The First Steps in Buying a Home

So, you’ve done the hard yards going to the open homes and you’ve finally found the home you want. What’s next? Let’s take a look at the first steps in the process. For the purposes of this blog, we’ll assume the vendor is using a real estate agent.

1. Work out your offer

You will be in a more confident position if you spend a little bit of time working out your position. You’ll need answers to these questions:

• How much are you prepared to pay? What price are you going to start with? Are you prepared to increase this? What is the highest price you will go? If you are buying a home is a strong, busy market, don’t risk pitching a low offer with a view to increasing it. You are likely to miss out. In a strong market, it is worth putting your best foot forward.

• Do you need time to get finance approved? How much? Check with your bank or broker to get an idea. Especially if you are putting in an offer in the lead up to Christmas or Easter. The typical ‘finance clause’ these days is 21 days.

• Do you want to get a pest and building inspection completed? How much time? You may not need to if the seller has had a recent report completed.

• Are there any other conditions you need to include in the contract? Do you need to sell your house in order to settle this one? Perhaps you already have a contract on your house – is it unconditional?

• How long do you need to settle? This is the total period from the date of signing the contract to the day you pay for it and get the keys. Lots of things can impact the length of this period for both the buyer and seller. Have an ideal time in mind, but be prepared to have to change it if the seller can’t meet that deadline. For example, perhaps a tenant is in place and is entitled to stay until the end of the lease. Or maybe the seller hasn’t found a place to move to yet.

• How much money can you put down for a deposit? Unlike auction contracts which almost always have a 10% deposit, private treaty contracts can vary. This amount is like an instalment on the purchase price. It is NOT the deposit on the bank loan. Investors often try to pay as small a contract as possible. Owner-occupiers will often pay between 5% and 10%

2. Put your offer forward

When you’ve nutted out your price and terms, contact the agent and tell them you are interested and would like to put forward an offer. You might need to run a few of the terms by them. For example, you may want a short settlement period of 30 days from the date of the contract. But the agent might be aware that the sellers would like at least 45 days. The agent will be able to advise you on what to do.
The agent might ask you to put your offer in writing. This could be on a contract, but can also be in the form of an email.

It is important to note that the agent is legally obliged to put all offers forward to the seller. They cannot say to you “I’m not going to pass that offer on as I know the seller won’t accept it.” If this happens, report the agent to their Principal and warn them that you will report them to the Office of Fair Trading.

3. Negotiate your offer

The agent will take your offer to the seller, who then may return with a counteroffer. The counter might be on price or a term. A change to the settlement period perhaps. Or no clause allowing you a few months to sell your home first.

You shouldn’t ever feel pressured or rushed during this stage. If you need overnight to reconsider your position, then you should take it. If you are feeling rushed, then maybe this is not the house for you.

4. The deal is sealed

If the offers have been via email, then now the details are turned into a formal, legal contract. In Queensland, this is typically on the REIQ/Qld Law Society Contract for Houses and Residential Land. The agent will prepare this document and have it checked by the seller and their solicitor. The document will then go to you for you and your solicitor to check. (You don’t have to get a solicitor to check but you really should do so).
When all of the checkings are done, you the buyer will sign the document first, followed by the seller. The contract is dated after the seller signs, that date becomes the ‘contract date’ which determines when things such as the finance clause end and when the property will settle.

Many agents these days use electronic signing systems, so you won’t necessarily sign a hard copy contract in person.

5. Pay the contract deposit

You are required to pay the deposit within 1 business day of the contract date. The agent will give you instructions on this – typically, the deposit is held by the selling agent’s Trust Account.
Talk to your agent immediately if you have problems with this. For example, daily limits on your electronic banking.

5. The Cooling Off Period

The standard Queensland contract allows for a 5 business day cooling-off period. This means that a buyer can pull out of the contract during this time for no reason. However, if you do exercise this right you will have to pay a penalty to the seller of 0.25% of the purchase price.