LawTalk Blog

Millennials: Buying your first home

Are you thinking about buying your first home?

As a millennial, you may be reaching that stage in life where you are sick of your housemates’ dishes, you have saved a sum of money and are looking to invest, or you and your partner and looking to settle down and purchase your own home. You have likely never done this before, and buying a home is often the greatest purchase most people will ever make.

This blog explores some handy tips to ensure you are ready to buy your first home.  It is not an exhaustive list but rather a guide to point you safely in the right direction.  When it’s time to purchase, Andersons Solicitors are ready to act as your conveyancer in this important transaction.

Step 1: Being Ready - How to ensure you are ready to buy your own home?

Being ready means being ready to purchase,  the test is whether you would be in a position to make an offer or sign a contract if the next inspection you attended was the one. This means having your finance pre-approved, not just an indication that a bank will look at the transaction but that you can secure a suitable loan and be able to settle.

Step 2: Paying a deposit on your new home  

If your offer to buy a house is accepted, you will be asked to pay a deposit.  That deposit is typically 10% and will amount to thousands of dollars.  The money needs to be ready to transfer electronically or be payable via cheque immediately.  It is important you are ready; a vendor of an attractive property is unlikely to wait for you to break term deposits or access the bank of Mum and Dad. 

Step 3: Getting advice on Contracts of Sale

Being ready also means having someone ready to review and advise on the Contract of Sale.  Ideally you would have engaged them already and spoken about the conditions of sale you want as part of your side of the transaction. 

Andersons Solicitors are well equipped to ensure you are ready for the market.

Step 4: Contract of Sale: making the deal subject to …

One major pitfall is agreeing to a contract that is unconditional.  That means you have no protection to withdraw should you discover any issues or defects after signing the contract and before settlement.

It’s important when negotiating the Contract of Sale, the buyer is able to make the deal subject to certain conditions. The typical subject to clauses that a buyer generally inserts are for finance, pest inspection and building inspection. 

Finance Clause

A finance clause gives you time to organise a loan for the property you are purchasing. It means that if your loan application is refused, you can choose to end the contract and not go through with the sale.

The finance clause is particularly important due to the conservative lending climate we are currently facing due to the Banking Royal Commission.  It is very important that the finance clause is realistic, precise and reflects current lending conditions.

Pest and Building Inspection

The Pest and Building Inspection allow you to arrange a professional to inspect the property for damage and/or defects.  Both are simple ways to reduce your exposure to the inherent risks of the investment.  It is best to get a quote for these services (as they do cost) and have the professional briefed and ready. 

The Building Inspection is important for exposing potential issues, such as whether the house will require a new roof or re-stumping in the future.  These issues would not be obvious from the external appearance but can be uncovered by an experienced inspector.  If these issues become problematic after settlement then you as the new home owners will need to find more money to maintain the house. 

The Pest Inspection is not included as part of the Building Inspection. Pest Inspectors will complete visual checks on the timber for any indicators of white ants and noticeable defects and decay. The inspector may also include recommended ways to protect the house post purchase. 

It is important that the contact is subject to inspections taking place, and the outcome of the inspections being to your satisfaction. Should these reports uncover any defects, then you must have the option to withdraw from the sale without penalty.  Some buyers see such defects as an opportunity to re-negotiate, however, the vendor has no obligation to do so.

Step 5: Negotiating the sale

You may be able to negotiate certain works that the vendor must complete prior to settlement.  In this scenario, you would be entitled to a pre-settlement inspection to ensure the vendor has completed the agreed works to a satisfactory standard.  Here you would be entitled to delay settlement or withhold settlement proceeds until these works are completed.

When you do negotiate a sale, the vendor must agree to these conditions for them to form part of any contract.  A vendor is entitled to refuse any and all of these conditions, however, their position will be determined by the attractiveness of the property and their motivations to sell.  It is often accepted by most vendors that such clauses are part and parcel of the sale process. Most of the time, vendors will want the sale to go through just as much as you do.

What else do I need to know about buying a property?

  • Sale of Land contracts have a cooling off period of 2 clear business days and should you change your mind during this time you can give notice to withdraw from the contract absent of any reasons.
  • If you are successful at an Auction then you must buy the property and are unable to include the conditions we recommend above. There is also no cooling off period. This means you must be ready and committed should you make a bid on Auction day. The Contract of Sale for an Auction is available for viewing prior to an Auction and, sometimes the settlement period is open to negotiation.
  • To protect your investment, it is best to take out Insurance on the property from the day you sign the contract.

Fees to consider when buying a house:

In addition to the Purchase Price, a buyer will incur a number of transactional costs that cannot be avoided and add up considerably. Extra costs associated with buying a house include: 

  • Stamp Duty
  • Land Tax
  • Emergency Services Levy
  • Registration Fees
  • PEXA Fees
  • Council Rates and Water Rates: pre-paid by the vendor, your settlement will be adjusted for these
  • Pest Inspector
  • Building Inspector
  • Solicitor or conveyancer
  • Lender fees and charges: some of these amounts are paid as part of settlement however you need to be aware of what your lender is funding and when you will need to access your own cash flow or savings as a top up

This article is intended to be an introductory for those looking to purchase their own home. With research and preparation you can enter the property market with the advantage of being informed.

Do you have questions about buying a property? Get in touch with the conveyancing department at Andersons Solicitors. We can guide you through your pre-purchase questions and take you through the settlement process.

This blog post has been written by Law Clerk, Antony Boonen and settled by Partner, Felix Hoelscher. 

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Get in touch with today's blog writer:
Antony Boonen

Please note, this Blog is posted in Adelaide, South Australia by Andersons Solicitors. It relates to Australian Federal and South Australian legislation. Andersons Solicitors is a medium sized law firm servicing metropolitan Adelaide and regional South Australia across all areas of law for individuals and businesses.

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