Buying a Property
Relocating to Australia: Buying a Property
Buying a property is a stressful time, whether you know what you’re doing or not. You’re investing a lot of money, you’re relying on advice from people who want to make money from you, there’s a lot at stake if you get it wrong. This article looks at how to make an offer on a house, how buy a property at an auction, and what happens when your offer is accepted.
Foreign Investment Review Board
Firstly, before you put an offer in on any property, double-check that you’re eligible to buy a house in Australia. If you’re not an Australian national, your attempt to buy property in Australia is subject to approval from the Foreign Investment Review Board (FIRB). Basically, you need permission from the Australian Government.
You do not need permission if you are an Australian citizen with a foreign spouse buying a property as joint tenants, or if you are an Australian citizen resident abroad, or if you are a foreign national with a permanent resident visa or a special category visa (for example, if you are a New Zealander).
These decisions take about 30 days, usually. If you sell this property and buy another one, you will need to apply to FIRB again.
Making an Offer
Once you’ve found a property you’d like to buy (check out our Find a Property section for advice on how hunt down the perfect place for you) you’ll need to “make an offer” on it.
By this stage the real estate will have shown you around the property at least once, you’ll have scoped out the area, done your due diligence and have advice from your mortgage broker or bank to suggest that you’re likely to be lent enough money to be able to afford the asking price or whatever it is you’re offering to pay. (Check out our House Purchase Finance section and Costs Associated with Property Purchase section for a little more on mortgages and getting finance).
Everyone likes a bargain and you’re certainly free to make an offer $5000 or $10,000 less – or even $100,000 less – than the asking price, should you wish. The owner of the property can always say “no”, or come back with a counter-offer – that’s how the negotiating process works, after all.
The most important thing to recognise, however, is that making an offer on a house in Australia isn’t made by some informal chat over the phone. It’s a formal written process with very specific forms you must fill in. The property technically remains on the market even though the offer is made, and the vendor is free to consider several offers at once, should they arise.
The forms you need to make an offer will be given to you by the real estate agent acting for the party selling the property. They will act as the agent between you and the vendor – but don’t forget they’re acting for the vendor, not for you. After all, the more you pay, the greater their commission. The offer terminologies are likely to be called slightly different things in each state but “private treaty” and “offer and acceptance” are common.
At this point you might be asked to pay a token deposit, or a show of good faith, if you will. It’s not the full 10 per cent of the house or anything like that, but it will be a dollar value in the thousands. You pay the rest of your full deposit after the offer is accepted. This money is returned to you, if the offer is not accepted.
If you like a property but don’t have all your paperwork in order yet (perhaps you need to check with the bank if they’ll lend you that little bit extra) you can always put in a conditional offer. You fill in the paperwork and submit the offer “subject to” whatever the condition is. “Subject to finance” is quite common, for instance, but it could also be subject to a pest or building inspection.
Building inspections can be particularly important in older homes. Pest inspections are important throughout Australia as termites (or white ants) are very common and may well exist in the wooden parts of a property.
If your offer is subject to finance, it is often recommend that you nominate the specific lender you plan to use on the forms.
Once your offer has been accepted by the vendor, it is deemed a contract has been entered into and you must pay the full deposit. At this point a Contract of Sale will be signed by both parties. Once signed, the contract is binding.
At this point, you’ll need to nominate a settlement agent (or a solicitor or conveyancer – the terminology differs depending on which state you’re in) to act on your behalf. There is a lot of paperwork to do here, so leave it to the professionals. A settlement agent doesn’t cost a lot of money and they streamline the process and make sure everything is done in accordance with the law. We’ve got more on this in the Purchasing Procedure section.
It’s worth noting that there is a statutory “cooling off period”, of five business days where the purchaser can terminate the Contract of Sale. (That is only for non-auction sales). You do lose a quarter of your deposit though.
You might want to look at cover note insurance for the property at this point. Not everyone does it, but it’s the kind of thing you’ll regret if something goes wrong with the property between now and the settlement of the transaction.
Auctions can be a great way to buy a house – for one thing, they’re fun. But more than that, you can potentially also nab a real bargain.
But the rules for buying a house at auction in Australia are different to a simple offer and acceptance scenario. You’ll really need to have “got your house in order”, so to speak, before auction day comes around. Make sure you’ve done your due diligence – have you had a thorough look around the property and the area? Do you know its true value? Do you know how much money the bank will lend you?
Get to know the selling real estate agent (realtor) before auction day. Ask them for condition reports, a copy of the contract of sale – look for caveats and anything that might cause you a problem down the track.
To make sure you’re not nervous about the actual bidding process, you can always attend auctions for houses you don’t want to buy, just to get a feel for how they work. Alternatively, find a buying agent who can act on your behalf. They will also be able to give you a realistic valuation on the property, so you don’t find yourself paying too much.
It’s worth noting that while auctioneers have lots of tactics to encourage you to pay more, the use of “dummy bidders” is illegal in Australia. It doesn’t mean it doesn’t happen, but if you have proof of it, the law is on your side. Make sure the auctioneer belongs to the relevant real estate institute in their state, as well as being a registered to actually conduct auctions.
The auctioneer will announce the rules of the bidding before the auction starts. If you’re serious about buying a property, get him to spell these out before auction day. Once the hammer falls, if you’re the highest bidder you’ll be required to sign the Contract for Sale and to pay the deposit then and there.
Visit our Life in Australia section for more articles related to the subject Moving to Australia.