9 Tips For Buying And Selling Property
Money Magazine Australia|September 2021
1.The Buyers Agent 2.The Budget 3.Lenders Mortgage Insurance 4.Recurring Payments 5.Joint Ownership 6.Valuations 7.Bridging Loans 8.The Real Estate Agent 9.Auctions
Julia Newbould, Susan Hely And Nicola Field

SPRING IS traditionally the time for buying and selling property. This year we’ve experienced rocketing real estate prices with a scarcity of available properties but perhaps with the arrival of spring, change is in the air.

Successfully buying and selling property entails becoming familiar with aspects of the process you might not have considered before. We asked around the office and came up with nine buying and selling tips you most need to know more about. Here’s one example: is it better to hold property as tenants in common or as joint tenants?

And buyers agents – the popular UK TV show Location, Location, Location for aspiring home buyers has brought these industry experts into the limelight, but who can most benefit from their knowledge and what are the costs involved?

There are also costs involved in entering the property market that you might not have considered, yet they could very well tip the scales to making a property unaffordable. This is where a comprehensive budget comes in. We also look at lenders mortgage insurance, and what it means for you.

If you’re selling a property, there are other factors to consider: choosing a real estate agent, valuing your property, and – a big one – should you go to auction?

Good luck to those who are about to enter the property market, whether you’re buying or selling. The valuable tips in our cover story and this spring property issue as a whole are designed to make the process easier to navigate for a successful outcome.

1 THE BUYERS AGENT

Call in a specialist to do the groundwork

A buyers agent, sometimes known as a buyers advocate, represents the best interests of the buyer in the purchase transaction. Sellers on the other hand rely on advice from real estate agents, see page 40.

Typically, buyers agents have industry connections to source off-market properties that the average buyer would not be able to find on their own, says Emily Wallace, a buyers advocate based in Melbourne.

Buyers agents have been around for more than two decades but they’ve become more common in the past three to five years in the big capital cities. Often they come from a finance background or are real estate agents who have moved across to the buying side.

According to Wallace, there is a misconception that buyers agents are used only by wealthy purchasers.

“Our typical clients are first and family home buyers who are getting priced out of the market and need a competitive edge,” she says.

A buyers agent is paid a percentage (often about 2%) of the eventual purchase price (with a retainer paid upfront and then subtracted from the final percentage) or a fixed fee, which in Wallace’s business is around $12,000 for a full service. The cost includes sourcing the property, carrying out inspections and handling negotiations with the seller.

“We go out on the client’s behalf, do the first-round inspections, video and qualify the properties to save them time. Out of 10 properties we might only find five that meet the brief after inspection, and three where the client may go back with the agent to inspect,” says Wallace.

“This is a repetitive process until the buyers identify a suitable property they want to buy. You’ll find variance in how long buyers agents will act for someone. We have a three-month agreement, but the average purchase time is around 35 days.”

Buyers agent Bernadette Brennan, of Premier Home Finders, based in Sydney’s Mosman, says buyers get access to off-market properties through a buyers agent as well as the first opportunity to view properties before they come to market.

“For example, I have a client who wants a two-bedroom investment unit at the moment and I show them properties before they come to market. The price is still market price, but inevitably if a property comes to market and there is competition or an auction, the price runs higher.”

She says for clients buying investment units, she’d expect to find a property within six weeks. A home search can take longer depending on the requirements.

Typical clients are those who have previously missed opportunities or been the under bidders. Wallace says clients are often surprised at the number of properties that are available off-market. This might be because those sellers want privacy and don’t want people coming through their homes, or because it can cost less.

Brennan says clients need to have finance approved and have a clear idea of what they want. This makes it easier when dealing with real estate agents because they know the client is committed to buying.

Buyers agents and advocates tend to specialise in specific geographic areas so they have the depth of knowledge and contacts necessary to do their best job. But they can’t take on more than one client at a time looking for the same kind of property in the same area. They have to wait until the first client has bought before they can take on their next client interested in purchasing in the same area otherwise it creates a conflict of interest, says Brennan.

“I will only take one client per price point per location – for example, for a two-bedroom unit at Bondi Beach,” she says. JULIA NEWBOULD

2 THE BUDGET

'Hidden' extras can come as an unpleasant shock

Homebuyers tend to focus on the price of a property and underestimate the “hidden” costs. You don’t want to get caught short, so here is a list the extras to include in your buying budget.

Inspections

Before you buy, it is essential to have the home inspected thoroughly to work out if there are any structural issues such as termites, damp, asbestos or a leaking roof.

A building report by a qualified inspector costs around $1000 for an average-sized house in Sydney. A pest inspection will be another $150. Reports for regional property and apartments are much cheaper.

If you are buying an apartment, get a strata report that looks at the strata records to understand the history of the building and what has happened with repairs. These reports can help you budget for repairs or save you from making a disastrous purchase. Knowledge of defects could also give you some bargaining power over the price.

Stamp duty

State governments charge stamp duty based on the purchase price and it’s the biggest upfront cost after the deposit. The amount varies from state to state and changes regularly. Check the government and territory websites and their stamp duty calculators to estimate how much. Some states give first home buyers a break from stamp duty if they meet certain criteria. For example, first homeowners don’t have to pay stamp duty if their household earns less than $160,000 in the ACT.

Lenders mortgage insurance

If you are borrowing more than 80% of the property’s value, your lender will typically charge you lenders mortgage insurance (LMI). It protects the lender, not you, if you default on your loan. It is a one-off premium and can be substantial, depending on your deposit, the type of loan and how much you borrow. It is added to your home loan.

Conveyancing

Before you buy you need an expert licensed conveyancer or solicitor to look over the seller’s contract for any risks such as exclusions, restrictions or peculiarities. They will also check the title deed and arrange the settlement documents. Often disbursements such as search fees for court hearings levied by government authorities are charged separately. Depending on the complexity, the cost is around $1000 to $3000 for a property in Sydney but half this amount in Melbourne and Queensland.

Title transfer

State governments charge fees for transferring the title from seller to buyer. It is typically a few hundred dollars.

Mortgage registration

States charge a fee for registering the mortgage.

Home, building and contents insurance

If you have a mortgage, building insurance is often compulsory. It is important to protect your home from any disasters that could destroy you financially. Shop around the many providers for building insurance. While contents insurance is not compulsory, it makes sense to protect your belongings too. It is a competitive product offered by many providers, so shop around.

Moving

This cost depends on how many belongings you have and how far you are going. Shop around for the best rates by getting at least three quotes.

Lender fees

Depending on your loan, there could be extra fees. If you have a no-frills loan, upfront fees or application costs may be low or waived, but other costs such as settlement could be high.

Information

If you want a detailed property report on sales of homes in a certain suburb, you may have to pay for helpful data from a group such as CoreLogic.

Financial advice

If you want to run your property plans past an accountant or financial planner, expect to pay an hourly rate.

Utilities

You will need to cover the costs of connecting gas, electricity and telecommunications to your new home. SUSAN HELY

3 LENDERS MORTGAGE INSURANCE

Sometimes it pays to grin and bear it

Insurance tends to be a grudge purchase at the best of times, and lenders mortgage insurance (LMI) can seem especially galling. It protects the lender in the event that a home buyer can’t keep up their mortgage repayments – yet it’s the buyer who pays the premium. However, LMI can work in a home buyer’s favour, and there can be ways to bypass the cost altogether.

“LMI traditionally applies where the buyer doesn’t have at least a 20% deposit,” says David Hyman, chief executive of the Lendi Group.

LMI is not a type of insurance consumers can shop around for. Your lender will arrange cover and let you know the premium.

How much you pay is based on the risk you represent to the lender, something that hinges heavily on your deposit. “The higher the deposit, the lower the premium on LMI,” says Hyman. He adds that putting down a 10% deposit rather than a 5% deposit can almost halve the premium because you’re dramatically cutting the risk to the lender.

As an example, a first home buyer who uses a 5% deposit ($25,000) to buy a $500,000 apartment could be looking at an LMI premium of $14,870. If the buyer manages to save a deposit of 10% ($50,000), LMI drops to $8680 – a saving of $6190.

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