to contribute overlook this “expense”. In most cases it won’t cause a problem as the adjustments tend to be relatively minor (in the hundreds not thousands), however many buyers have been stung who are literally borrowing every last dollar and have been caught short.
Tip-allow a minimum of $1,000 for these adjustments but make sure you check with your solicitor what they will amount to in your particular transaction.
B is for Buyer Beware
While property law and conveyancing practice is being dragged into the 21st century, the fundamental notion upon which property transactions are built, is “buyer beware” (the Latin term being caveat emptor). Essentially, this means that while the seller is required to provide certain prescribed information in the sale documents, the buyer is ultimately responsible for making all enquiries that are needed in order to be satisfied about the nature of the property and that all applicable rules and regulations have been complied with in relation to the title and the building constructed on it.
Tip-NEVER purchase a property without consulting your solicitor before you make an offer to purchase a property, including having your solicitor review both the Contract of Sale and the Vendor’s Statement (Section 32) and advising you on the types of enquiries you should make before making that offer.
Don’t leave it until you have signed the Contract of Sale, as even though you might have a cooling off period, the seller’s mindset has altered and it is a lot harder to obtain changes to the contract terms at this point. Your mindset has also changed so there is a greater risk you will not heed your solicitor’s advice. The fees that your solicitor will charge you for this advice pale into insignificance when compared with the costs you will face in rectifying something that you have overlooked or the opportunity cost you face when you are precluded from doing what you had planned with the property.
C is for Cross Collateral
When selling a property you are obligated to provide the buyer with a clear title. This means that you have to discharge any mortgages over the property by paying out any loans that are secured by that mortgage. In the majority of cases a seller has one loan secured by one mortgage over the property being sold.
However, where the seller owns more than one property, their lender may have taken security over two or more properties to secure these loans. When you seek to discharge the mortgage over the property you have sold, your lender may need to undertake fresh valuations on your other properties to ensure that they will retain sufficient security once they release the property that has been sold. If you do not factor in the time it will take for these fresh valuations to be done, you run the very real risk of delaying settlement, which will potentially expose you to a claim by the buyer of your property.
Further, if you have a linked settlement (that is, you are simultaneously settling a purchase with funds from your sale), this transaction will also be delayed, exposing you to penalty interest and other costs. Finally (and probably, most importantly), your lender might require you to pay back more than the amount you are receiving at settlement, due to reductions on the value of your other properties or changes to your lender’s funding parameters.
Tip-if you are selling a property and own other property, discuss any consequences with your lender, before you put your property on the market AND instruct your solicitor of the possibility that your lender may need to do fresh valuations on the remaining properties in your portfolio.
Secondly, don’t agree to a settlement period of less than 45 days unless there is a very good commercial reason to do so as the process of revaluations and consequent decisions made by your lender can take time.