Welcome to our second instalment of Caveat emptor – some key tips on protecting your interests when buying a property.
You can check out the first instalment here, where we looked at why conveyancing isn’t quite the doddle some assume, and why “going out on a ‘LIM’” is a great start.
Knowledge is power
So, you’ve found your dream house and, frustratingly, your due diligence throws up something faulty or illegal.
You can either opt not to buy until the problem is addressed or, alternatively, negotiate a lower price.
It’s not unheard of for people to buy a house only to find, for example, the whole second floor is illegal. Ever tried to gently remove the top half of a house? There are instances where there is some – and, I stress, some – legal recourse. Even with comeback, though, you might still wish you’d never laid eyes on the place. Nothing beats robust due diligence.
Just like a book, never judge a house by its exterior. Get in the experts. Builders and specialist housing inspectors can provide reports outlining what lies beneath the surface.
Remember “leaky house syndrome?”
You’ll need to get your financial ducks in a row well in advance, too. If you’re borrowing money, your lending institution could well want a valuer to assess the property’s worth. Lending criteria are particularly changeable at the moment, and the rules can vary depending on your particular circumstances, so be sure to allow plenty of time for discussions with financial institutions before finding the property of your dreams.
Don’t forget, lenders generally require a 20 per cent deposit, with repayments at no more than 30 per cent of your income – but, again, double check this, as your circumstances might call for a different expectation. Banks have been loosening the purse strings of late, but that is on a case-by-case basis.
Wrapping up a deal
If you’re negotiating with a vendor, or their representatives, you’re able to put the house “under contract”, but with conditions, until you and your advisors have finished the checks and balances and arranging finance. It’s imperative, though, that this contract is not only committed to paper, but that it spells out the correct conditions and that the clauses are properly worded.
You’ll likely need to stump up a deposit – usually 10 percent – for the vendor on finalising the deal. Remember, too, the bank won’t usually release your money until after you’ve the signed the contract, so don’t rely on your loan to cover the down payment.
Now, who said conveyancing was easy?
Read our next article where we look at property transactions from the other side in Caveat venditor: Seller beware – Pt 1.
