Buying a property is one of the biggest financial steps that you will take as a first home buyer, therefore, it is critical for you to understand your rights as a buyer and just how the home buying process works. Unfortunately, the home buying process isn’t transparent across the country as each state has their own rules & processes when it comes to buying your first home.
Our 2nd edition in our ‘Guide to buying your first home’ series is Australia’s most populated state – New South Wales (NSW). Below you will learn more information how the buying process works in NSW.
Important: The below information assumes you have got a home loan pre-approval, and have done your research and found the property you are looking to purchase through a private treaty. This article is general in nature and should not be relied upon. We recommend you seek your own advice or use the services of the relevant professionals. Speak to an FHBA Coach for details.
Before signing the contract
1. When you have expressed your interest in purchasing a property, the real estate agent or the seller will provide you with a ‘Contract of Sale’, upon request. A seller must have the Contract of Sale ready before offering a property for sale. It is important to ensure you have your own legal representation before signing this contract, as it can be quite a large document. The agent or seller must also provide you with the following:
• A Section 149 certificate from the local council, detailing zoning and other information
• A sewerage diagram (for houses)
• A copy of the title folio from the Land and Property Information NSW
• Copies of all documents creating easements or restrictive covenants (mainly for houses)
• A cooling-off statement
• A notice directing parties to the Conveyancing Act 1919 (Section 52A) and the Conveyancing (Sale of Land) Regulation 2000
• If it is a strata unit, copies of the folio of the Register for the lot and common property and a copy of the strata plan.
Important Tip: It is wise not to use the legal representative recommended by the real estate agent, as they have the seller’s interests in mind. It is always best to source your own legal rep, or talk to our preferred solicitors – Lawlab, who have already helped many first home buyers. Furthermore, if any of the above documents aren’t provided, you may be entitled to cancel the contract within 14 days of exchanging the contract.
2. Once you have passed on the draft contract to your legal rep, they will review it, guide you through the terms of the contract and advise you on any special conditions. If necessary, they can also add special conditions to the contract, e.g. a 5 or 10 day cooling off period, which is strongly recommended. Once you make an offer, most real estate agents will ask you to pay an initial or part deposit as a sign of good faith. If you haven’t signed and exchanged contracts this payment does not ‘hold’ the property. It is refundable if you change your mind. You can still miss out if another buyer exchanges contracts before you.
Important Tip: You can make arrangements through your legal rep with the agent to exchange contracts with a 5 or 10-day cooling-off period in order to secure the property. This will allow you to get all the checks done.
3. You will need to ensure you get the following checks & approvals during the cooling off period:
- Building & Pest Inspection
- Strata Inspection (if you are buying strata titled property)
- Unconditional Finance Approval
Important Tip: If you already have a home loan approval, in most cases you will be able to get unconditional approval within 14 days. Therefore, it is important for you to get a home loan pre-approval prior to searching, allowing you to meet the conditions for the ‘unconditional loan approval’
At the point of signing the contract
4. When you are signing the contract it is important to ensure you have the stated deposit ready, because once the seller signs the contract you will be required to pay the deposit, as the contract will be officially binding. The deposit is negotiable and is usually an amount up to 10% of the purchase price. You may be able to negotiate paying a lower initial deposit when you sign the contract and the balance at a later date (e.g. once any cooling off period expires)
Important Tip: It is a good idea to have a bank cheque drawn out to the name provided by your conveyancer when signing the contract – the legal rep won’t bank the cheque until you have confirmed you are ready to exchange the contract.
5. If you are buying the property with someone else, you will need to provide your legal rep with the type of ownership you will have. There are two types of shared ownership; joint tenants or tenants in common.
Important Tip: Speak to an FHBA Coach to get some guidance on which option is best suited to your needs. Your legal rep is also qualified to provide advice on which type of ownership is your best option.
After signing the contract
6. If you have a cooling off period, you will need to ensure you have done your checks (i.e. building & pest inspection if applicable) and got unconditional finance approval within this time frame. During this time, enquiries and searches are made and documents prepared by your legal rep.
Important Tip: It is wise to get the building & pest inspection and the unconditional loan approval as soon as possible after the contract is signed. This will allow you to save time if you don’t end up proceeding with the purchase and have to find another property.
7. The standard settlement period is 4 weeks from the contract date, but you can negotiate a shorter or longer period if required, even after the contract is signed, through a request made to your legal rep. Keep in mind that your lender may take at least 2 to 3 weeks to confirm formal approval, issue loan documents and be in a position to settle. Furthermore, if the current owner has requested a longer settlement when the contracts were signed, their demands will need to be met.
Important Tip: Once the settlement date is confirmed, make sure you have given enough notice to your current landlord (if you are renting) to ensure you don’t have to pay rent and your mortgage at the same time.
Getting ready for settlement
8. Transfer (stamp) duty is payable on the purchase of the property, where the purchase price exceeds $650,000 for the first home purchase of an established property. If any concessions apply to you then your legal rep will prepare the declarations for you to sign and return. They will advise you when and how stamp duty will need to pay (which may be required before or at settlement depending on the settlement date and transaction type).
Important Tip: It is a good idea to look at the current government incentives that are available in the state of NSW before starting your first home buying journey.
9. Prior to settlement, your lender will also send you the loan offer documents for you to review and sign. If a guarantor is guaranteeing the loan then they may need to obtain independent legal and financial advice before the lender can be ready for settlement. Once the documents have been received and certified by the lender, they will be in a position to advise your solicitor what funds they will be contributing the purchase, allowing your legal rep to advise if you have any remaining deposit amount to contribute to the purchase.
Important Tip: It is a good idea to get these documents signed and send back to the lender as early as possible to ensure you still have enough in case they need to be redone or re-signed. It is why we suggest you use a broker, who can guide you through this process.
10. You should organise your insurance well in advance of your settlement day (i.e 1 week) to ensure your building (and contents if necessary) is covered from the day you move into your first home.
Important Tip: Speak to an FHBA Coach to get an Insurance quote that ensures you are covered in case something goes wrong with the property.
11. You should contact the real estate agent to arrange a final inspection of the property on the day before or day of settlement. This gives you an opportunity to make sure that the property is in the same condition as at the contract date and that any items that were in the contract are left on the premises. If there are any discrepancies, you should contact your legal rep immediately as the other party may be in breach of the contract.
Important Tip: Take the ‘contract of sale’ with you to ensure you remember all the special conditions have been met.
The big day – Settlement Day!
12. On the morning of the settlement day, you should check in with your legal rep to ensure that your funds (if applicable) have been received and if the settlement will take place as planned. There is usually no need for you to attend settlement as your legal rep will attend settlement on your behalf. Once settlement has occurred your legal rep will usually contact you immediately to advise that your purchase has settled! You can then collect any keys from the real estate agent.
Important Tip: Our final tip is that you should speak to an expert before starting the process of buying your first home in NSW, as there are many steps in the process and an expert can ensure everything is done smoothly.
If you want to start your first home buying journey today or if you would like a complimentary chat with a first home buyer expert, please complete the form below:
First Home Buyers Australia