For many, purchasing a home is a daunting process. This is especially true for First Home Buyers, but also those that haven’t purchased property in a while. Let’s face it, most of us stay in one property for quite some time and it might be a decade or more before we have to go through the process again. It can be intimidating having to negotiate with Real Estate Agents, securing a loan and dealing with the legal side of purchasing a property. Having a broker that is by your side during the whole process can certainly make it a whole lot easier. Here are some of the key steps of the property purchase process in NSW.

You have pre-approval, now what?  What happens when you find the right property:

Offer- you make an offer and there might be some negotiation back and forth until you get an accepted offer that both parties agree to.

Contracts - Once you have an accepted offer the contracts will be sent to your Conveyancer/Solicitor, that handles the legal side of the purchase for you, to look over and discuss any legal issues with you.

Formal Loan Approval - You should also contact your broker to organise the valuation and formal loan approval. It is important to have this before you are locked into a contract.

Building and Pest Report – you might want to organise a building and pest report on the property to make sure there are no big problems with the property’s structure.

Exchange – this is where the contracts get exchanged with the seller of the property. There are usually two options:

   1. Exchange contracts with a cooling-off period, usually 5 business days, sometimes you can negotiate a longer period if necessary – 

                  You usually pay a small holding deposit upon exchange around 0.25% of the purchase price. The contract doesn’t become binding until the cooling-off period expires (always check this with your solicitor before exchanging and discuss any risks with them). If you do pull out of the purchase within the cooling-off period, you usually lose only your holding deposit of 0.25%.

                  Many people use the cooling-off period to get the valuation done and receive formal loan approval as well as getting your building and pest report done during this time. It is a bit of a juggle between the risk of losing the property to another buyer if you don’t exchange quickly, and the risk of losing your holding deposit if something falls through within the cooling-off period. Keep in mind that until you exchange contracts the seller can still accept other offers.

   2. Exchange contracts unconditionally without a cooling off period. In this case you should have formal loan approval and have your building and pest report done before exchanging. Always discuss the risks with your Conveyancer/Solicitor before exchanging contracts.

You will also need to pay your deposit when the contract becomes binding. Either on the day that the cooling-off period expires or the day that you unconditionally exchange contracts. This is usually 10% of the purchase price, but you can negotiate to pay 5% in cases where you don’t have all the funds, for example, where you only have a 5% deposit and the lender needs to pay the rest from the loan, or if you haven’t sold your existing home yet and are waiting for the rest of the funds (in this case you may need a Deposit Guarantee - speak to your broker about this).

You should arrange building insurance from this date as well. Although you don’t technically take ownership till settlement, it is a good idea to be covered. Some insurance companies will provide free cover during the settlement period (ask your broker). In any case, if you have a mortgage on the property the lender will require a copy of the insurance before the settlement date (PS: You wouldn’t want to be stuck with a mortgage, but no house to live in if it burned down. Yikes).

Settlement- This is the date that you officially take ownership of the property. The lender releases the loan funds and the Conveyancer/Solicitor attends the settlement on your behalf. This is the date you receive the keys to your new home. The standard time period from exchange to settlement is usually 6 weeks, but a different settlement period can be negotiated before exchange and put into the contract. The loan will start on this day and you have to start making repayments on the loan, usually one month after the settlement date, depending on the frequency you chose.

Now time to pop the champagne… and the moving, painting, decorating …

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