House & Land

To buy or sell first? Part two

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If you are looking to buy a new home and sell your existing home you've most likely wondered whether you should buy or sell first.

There are several things to consider when making this decision so you are best prepared for the journey. In part two here we'll look at things to consider when buying first.

Buying first

Pros

  • There is less pressure to just ‘get’ a new home so you can settle on time – you can really shop around
  • You have greater certainty that you will only have to move once
  • In a quickly rising market you may be able to achieve a higher sale price and secure a better price on your new home

Cons

  • Bridging finance may be required if you do not sell your existing home in time for settlement
  • You won’t have a clear budget for your new purchase
  • You will need to ensure you have a cash deposit sufficient to cover the purchase or be prepared to obtain a deposit bond

Deposit Bond

When buying a property, first you will need consider options for payment of the deposit.  The traditional method of payment of a deposit is cash.  However, when cash is not available like when your equity is tied up in your existing home, a deposit bond maybe a suitable option.

There are private companies that issue deposit bonds and banks can issue the equivalent being a bank guarantee.  Each issuing institution will have different fees and criteria so you will need to investigate these and ensure you comply.

Your conveyancer and mortgage broker can assist in this process.

Bridging Finance

When buying first your ability to cover the mortgage of two properties will be a main consideration.  Bridging finance is an option worth discussing with your mortgage broker.  Bridging finance loans have:

  • shorter terms of between 6 and 12 months;
  • fixed and variable rates are typically still offered;
  • higher interest rates; and
  • Lenders Mortgage Insurance may still apply if the loan is more than 80% of the total value of both properties.

Extended Settlement

As noted above, a longer settlement period of approximately 10-12 weeks (or longer if you are moving to an area where properties are scarce) maybe a necessary consideration.

The downside of an extended settlement is you may need to accept a sale price that is lower than you originally expected in order to sell in time to achieve settlement.

Contingency Plan – Conditional Purchase

A last resort to overcome the cons is to make your purchase dependant on the sale of your home.  As noted above, this can be negotiated be your conveyancer or solicitor.  Keep in mind that a vendor does not have to agree to this request.

Other Considerations

If settlement of both your sale and purchase have been timed perfectly there are some last minute considerations that need to be covered to ensure settlement goes well.

  • Timing for final inspection

When buying property you are entitled to a final inspection of the property within 48 hours prior to settlement.  This is also relevant for the people buying your property.

  • Timing for settlement

If settlement has been timed perfectly it will occur at the same time on the same day.  Otherwise, settlement may need to occur a few days apart to allow funds to clear and cheques to be drawn.  Settlement is most likely going to occur after 2pm as many banks have this requirement.

Do you have to attend settlement – the short answer here is no.  Your solicitor to conveyancer will arrange attendance by a settlement agent on your behalf.

  • Timing for moving out/moving in

So, settlement has been set for the same time on the same day.  Great news – you only have to move once.

Now it is time to co-ordinate moving.  The best option tends to be hiring a removalist with a truck large enough to fit all of your furniture and possessions in, in one go.  This will allow you to pack up and vacate the property easily prior to settlement.

  • Moving into new property including the collection of keys

Once you have moved out of your old home, you will be waiting for the keys to move into your new home.  In order for you to collect the keys , your solicitor or conveyancer will call the agent and let them know settlement has been finalised, this will happen within 30 mins to 1 hour of the set settlement time.  This call will enable the agent to release the keys to you and you will finally be able to move into your new home.

If you're thinking of selling first, have a read of part one here.

If you would like more information on the process of buying and selling please contact Kylie Fuentes our licensed conveyancer in Picton.

To buy or sell first? Part one

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If you are looking to buy a new home and sell your existing home you've most likely wondered whether you should buy or sell first.

There are several things to consider when making this decision so you are best prepared for the journey. In part one here we'll look at things to consider when selling first.

Selling first

Pros

  • You are in a better position to negotiate your sale price
  • You will know what your limit is on purchase price when buying your new home
  • The need for bridging finance is less likely
  • You can plan ahead and extend the settlement period to allow you to secure your new home

Cons

  • In a quickly rising market your new home may be more expensive than you planned for
  • You may need to consider temporary accommodation if you have not secured a new home by settlement on your sale
  • Possibility of storage fees or double the removalists fees
  • If permitted under your contract you may use the deposit paid by the purchaser towards the deposit payable on your new home

Negotiating power

A main benefit in selling your existing home first is that you will know exactly what you can spend on a new home.  This will help you budget your family expenses and make the right move for you and your family.  By selling first, you also put yourself in a better position to negotiation the best sale price as you are not under pressure to achieve settlement on a certain date.

Extended settlement

In this scenario however, a good option is to have a longer settlement period of approximately 10-12 weeks (or longer if you are moving to an area where properties are scarce).  This will allow time for the cooling off period on your sale to come to an end and for you to secure a new home to move into.  This will also reduce the likelihood of needing temporary accommodation and extra moving costs.

Releasing your deposit

Many people looking to move on in the property market may be hesitant due to access to funds for a deposit, especially if your deposit funds are tied up in the equity in your home.  By selling first you can overcome this issue.  Ensure when your Contract is prepared that it allows you to use the deposit being paid by the purchaser prior to settlement.  By having this provision in your Contract you will be able to access these funds for your purchase.

Leaseback

If an extended settlement will not work for your buyers you could raise the option of a leaseback provision.  By doing this you effectively extend your moving out date until you secure a new home.  This is useful if your existing home is one investors are likely to be interested in as they will have a guaranteed tenant from the settlement date.  The details of this kind of provision are usually negotiated at the time of exchange.

Contingency plan – Conditional Sale

A last resort to overcome the cons is to make your sale dependent on you purchasing your new home.  Your conveyancer or solicitor can insert a clause into the Contract that stipulates that settlement is not triggered until you have secured your new home which will allow you to line up settlement allowing you to only have to move once.  Keeping in mind this may reduce the number of buyers interested in your existing home.

Contingency plan - Renting

If the above options do not suit your needs or your purchaser you may need to consider a short term rental until you have secured your new home.  If you do consider this option, when looking at rentals be very clear that it is short term situation and check what the termination costs are if you move out earlier than the lease expiry date.

If you're thinking of buying first keep an eye out for part two where we'll outline further considerations to help you prepare for the journey.

Ready to discuss your next buying or selling property transaction? Talk to the team at Coutts Solicitors & Conveyancers.

First home buyer benefits and your spouse

First home buyer benefits

Some of the most common questions we receive in relation to obtaining first home buyer benefits are:

  • “If my spouse has purchased a property before, can I still claim first home benefits?”
  • “If my spouse purchases this property and I purchase a property later, can we both receive first home benefits?”

A spouse is a husband or wife and in relation to the term “de facto”, the Office of State Revenue uses the definition found here under Section 4AA of the Family Law Act 1975.  You should ensure you fall into either of these categories and if you are unsure, it is best to check before you enter into a Contract for Sale.

There are currently two benefits available to first home owners:

  • First Home New Home Scheme
  • First Home Owner Grant

First Home New Home Scheme

This scheme provides an exemption from stamp duty on properties up to the value of $550,000.00 and concessions on properties valued between $550,000.00-$650,000.00, you must meet the following eligibility criteria:

  • The Contract and Transfer must be for the purchase of the whole of the property.
  • All purchasers must be ‘eligible purchasers’.
    • An ‘eligible purchaser’ is defined as a natural person (i.e not a company or trust) at least 18 years of age who has not, and whose spouse/de facto has not:
      • At any time owned (either solely or with someone else) residential property in Australia other than property owned solely as a trustee or executor;
      • Previously received an exemption or concession under First Home New Home.
    • At least one eligible purchaser must occupy the home as their principal place of residence for a continuous period of six months, commencing within 12 months from the date of settlement.

First Home Owner Grant

To receive this grant you must meet the following eligibility criteria:

  • Each applicant is a natural person and not a company or trust.
  • Each applicant must be at least 18 years of age.
  • All applicants and/or their spouse/de facto have not owned a residential property, jointly, separately or with some other person, in any State or Territory of Australia before 1 July 2000.
  • All applicants and/or their spouse/de facto have not previously owned a residential property jointly, separately or with some other person in any State or Territory of Australia, and occupied that property for a continuous period of at least 6 months.
  • Each applicant has entered into a contract for the purchase of a new home or signed a contract to build a home on or after 1 January 2016. In the case of an owner builder, laying of the foundations commenced on or after 1 January 2016.
  • The total value of the property does not exceed the cap amount of $750,000.00.

This must be the first time an applicant and/or their spouse/de facto has received a first home owner grant and at least one applicant must occupy the home as their principal place of residence for a continuous period of six months, commencing within 12 months from the date of settlement.

Basically the short answer is that, as ALL applicants for each first home benefit must NOT have either jointly or solely owned a property previously, you will not be entitled to any first home benefit if your partner has previously owned a property.

The Office of State Revenue will assess each application on a case by case basis so if you feel that you have circumstances that don’t quite fit into any of the above criteria, we can submit an application on your behalf for individual assessment.

If you would like to speak to Carina about first home buyer benefits please contact us.

Article written as an update to the original entry posted in June 2016. Updated 30 September 2016.

Changes to The State Revenue Legislation Amendment Act 2016

As a Licensed Conveyancer  at a Law Firm, I deal with many clients, from first home buyers to investors and businesses. The State Revenue Legislation Act  effects a large portion of my clients and determines what they can do, the grant amounts they will receive and the tax they need to pay. So when The NSW Office of State Revenue or OSR,  announced changes to the act with The State Revenue Amendment Act 2016, I realised many of my clients would be unaware or confused by the changes. So for those people or businesses undertaking a transaction with the OSR,  and to help you understand the changes, I have summarised the changes to the act below. The changes include:

  • To be classified as a "Substantially renovated home" for the purpose of the First Home Owner Grant and First Home New Home Exemption or Concession from Duty, the home must now be created by renovations that remove or replace all, or substantially all of the building.
  • To be classified as a "home built to replace demolished premises" for the purpose of the First Home Owner Grant, the home must be built on the same land that the demolished premises stood.
  • Unoccupied land which is eligible for the principal place of residence land tax exemption that is occupied by a person other than the owner can now be exempt for a period of up to 4 years from when that person stops using the land for residential purposes.
  • Wages that are paid to a person by a body corporate wholly owned by at least 2 local councils, for activities carried out for those councils, are now exempt from payroll tax.
  • After a successful objection or review, the chief Commissioner must now pay interest on a refund made to a taxpayer.
  • Enterprises may now voluntarily report amounts which are not classified as unclaimed because the total is $100 or less. The amount must be paid to the Chief Commissioner and can be claimed by the owner of the money.
  • The Chief Commissioner may now allow an owner of unclaimed money whose right to the money has expired to still claim the money.
  • References to anything done or held by a trustee of a unit trust scheme as trustee in respect of corporate reconstruction transactions and corporate consolidation transactions that are exempt from duty now extend to include anything done by or held by a custodian of the trustee of a managed investment scheme.

For more information on the The State Revenue Legislation Amendment Act 2016 click HERE.

If you need legal advice in relation to a property or business transaction. Coutts can give you the advice you need. 

5 tips to having funds ready on your settlement date

As a licensed Conveyancer I work with hundreds of properties (and people) with the exchange of ownership and transferring of funds. I have seen the pitfalls that can occur when purchasers are not diligent with their funds and do not ensure they have the correct amount in their account upon settlement. Your conveyancer can guide you, but in the end it is up to you to make sure you plan your finances correctly and have the correct funds in your account. To help you plan for that day here are my 5 tips to having funds ready on your settlement date, ensuring that you are not short of funds.

  1. Make sure that when you are borrowing money that your broker/banker includes the following in your loan amount or ensure that you have these funds available in your savings account on top of the purchase price:
    1. Stamp duty;
    2. Legal fees:
    3. Pest & Building fees;
    4. Strata Report fees;
    5. Title Insurance;
    6. Council/Water (approximately $2,000.00 + ); and
    7. Bank registration fees (approximately $500.00 +)
  2. Ask your broker/banker to sign an authority to debit shortfall account. This means that the bank will be able to debit from your nominated bank account (provided that it is with the same bank). This will save you from running around the day before settlement to try and get cheques for settlement.
  3. If you are a cash purchaser you can transfer approximate funds into your solicitors/conveyancers trust account well ahead of time and in stages. This will also save you time and money in running around the day before settlement to obtain cheques.
  4. Ensure that you do not overspend – set yourself a budget. When at an auction and the bidding price keeps going up and up, don’t make emotional decisions. Make sure you have a budget. Over spending could mean that you will have to contribute more of your own savings into the property or if you have lack of savings then borrowing off family or friends.
  5. If you are buying and selling and you are doing your budget, ensure that you add break costs for your discharging bank. If you have recently fixed your interest rate break costs can be quiet expensive and people forget about break costs. Calling your existing bank ahead of time and questioning the break costs could be very beneficial for you. They may even have a deal if you buy and sell and use them as the incoming bank.

If you would like advice on your property matter be sure to contact Coutts today.

What is a Put and Call Option?

A Put and Call Option is an agreement, usually between a landowner and a Builder. The agreement allows the landowner to allocate certain blocks to the Builder for their exclusive right to sell to third parties, for an ‘option fee’. The benefit to the landowner is that they have a guaranteed sale because even if the Builder doesn’t find a third party, the ‘put’ option allows them to make the Builder purchase the lot. The benefit to the Builder is that they get to package the land up as a house and land package, guaranteeing their build on that block of land. The risk to the Builder is that if they do not find a third party to purchase the block of land, they are required to.

There is also such thing as just a Call Option. The difference here is that the landowner no longer has the option to require the Builder purchase the lot however if the Builder doesn’t nominate a third party to purchase the lot, they may forfeit their option fee.

Option Deeds entered into between landowners and Builders include certain terms and conditions. Usually the most crucial is the Call Option expiry date. The Call Option expiry date is the latest date that the Builder has to nominate a third party to purchase the land. In most cases, in order to nominate a third party purchaser to purchase the land, the Builder must ensure that a both building and land contracts have been entered into by the Call Option expiry date.

If you would like advice on Put and Call Option deeds please contact Melina Costantino, expert in Conveyancing for Builders and Developers at Coutts Solicitors & Conveyancers.