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This is an article written by Raymond Tan, Lawyer and Public Notary. The
article first appeared in the webpage of Tan and Tan Lawyers.
Portfolio Settlements are pleased to be associated with Tan and Tan
Lawyers.
Things to watch out for, how best to ensure you do not get caught on the
wrong foot, what happens after the contract is signed.
Introduction
Buying A Home
This
will usually be the singular most important decision in a person's life
if you disregard marriage. I have seen too many clients get into trouble
because they did not consider carefully their actions prior to signing
contracts to buy a home or for that matter a commercial property. Very
often the chances of getting into trouble can be minimised if legal
advice was obtained prior to signing the contract to purchase the
property. Some things to consider or be aware of:
Possible method of sale:
Private treaty is the most common way to buy. It includes both...
Buying through a real estate agent; and buying directly from the owner.
The
latter is known as a private sale as the seller does not engage an
agent. Instead, the seller negotiates directly with potential buyers.
In
both cases the agent or owner will try to "sell" you the property,
emphasising its benefits and minimising its faults. You should never be
rushed, pushed or persuaded to sign an offer to purchase without putting
a lot of thought into the contract. You should always take your time and
ask all questions necessary to ensure that you are happy with the
property. Do not hesitate to ask to look at the property for as many
times as you need to feel sure of what you are doing. It is a good idea
to take notes while viewing the property.
Auction
Most
auctions for sale of property are subject to a reserve price. A reserve
price is the lowest amount the seller is prepared to accept for the
property; the reserve price however is not made available to the
purchasers. An auctioneer or agent is not bound to accept the highest
bid if this is below the reserve price or accept any bid until the fall
of the hammer.
WARNING
You
should always have your finance formally approved and clearly understand
any conditions imposed by the lending body before attending the auction.
On the fall of the hammer and exchange of contracts you are legally
bound to purchase the property. You should remember your finance limit
at all times so that you do not bid above your limit.
You
should obtain a copy of the contract and any certificates well in
advance and have your solicitor or legal representative check the terms
and conditions.
Make
sure you understand exactly what is included in the sale. It is
advisable to check what fittings are to be included in the sale. It may
be wise to pay an expert for a pre-purchase property inspection and a
pest inspection to ensure the property is structurally sound and free of
pests.
Sometimes, it may also be worth it to have a valuation done on the
property if you are unsure of an appropriate price for the area. You may
be able to establish a realistic estimate value by analysing recent
sales information in newspapers or local estate agents' notices.
If
you are successful at the auction as the final bidder you will be
required to pay the deposit (usually 10% of the purchase price) on the
spot. These moneys are handed over to the agent immediately on signing
the contracts. There are certain acceptable ways of having these moneys
available (you should check with the agent prior to auction).
Very
Important Note:
Once
a contract or an unconditional offer to purchase is signed, there is no
backing out. There is no such thing as a cooling off period. One of the
best ways to give yourself a way out of a contract is to make the
contract subject to a condition eg. finance. Therefore it is important
that you seek legal advice on the conditions that should be included in
any contract or offer to purchase prior to signing. However, when
bidding at an auction, you are usually unable to place any conditions on
the purchase.
What Happens After The Contract Or The Offer To Purchase Is Signed?
The
transfer of property ownership from the seller's name to the buyer's
name is called "conveyancing" OR in Western Australia, "settlement".
You
may choose one of the following options for carrying out the
conveyancing procedure:
n
engage a solicitor
n
engage a licensed settlement agent
n
do it
yourself
If
you engage a solicitor or settlement agent it is advisable to choose one
who will act solely in your interest and not also act for the seller.
Very often the selling agent persuades the buyer to use a settlement
agent recommended by the selling agent. Be aware that the settlement
agent thus appointed may not be independent. It is also important to
know that most settlement agents and law firms are now unwilling to act
for the vendor and the purchaser because of potential conflict of
interests situations.
Solicitors
All
settlement agents and solicitors carry professional indemnity insurance
and contribute to a fidelity fund. Settlement agents and solicitors
charge a negotiable fee with disbursements usually charged separately.
Disbursements are the miscellaneous fees and charges incurred during the
conveyancing process. These include search fees charged by Government
authorities. Sometimes you may arrange with a solicitor not to charge
for preparing the Contract of Sale and for advising on the mortgage
document on the understanding that the settlement will be performed by
the settlement agent and solicitors.
Settlement agents
Settlement agents specialise in conveyancing only. They charge a
negotiable fee with disbursements usually charged separately. All
licensed settlement agents also carry professional indemnity insurance
and are covered by fidelity insurance. Settlement agent's fees are
usually lower than solicitor's fees.
Do it
yourself
If
you do your own conveyancing, all responsibility is your own if you make
a mistake. Although conveyancing is fairly routine there are potential
pitfalls which a solicitor or settlement agent is less likely to fall
into. The professional indemnity and fidelity cover is an important
security for a purchaser to consider.
What
happens at Settlement
Settlement is the completion of the transaction. A date is arranged by
both parties and your lender for settlement. This usually takes place at
the offices of the buyer's lending body. Representatives of the seller
and the purchaser attend, together with a representative from the
lending bodies of the seller.
Prior
to settlement the buyer's settlement agent or lawyers will calculate,
"adjustments" such as taxes, council and water rates already paid in
advance by the seller for the current rating period. This payment will
be calculated from the date of settlement. Land tax is payable in total
by the seller and may be adjusted if provided for in the contract.
Your
solicitor or settlement agent will have received a transfer form signed
by the buyer and the seller together with the title deed, and the lender
will arrange for the Land Titles Office to register the transfer and the
mortgage on title. The title documents and mortgage will be held by the
lending body until the term of the mortgage is completed.
The
buyer pays the stamp duty on the mortgage as well as on the contract.
You are responsible for insuring the property from settlement. You
should arrange this before settlement whether or not it was a
requirement of your lender.
The
key to the property is handed over 24 hours after settlement or you can
pick it up from the estate agent 24 hours after settlement.
Interesting fact: In the olden days in England, for settlement to be
effective, the seller had to grab a handful of the soil from the
property being sold and physically hand the soil over to the buyer on
site.
Portfolio Settlements are pleased to act for either Vendors or
Purchasers in any purchase or sale of properties whether residential or
commercial.
We
are also qualified to act for you if you are purchasing or selling a
business.
Do
feel free to give us a call if you have any queries.
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