Advice for first time home buyers | Buying at auction | The market in 2015 | Property development: Before you start

06 Feb Advice for first time home buyers | Buying at auction | The market in 2015 | Property development: Before you start

 
Our legal eagle Rob Balanda has some good advice for first time buyers and Michael Yardney draws on his years of experience at buying property at auction. He has 9 pearls of wisdom for you.
A question asked of me during the week about developing a property prompted me to consult with Nhan Nguyen and he talks about the steps to take to access an opportunity and what you should be aware of before starting.
Market researcher Louis Christopher joins us to look back at how we ended 2014 and what he thinks is ahead for this year.
We answer a question from Kylie about the step from one investment property to a second.
Co-host of Location, Location, Location Australia and partner at Empower Wealth, Bryce Holdaway, says there are some clear signals about how buoyant the market will be this year and he tells us about some markets that he believes will show good growth this year.
 

Transcripts

 
Kevin:  This time every year, we always like to take a look ahead. It’s easier to look back, but what’s coming up into 2015? I’m talking to Bryce Holdaway now who is the co- host of Location, Location, Location Australia – a great show on LifeStyle television – and also a partner and director at Empower Wealth along with Ben Kingsley.
Good day, Bryce. How are you doing?
Bryce:  I’m good, Kevin. How about you?
Kevin:  Good mate. I was just watching your video that’s on the website there, too, where you and Ben did your overview of 2015 or your look ahead. I thought we might just spend little bit of time and talk about that. Where do you see the market heading this year?
Bryce:  It’s an interesting question when someone says, “Where do you see the market heading?” I think the thing is that anyone who has been investing long enough knows that Australia is not one big market. It’s made of hundreds and hundreds of sub-markets.
I guess probably the major story of 2015 is that there are a few cycles that are probably at the top end, there are a few that have probably had a pretty good run of late, and there are a couple that are looking really good in terms of the upside.
Kevin:  We’ll talk about a few of those. But it was certainly demonstrated in 2014, wasn’t it, just that variety in markets around Australia?
Bryce:  Yes. As you know, I travel around the country, and it’s quite a contrast. It’s interesting. Even the Reserve Bank is trying to do a little bit of jawboning and to try and put a lid on maybe the problem children of Melbourne and Sydney. But they’re having a really tough time because any measure that they do – whether it’s interest rates, macro-prudential tools, whatever they do – it will probably have an impact on Melbourne and Sydney, but unfortunately, it will really negatively impact the markets that need the help the most. It’s a bit of a challenge.
Kevin:  There was even talk this morning about taking another look at a negative gearing, and I think that’s a pretty dangerous path to go down. It’s easy to say investors are pumping up the market, but I tell you what, take them out of the market, and what it’s going to do to rents?
Bryce:  That’s the other challenge, isn’t it? They tried in 1983. It was a little bit of a disaster. They had to bring it back in 1985 and give you some sort of depreciation benefits to entice the investors back. If the government actually takes it away, it creates a huge burden for them to provide the rental accommodation.
But let’s be honest and get to the crux of it. Probably most politicians have got some form of property investment themselves, so they’re unlikely to cut off their nose to spite their face.
Kevin:  Are you suggesting self-interest here, Bryce?
Bryce:  I wouldn’t suggest that at all!
Kevin:  In your video with Ben, let’s have a look at what are some of the good markets to be looking at around Australia, and where will you be talking to your people through Empower Wealth?
Bryce:  Look, we are suggesting that the opportunity moving forward is that you really want to try and get some yield play, where a part of the cycle is getting some upside. We’ve seen that Brisbane has an opportunity to buy there and get good yields at the moment, because they have been flat for a little while as a combination of probably post-GFC, a little bit of natural disaster, and a little bit of negative sentiment. The upside of the cycle looks pretty good in terms of growth. But right now, we are buying stuff there that’s getting 5%, 5.5%, and in some cases 6% yield. The opportunity is looking good.
Kevin:  What about other areas? You did touch on briefly there Sydney and Melbourne and how hot they are. But what’s your view on the future there?
Bryce:  I think that you’re re always going to find good opportunities in those two big metropolises in this country. I say all the time that they’re in the top 100 cities in the world as measured by population, so it’s never a bad idea to have good real estate in those cities. But given that they’ve had such a strong run, probably selection is more critical than ever.
There’s always going to be a bit of an owner-occupier contingent in any city, and that’s what you really want to be focusing on, because I think the investor sentiment is largely looking outside Melbourne and Sydney in 2015.
I even think that there are opportunities to run the ruler over places like Adelaide or Hobart, because they have got such low entry points. They have got really good yields, and if you can buy in the very few unique and specific suburbs in those two cities, there could be some upside there.
But for the safety of having a larger population base, a bigger economic base, you would probably stick to Brisbane.
Kevin:  What about some of the stronger regional markets, like Townsville, Cairns? I know they’re based primarily on tourism, but also Newcastle, New South Wales, some of those strong regional areas, Bryce?
Bryce:  Yes, I think that Newcastle in particular will get a ripple effect of Sydney being so strong. You can still get the lifestyle. You still have the access to the capital city job market there. I think that particular market is good.
I even think if you are looking at places like the Gold Coast, or you talked about Cairns, they’ve been depressed markets for so long that if you do run the ruler over, you might see some opportunities.
Now I’m certainly not suggesting that you’re investing in those markets, because there is a little bit of speculation to it. But given that the price point you’d suggest is at the bottom, so the downside risk would be low, given that there’s some yield, there might be some upside that gets some ripple effect of the fact that people have had some good results in Melbourne and in Sydney and they’re looking for other opportunities, particularly to help them retire and get some yield
Kevin:  Always great talking to you, Bryce Holdaway. Thank you very much. Bryce, of course, is the co-host of Location, Location, Location Australia and with Ben Kingsley at Empower Wealth. Check out their videos, too. There’s a huge number of them on their website at EmpowerWealth.com.au.
Bryce, always welcome anytime, mate, and great talking to you.
Bryce:  Likewise. Thanks, Kevin.
 

Michael Yardney

Kevin:  Here we are in February already, and the auctions are cranking up for 2015. Joining me once again to talk about auction strategy, if you find yourself at auction, is Michael Yardney from Metropole Properties, who does this quite often, not only for himself but for clients, as well.
Good day, Michael.
Michael:  Hello, Kevin.
Kevin:  Let’s have a look at your tips for buying at auction.
Michael:  First of all, we have to assume that all the other homework has been done about choosing the right location, choosing the right property in the location, so I’ll just concentrate on what happens just before and when you get to the auction. Is that okay?
Kevin:  Yes, please. Thank you.
Michael:  I guess the first thing you have to realize, of course, is that an auction is an unconditional sale. You’re stuck with it, so you have to do your homework first. First of all, I guess that means you have to have your finance pre-approved. Make sure that you have the ability to buy unconditionally, not subject to evaluation. You know where you stand.
The second thing is you have to do all your homework, your due diligence prior to the auction. This may include a strata report, maybe building and pest inspections, checking zonings, council ratings, etc.
Then understand what the value of the property is again by doing your homework, by looking at comparable sales, and giving yourself a fair limit to give yourself a good chance. But never do your limits on a round figure. Do you know how many people finish on $500,000 or $550,000? Always give yourself one or two bids above that. That may just get you that property.
Kevin:  Just on that point, Michael, when you are doing a strategy before you go to an auction, would you have a couple of figures in your mind, like the figure I’d really like to buy it at and the figure I’m prepared to go to?
Michael:  Yes, and they’re very different, aren’t they? I’d like to buy cheaply, too, but I’m also realistic, knowing that if it’s a good property, there’s likely to be other good competition. If I was the only one bidding on them, I’d be a bit concerned have I actually chosen a dud somehow or another, not seeing something everyone else has?
Kevin:  That’s a good point.
Michael:  I’d also get my solicitor to check my contract beforehand, make sure I understand my legal obligations if I’m a successful bidder. You’re allowed to ask for changes, you’re allowed to ask for commitments. That doesn’t mean that they’re going to accept them, but if I do ask for changes and they do accept them, you often have an indication of how many other potential bidders there are. In other words, if they’re very standoffish and not prepared to countenance any options or changes, maybe there’s other strong competition. On the other hand, if they’re prepared to look at it, maybe there won’t be as many people.
Kevin:  Maybe.
Michael:  Also, understand the rules of an auction. Go and see as many auctions as you can, but with the particular auctioneer, not the company, because each auctioneer has their own set of words, they have their own way of doing things. So when the property comes on the market, you’ll know the words they say when they’re going to sell. You research auctions, the agency selling it, and this auctioneer, as well.
On the day, I’d turn up early. If it’s at the property, not in rooms, I’d actually be looking at the surroundings. I’d be seeing who the attendees are. Of course, don’t forget to bring your checkbook.
When I go there, I actually hang around where the contract is, which is often on the kitchen table or somewhere, just to see who else is looking. Interested parties will look at the contract, while neighbors who are just sticky-beaking probably won’t look at the paperwork.
Kevin:  When it comes to the time of the auction, where do you position yourself with the auctioneer?
Michael:  I actually do something that’s a bit cheeky. I actually stand as close to the auctioneer, facing the crowd, as I can. I’m usually there in a suit, and they wonder, “Who’s this guy?” He’s another estate agent? He’s part of the team? All of a sudden, he’s bidding.
Kevin, what I actually do is I speak to the auctioneer by name. I will usually start the bidding in this market, which is a hot market compared to previous years when it was flat. I’ll say, “John, I’m going to start by bidding $450,000.”
What do you think? Hey, he knows him by name. He’s standing there as part of it. I’m confusing them. It’s all legal. It’s all correct. I’m confusing them a little bit. I call him by name, that’s where he’s starting.
I often start close to where I think the reserve is going to be, and it stops the momentum. Then I bid strongly, and my last bid is as strong as my first. Without hesitation, I go right up to the limit I’m given by my clients, and if I do it that way, people have no idea where my limits are. It’s basically psyching them out a bit.
Kevin:  Yes. There is a skill in bidding at auction. There is no doubt of that whatsoever. That’s why anyone who’s inexperienced with that should consider getting a buyer’s agent to do it for them, which is what you do, I guess?
Michael:  I guess, that’s exactly what we do. There’s also a skill that happens if the property gets passed in. When the property gets passed in, a lot of people think you have to go inside and you’ve actually got to talk with them and you have to negotiate on their turf. I actually don’t do that. I say, “That’s okay. I do want to speak with you, but if you don’t mind, I’m going to stay out here.”
There’s a reason why. It’s again partly playing the game, but I’ve found that when you go inside, they say “Oh look, the under-bidder is hanging around outside, and he’s moseying around.” I want to make sure that he is there or he isn’t there. I play it on my turf and I play it my way again. It’s a little bit like chess. It’s a little bit like knowing where you want to end up and having a plan and then implementing that plan.
Kevin:  There you go. That’s the plan for auction from Michael Yardney at Metropole Properties. Thanks for your time, mate.
Michael:  My pleasure, Kevin.
 

Louis Christopher

Kevin:  One of the things that’s of most interest to most investors is what’s happening with vacancies, how many tenants are going to be on the move. Traditionally, we see at the end of the year that a lot of people are on the move. That’s certainly been reflected in the figures, the vacancy rates that have been published by SQM research.
The man from that organization, Louis Christopher, joins me on the line. Hi Louis?
Louis:  Good day there, Kevin.
Kevin:  The December figures for vacancy rates, what do we see?
Louis:  We saw nationally a rise in vacancies. Our vacancy right now stands at 2.6% nationally, which approximately translates to about 57,000 properties being vacant on the market nationally for the month of December.
Kevin:  That’s firmly in the middle of that 2% to 3% band, which is an area I think you closely watch, isn’t it?
Louis:  That is so. Generally speaking, we believe that that’s a market that’s in equilibrium, where it’s neither tenants nor landlords controlling the market and putting a downward or upward influence up on the market. But I can’t stress enough that each city is really telling its own story, so we’re seeing some cities where we’re getting big rise in vacancies right now, both month-on-month and year-on-year, which is a concern.
Kevin:  Whereabouts are they, Louis?
Louis:  Surprise, surprise, Kevin. They’re in the mining- or commodities-related towns. We’re pretty concerned about Darwin at this point in time. We’ve been seeing basically about seven to eight consecutive months now of rises. We have a vacancy rise in Darwin of 3.4%, and there was a massive increase on the November result. That’s already putting downward pressure on rents on our measurement. We’re seeing fuller rents in Darwin now over 8% year on year, so we’re very concerned about Darwin.
Perth is also another weaker city. We have a vacancy rate– it doesn’t sound that high – of 2.8%.
Kevin:  It’s a struggling market, Perth, isn’t it right now?
Louis:  Yes. It’s relative. Back in the beginning of 2013, we had a vacancy rise in Darwin of under 1%. It’s that relative movement, going from under 1% all the way up to 2.8%, which is putting a lot of stress on landlords, because it’s definitely clearly turned into a tenant’s market, and hence the reason why we are seeing falls in rents in Perth, as well.
Kevin:  What about some of the other markets? Let’s say Brisbane. What’s happening there?
Louis:  In Brisbane, things have been rather steady. We haven’t really seen a big move either way. We have a vacancy rate in Brisbane for December of 2.7%. Now, there’s a bit of seasonality there. We tend to get higher vacancies in each December. That’s not just in Brisbane. We do see that in other capital cities. This time last year, Brisbane we had a vacancy rate of about 2.6%.
Kevin:  I see. It’s not a big movement up, and it’s consistent with what’s happening nationally, isn’t it?
Louis:  Yes, that’s right. One thing we are seeing in Brisbane – and you might recall I raised this about 12 months ago – is we’re definitely seeing on going elevated vacancies in the CBD itself. Right in the heart of the city saw quite a lot of vacancies.
Kevin:  We’re going to see that continue I would think, with the amount of stock that’s coming on, as well. Just looking around at the number of cranes on the horizon, it always tells a bit of a story.
Louis:  That’s correct. I think for Brisbane, for the CBD, vacancy rates are likely to go higher from here rather than lower over the course of 2015. I have to say, though, on the east side of Brisbane – like Wynnum – we’re seeing tighter vacancy rates there. We’re seeing vacancy rates actually back below 2%.
We like the east side of Brisbane, and we don’t mind the west side. We think that’s slightly favoring landlords there. It’s the CBD itself that really seems as though it’s favoring tenants right now.
Kevin:  Yes, which is a bit surprising. You look on the west side of Brisbane over around the Toowong area, which carries a lot of students, as well. I know one of the reasons why the vacancies seem to spike at the end of the year is because of students vacating.
Louis:  Yes, that’s right. It’s not just students. Lots and lots of people decide to make a change before Christmas or just after Christmas for the New Year. So you do see a lot of movement around the country, not just city by city but in the regions, as well. That’s the reason why you see the seasonality in December, where we tend to get higher vacancy rates in December.
Kevin:  We’ll talk to you again real soon. Louis Christopher from SQM Research. Thanks for your time, Louis.
Louis:  Thank you, Kevin
 

George Raptis

Kevin:  If you have a question for any of our experts, you can free call anytime on 1-800-300-206, and we’ll get it answered for you. Carly called recently, and here is her question.
Carly:  I currently own one investment property. How do I go about purchasing my second one sooner?
Kevin:   Thanks for that, Carly. To answer your question, I’ve got George Raptis on the line from Metropole Property Strategists in Sydney. George, what would you say to Carly?
George:  There would be a number of things that I think you should take on board. First of all, you have to make sure you buy the right property so that you get growth and equity and it allows you the ability to borrow your next deposit. In a lot of cases, it’s just too hard to save it.
Another thing I’d like to suggest is make sure you are attractive to the lenders. In other words, have a good income, a good credit record, have all your accounts in order, no large credit card debts or any huge personal loans, and make sure you’ve got all your tax returns up to date.
Another thing is make sure you are achieving the right rental return for your property. A few extra dollars from your rent can determine the amount that you can borrow next.
Lastly, spend less than you earn. Save the difference and invest it.
Kevin:  The  first point you mentioned there about how hard it is to save for the next deposit, tell me a little bit more about what you mean by that, and how long does it take  to build the  equity to get the next deposit?
George:  Obviously, a few things determine that – what happens as far as real estate prices are concerned. But also with regards to finance, I’ve spoken to a number of people where they would like to save a 20% deposit because they want to not have mortgage lenders insurance coming into effect. But I’ve found that in some cases, if they’ve saved the 10% deposit, they can take on the mortgage lenders insurance. In other words, they can add that on to their loan. In other words, it gets them into the market sooner rather than later. It’s just too hard to save another 10% deposit in a lot of cases.
Kevin:  Yes. Take on that insurance is what you are saying, and don’t fret over it?
George:  No. I call it cost of doing business.
Kevin:  The other point you made there, too, was about making yourself more attractive to the banks, and you gave a couple of hints there – about making sure that your credit cards are under control and so on. Is it that simple or is it about having a relationship with your bank manager?
George:  Having a relationship with a bank manager is good, but at the end of the day, various lenders all have different rules. I know for a fact that some banks will look at, let’s say, rental income for example. Some banks look at 100% of the rental income when it comes in to factoring in what sort of loan they’ll give you or how much they’ll give you. Some banks will factor in 90%, or some will even go as low as 80%. It’s very important to do your homework, shop around, and see what the various lenders have got to offer.
Kevin:  You are a buyer’s agent, so you’re dealing with buyers all the time. How are you finding them in terms of their relationship with the banks, and what sort of preparation should they be going through? Should they be talking to you first, or should they be talking to their financier first?
George:  Obviously, for me, it’s very important. It’s good to have the good relationship with the financier – don’t get me wrong – but in other words, if you don’t a property strategy in play when you’re going to have this conversation with a financier, it’s really irrelevant. I believe that’s putting the cart before the horse.
Kevin:  A buyer’s agent’s role in all of this is to actually help Carly find the best property?
George:  It’s about:

• Putting the strategy into place.
• Making sure she’s buying the right property.
• Does she buy it in her name? Does she buy it as a different entity?

It’s about dotting all the I’s and crossing all the T’s prior to getting out here and getting finance.
Kevin:  As you can see, Carly, it’s not just as simple as knowing when to do it. It’s a matter of having that strategy in place, which is what George has mentioned.
George, I want to thank you for your time. George Raptis is from Metropole Property Strategists in Sydney. Great to talk to you, mate. Thanks for your time.
George:  Thanks, Kevin.
 

Nhan Nguyen

Kevin:  I had an interesting question posed of me today. Someone rang and said they have a house they’re currently living in. It’s over three blocks of land, just over 1,200 square meters. Just wondering whether they should sell it as is, or whether they should go through the DA, get approval to get the house taken off and become a developer. Interesting question.
I want to pose that question of Nhan Nguyen from Advanced Property Strategies, because I know he faces this both personally but on behalf of a number of people he works with.
Hi, Nhan.
Nhan:  Good day Kevin. How are you doing?
Kevin:  Good. That wouldn’t be an unusual question to ask of you, would it?
Nhan:  No, I get that pretty much every day, every second day, because in a market where people are looking to make money, they look at all the different ways, but it depends on many things.
Kevin:  Anyone fortunate enough to have a house on 1,200 square meters or over three lots, what would be the steps they should take to work out whether they have the right mindset to be the developer, or whether they should just sell it on?
Nhan:  That’s a good question. Oftentimes, when a property like that hits the market, one of the challenges that as a developer or as a buyer I see is the people selling that property put it on the market as if it’s already got the three titles. But part of process is talking to the Brisbane City Council or whichever council they’re involved in, as well as the town planner. These things take time.
It can take somewhere between six and twelve months, and in a project that size, you’re looking at somewhere between $200,000 to maybe $400,000 capital outlay to pull it apart and make it happen.
It’s their mindset, in terms of patience. If they want to get the cash right away, they’re better off maybe selling it, but if they want extract the maximum value, then they’re going to have to deal with the extended timeframe, the risk of not getting approval, and also the extra capital outlay.
Kevin:  I guess the dilemma for many people would be they would think, “I’d hate to sell it now for a price and then find twelve months later that the person who bought it from me has got approval to re-develop it and is going to make a $1 million out of it.” Is that the right way to look at it?
Nhan:  As you call it, seller’s remorse. That could be one way to look at it, but I think that the person who’s made $1 million, the only way they’re going to do that is through lot of skill and a lot of past mistakes. I’m working on a project at the moment, which I’ll do very well out of, but it’s taken me many projects to make mistakes, cut my teeth on, and get to the point where I can exit a project like that. Everything looks easy from the outset, but it’s not always as it seems.
Kevin:  Do you find generally that the town planners you work with, are they independent town planners or are they largely people who are working for the local council?
Nhan:  Mostly the town planners, I find if they’re worth their salt, they’ll work for the individual. What they find is they just need to find out what the council wants and then aligning themselves with it. There are obviously the council rules and regulations that you have to adhere to. Then that’s where they have to align themselves with it, because they want to get an approval through, because it’s for their own benefit, their own reputation, and the client to be happy. If they don’t think they can do it, they’ll definitely let you know. They’re pretty straightforward about that.
Kevin:  Do you find those outside town planners think more outside the square than someone who works within the council? I guess that’s the point I’m getting at.
Nhan:  It really depends. It’s not just any real estate agent or a finance broker. I’d like to say that majority of them are, but I’ve worked with enough of them to really know. There’s always the good ones and always the average ones, as well.
Kevin:  In that scenario, if the land were zoned for units, and you have the option to do units or land subdivision, which one would you choose?
Nhan:  That’s a really good question. Let’s take a couple of basic scenarios. Let’s not worry about the hundred-unit developments. Let’s just say you can do five units on it or sell it into three blocks.
One of the advantages of land subdivision is that it’s quite relatively low capital cost. If you want to build five units, it might cost you $1 million plus to do five units or townhouses. Then you have to go to the bank to borrow that. If you’re going to do a one-into-three subdivision, the costs are a lot less, the processes are a lot faster, but possibly the profits may not be as high.
Personally, I’m doing townhouses as well as land subdivisions at the moment in two different scenarios. My preference is land subdivision. The construction or the development process is a lot faster and the capital outlay is not as much. But having said that, I’m still doing townhouses because land, once you develop it, you can’t rent it out, you have no income.
It really comes down to:

1. One’s expertise.
2. One’s requirements at the end.
3. One’s patience and capital resources.

Kevin:  If you find yourself in a situation like that, why don’t you do what we do: contact he experts? In this case, it’s Nhan Nguyen from AdvancedPropertyStrategies.com, and he’s the man who will have the answers for you.
Once again, Nhan, thanks so much for your time.
Nhan:  My pleasure, Kevin.
 

Rob Balanda

Kevin:   I received some very good advice recently from a good friend of mine, a man who I always take notice of, and that is Rob Balanda from MBI Lawyers.
Good day, Rob.
Rob:  Good day there, Kevin.
Kevin:  Would you like to know what that piece of advice was?
Rob:  What was that? Always borrow money from a pessimist because they never expect to get it back? Was that it?
Kevin:  Something like that. It was to do with buying property, of course. It was about first-home buyers and how, when you are going through the process, it’s quite daunting, but it can become a lot easier if you put a team together.
Let’s talk about that, Rob. Who would you see on the team, and what would be their function?
Rob:  You need people who will hold your hand as a beginner. The process is one you’ve never encountered before, so you need to engage with people who personally commit to helping you through it. This starts with the real estate agent. Everyone has to have more patience than most. Once you’ve done this once, then you’re well on your way, and then next time, you won’t have to.
The agents start with sending a draft of the contract to your solicitor or your conveyancer. The solicitor will make sure that it’s got the usual protections for you and then very importantly, it’s got pest and building clauses in it that genuinely allow you – as the buyer or the first-home owner – to pull out if you’re not happy with the pest and building.
Kevin:  Finance is a big thing, too?
Rob:  Yes. Make sure you get pre-approval of finance so you can be asking the seller for the minimum time possible for approval of finance. The shorter the better. The next big thing is the deposit. Make sure that you only pay a token deposit. I suggest $1000 or $2000 initially until you go unconditional. You just don’t want sellers holding some of your money until you’re actually genuinely unconditional. Have a clause that says the balance up to 5% or whatever it might be is payable within, say, two working days of signing off on finance.
Kevin:  You said 5% there, but sometimes agents will ask you for 10%?
Rob:  Yes. The ideal is to get 10% from a buyer as an agent, but often first-home owners won’t have that much. They’ll be on a real budget.
Kevin:  Normally the agents take their commission when the property settles out of that deposit, so they would want to make sure that they’ve got between 2% and 3%, because that’s basically what the commissions are around Australia?
Rob:  Yes, that’s right. People forget that the deposit is also a security for the agent’s commission, so without being undiplomatic about it, they’ll usually round it off to the nearest thousand.
Kevin:  Once we’ve done that and we’ve gone through this building and pest and finance, then normally about 14 days. Is that about right?
Rob:  Yes, 14 days if you’ve got pre-approval for finance. Make sure that you don’t sign off on finance until you get something more than that congratulations letter that often come out of lenders or brokers – the three-liner that says “Congratulations, the loan is approved.” A loan approval has many pages of conditions, and you need to make sure that you have that full letter before you sign off.
Kevin:  Once you go through those conditions, then the settlement takes place. Is it normally about 30 days?
Rob:  You need to allow a minimum of 30 days as a first-timer. I like to put in 35. Sellers don’t usually balk at that, especially if the settlement is going fall over the Christmas/New Year period when you’ll lose a few working days because of holidays.
Kevin:  When that day for settlement comes around, what does the buyer have to do? I know the answer to this, but I think it doesn’t hurt for first-time buyers to find out what happens at settlement.
Rob:  The solicitors handle the settlement. You just need to make sure that you’ve been in to see your friendly solicitor and they have all the documents and all the papers and all the monies needed to effect settlement in the coming days. You make sure that there is nothing more they want from you and that all you’re waiting for then, is that phone call to say, “Congratulations, the property is now yours.”
Kevin:  Now, what if I, as a buyer, want to go in and have another inspection on the property just before it settles to make sure that nothing has been missing that I thought was going to be in there. Is that in order?
Rob:  That’s usually in the standard contracts, and it’s a good idea to ask for that as a first-timer, say about a week out. Then if you got a seller who’s thinking about doing the old switcheroo – swapping the chintz curtains or those crystal chandeliers for some cheap substitute – that will put them on notice that you’re coming through, and they’ll have second thoughts about doing that thing. It does keep everyone honest. I like the idea.
Kevin:  Then I as the buyer can’t get the keys, I can’t take possession, until there’s been formal notice from both sides that the property has actually settled?
Rob:  Yes, that’s how it works.
Kevin:  I’d be given the keys, and then, of course, it’s all mine and I can move in?
Rob:  Yes.
Kevin:  What about if I want move some furniture in before the settlement?
Rob:  Usually sellers will indulge you there, but the thing to understand there is that when you put furniture in, it’s at your risk. Make sure that garage is locked up, because if someone breaks in, if the seller has moved out, then the risk is yours. If it’s stolen, that’s your worry, not the seller’s.
Ditto with pool equipment. If you are buying a house with a pool and the seller has moved out a couple of days before settlement, make sure the agent has got the Kreepy Krauly and the Barracuda in the garage locked away, because what happens is it goes missing. That’s what I find.
Kevin:  Rob, it’s great talking to you. Thank you very much for your time. Some great tips and pieces of advice there. Rob Balanda is from MBI Lawyers, and we would suggest you give him a call.
Thanks for your time, mate.
Rob:  Good day to you, Kevin.