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.
The 5th edition in our ‘Guide to buying your first home’ series is Australia’s state that is defined by extreme wilderness – South Australia (SA). Below you will learn more information how the buying process works in SA. Buying a home is not only one of the largest purchases you’re likely to make, it can also be one of the best long-term investments – so it’ s important that you get it right.
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. Congratulations! You’ve found a property that you like as it has all the features you’ve been searching for and now you are ready to make an offer to purchase. Before submitting offers it is important you engage the services of a conveyancer/solicitor or legal representative (legal rep).
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.
2. Before finalising the offer you are going to put on the property, there are some important things you should consider.
- All offers must be in writing
- The agent is required to submit all written offers to the vendor & the property will remain on the market while the vendor considers each offer
- Offers can be conditional clauses such as a building inspection, bank/financial institution loan approval or any other terms incorporated into the contract by the potential purchaser or vendor
- Each offer can include a lapse date for your offer
- Both the purchaser and vendor have to sign a contract of sale document before the offer is legally binding
Important Tip: When you make an offer, treat it as your best and final offer. Other hopeful buyers may be vying for the same property so you may not get a second chance.
3. If your offer is accepted, the cooling off period can be used by the purchasers to conduct further checks or to protect themselves in case the decision was made in a hasty manner. The cooling-off period expires at the end of the second business day after the contract was made if the purchaser received the Form 1 prior to making the contract.
The Form 1 must disclose any information on the property which would negatively impact the value so that the transaction is transparent and the purchaser knows exactly what they are purchasing. These ‘disclosures’ from the vendor must then be included in the Form 1 which the real estate agent will complete when they prepare the contract for sale e.g. asbestos, unusual easements, known building defects and advice of other parties.
Important Tip: It is important for first home buyers to get this document reviewed by your legal rep to ensure you are protected when purchasing the property.
At the point of signing the contract
4. If you are satisfied with the Form I and in a position to sign the contract, it is important to ensure you have the stated deposit ready, because once the cooling off period ends and 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 all the checks have been completed)
Important Tip: A seller may reject an offer for reasons other than the price, such as conditions placed on the offer. For example, a seller might reject your offer if it is conditional on a longer settlement period, or if another buyer offers a similar price with the seller’s preferred settlement period. Therefore, it is important you verbally confirm the condition with the agent before you sign 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. As you will have time to get the checks & approvals in place, you will need to ensure you have done your checks (i.e. building & pest inspection if applicable) and obtain unconditional finance approval within this time frame. During this time, enquiries and searches are made and documents prepared by your legal rep. It is important the dates for these checks & approvals are clearly mentioned in the contract of sale.
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 seller sets the date of settlement in the contract of sale. The settlement period is usually 4 to 6 weeks. 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 seller 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, regardless of whether you purchase an established dwelling or a vacant land for the purposes of constructing your first home. Your legal rep will advise you when and how stamp duty will need to be paid (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 SA 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. Most contracts in SA will specify that the purchaser is responsible for the property insurance once the contract is exchanged, so you should immediately organise building insurance to cover the purchased property.
Important Tip: Speak to an FHBA Coach to get an Insurance quote that is competitive and best ensures that 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 SA, 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