Try Before you Buy

In our age of online shopping, we often forget to 'try before we buy' - to give the thing a whirl before we hand over our hard earned cash. Most people when they buy a car, will take it for a test drive. But what about a house?

Well, you probably won't be able to live in it before you buy it. It would be difficult to imagine a Vendor saying: "Sure thing. Come and stay over. Sleep in the bedroom, watch TV in the lounge room, cook up a storm in the kitchen." However, this does not mean that you can't have a good look at the property before buying it. Open house inspections are often quite short, but if you are keen on the property, you may be able to arrange a personal showing. This is your chance to check the plumbing, test the air-conditioner, turn on the oven and stove-top, open and close the doors and windows or swing around on the hills hoist (not recommended!).

Why does it matter to try before you buy when it comes to buying a home? Most contracts for sale contain a clause that says that you, as the buyer, agree to take the property in its current condition including all defects and damage. This means that if the oven isn't working at the time you sign the contract, then the Vendor doesn't have to fix it before settlement (if it was working at exchange of contracts then you may have a case to say that the Vendor should repair it).

A wise purchaser makes sure they have a thorough look at the property and ascertains what is and what isn't working. If you know that the oven isn't working, then that will help you in working out an appropriate price to offer. As always, caveat emptor applies - 'let the buyer beware'.

Jonathan Marquet
Emil Ford & Co.

Streamlining Conveyancing - A Computer Sold My House!

More and more correspondence in property transactions is being done by email and often with draft documents as attachments. Banks such as CBA, now enable solicitors to book settlements and provide cheque directions via an online settlement booking system. Notices of Sale can now be lodged electronically in the form of an eNOS.

But with the Land and Property Information's recent Consultation Feedback - Initial Report, the key question on practitioners lips is whether the proposed electronic conveyancing system will work. The proposed system is still in the initial consultation stage, so it is unclear exactly what the finished product will look like.

What the system is likely to involve is authorisation from clients for a solicitor to complete the relevant legal documents on their behalf. The documents would have a digital signature (rather than the traditional "wet signatures" on paper) provided by a certifying body and then would be lodged electronically through the system with the end result of a new Certificate of Title with the LPI. The current proposal is based on the principle of "tell-me-don't-show-me". What this will mean is that the due diligence steps of confirming accuracy and legitimacy of documents is pushed down from the LPI to the certifiers and subscribers. Documents will need to be certified as authentic before being registered. At the moment, whilst practitioners make certain confirmations, the LPI is responsible for ensuring the authenticity of the documents prior to registration. The benefit of a more streamlined authentication and certification process will be costs-savings and increased efficiency.

Some of the other key aspects of the proposed system are:

• Client Identification: The system will rely heavily on practitioners doing the appropriate checks to ensure that a client is who they say they are. This is an increasing problem in an age of identity theft and primarily electronic communication. 
• Responsibility of Solicitors/Third Parties: Solicitors and other parties will need to ensure that documents are correctly completed and all relevant requirements are satisfied. This is not much of a change from current practices. However, there is scope for abuse by unethical practitioners as solicitors will be given a significant amount of responsibility on behalf of clients to complete the relevant documents. 

There are obvious benefits to an electronic conveyancing system. But as they say, "the devil is in the detail". It will be important to understand the exact mechanics of such a system.  

Jonathan Marquet

Emil Ford & Co.

When it comes to property, be wary of the advice you take....

How do you know who you can trust in the real estate game? Your agent, your buyer's agent, your broker, your investment manager?

There is an insightful article in the May edition of The Monthly by Christine Kenneally (no, not the former Premier!) on media reporting of the property market. Kenneally highlights the fact that commentators portraying the market as "bullish" or in other words ripe for growth, often have a personal interest in providing that type of diagnosis. You can only expect agents to say that there has never been a better time to buy, when they are under pressure to meet sales targets and obtain hefty commissions. But is this actually what is happening in the market? When a premium property is lauded as being sold for a high price, is there information available as to what it sold for 2 years ago? The glow of a property that sells at auction for $2 million starts to fade when it is discovered that it was  purchased 18 months earlier at $3.5 million.

Professionals in the property industry often gain directly or at least indirectly from commentary that supports a buoyant market. This doesn't mean that you should ignore what is said by real estate agents or other property professionals in the papers or other media. What it does mean is that you should carefully and critically evaluate what is said about the state of the property market. When you read, hear or watch a piece on the real estate market, consider the following:

1. Who is the author/presenter? Who do they work for? How might their interests be affected by the article?
2. Consider the nature of their source. Is it a primary source (such as government statistics etc) or is it a secondary source (i.e. just parroting what another agent said)?
3. Evaluate any research/statistics used. Is it based on surveys, academic research or property industry bodies?   

Jonathan Marquet
Emil Ford & Co.

Let the Buyer Beware - do your homework when buying a property

Caveat emptor - let the buyer beware! Due diligence. Doing your homework. Call it whatever you want, if you are purchasing a property you must ensure that you fully investigate all aspects of the property. You are about to spend a substantial sum, so you don't want to be stuck with a property that has serious problems.

What property searches you will need to do will depend on the type of property in question. Your property lawyer will be able to advise you on what searches you should obtain. Below are some of the common searches:

House (Non-Strata)

1. Building inspection: This involves getting a builder to inspect the property and note any issues with the structural integrity of the building, any existing damage and potential issues with Council approval. Unless you are a builder yourself, it is well-worth ensuring that you know exactly what condition the building is in before you purchase. 
2. Pest inspection: Similar to the building inspection, a pest inspection involves a pest exterminator inspecting the property for evidence of termite activity and other pests. Termite issues is one of the most significant problems as it will affect the structure of the building.
3. Survey: A survey will assist in identifying the boundaries of the property and will indicate whether there are any encroachments onto the property and by the property onto adjoining blocks. The surveyor will also note whether any buildings appear to be built in accordance with the local government regulations.
4. Building Certificate: If you want to be sure that Council will have no issues with what is built on the property (such as an unapproved back deck or recently built car-port or garage), then you will need to obtain a building certificate. You must have obtained a survey before applying for a building certificate and a building certificate can take a couple of weeks to be received.

Apartment (Strata)

1. Strata report: This is an absolute must have if you are looking at buying a strata property. Strata reports will indicate the financial status of the owners corporation and will often foreshadow future works and repairs that will need to be undertaken. A strata report will have the insurance details for both the common property and the relevant lot.
2. Pest inspection: A pest inspection may not be required if details of pest issues have been highlighted in the strata report.
3. Building inspection: As above, strata reports often outline any structural issues in the minutes of the meeting.  

Due Diligence on the Contract

You will need to get your property lawyer to review the Contract and in particular, ensure that the property is properly identified in the Contract and that the Vendor has good title to be able to sell the property. Any unusual or particularly onerous provisions should be identified by your lawyer with a view to having them removed or amended. A good property lawyer can provide advice on a Contract within hours of receiving the Contract in draft form.

Buying a property is a significant step. Given the value of the transaction, it pays to do your homework. Once you sign the Contract, you generally won't be able to back out if you find something wrong with the building. Make sure you get the right searches so that your dream home doesn't turn out to be a bricked nightmare.

Jonathan Marquet
Emil Ford & Co