June 19, 2013

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Building new or buying established?

June 4, 2013 by Leave a Comment

Build a house or buy a house?

People who buy newly established properties usually say it’s cheaper or more convenient than buying a second-hand home because all the hard work is done. Although, many buyers of existing homes eventually renovate which can be costly if it’s an older property.

Those who prefer to build from scratch say it’s worth the extra cost and effort in order to have a home that meets their particular desires. Building a new home also provides the opportunity to include some of the latest trends or environmental features that may be absent from established stock.

In recent years there has been a surge by people in their 40’s and 50’s wanting to build the dream home they have long desired and this has been assisted by the availability of land in established parts of the city through the drive for urban infill.

Ultimately, it is the cost comparison between building and buying that will usually decide which option people choose.

In recent years Australian Bureau of Statistics data has shown that the cost of building a project home increased by upwards of 16 per cent, while in WA the occasional shortage of builders and tradesman can lengthen the amount of time needed to finish a home if a resurgent mining sector lures them away.

Now that the mining sector has wound down a bit, building costs seem to have levelled or come down a little and finding skilled workers to develop land and undertake new housing construction isn’t currently an issue.

As a result, there are some excellent house and land packages in outer urban areas to help buyers into the market with affordable options.

First homebuyers should be particularly careful not to over extend themselves financially. Buying an affordable, existing home can often be a better option for many first homebuyers, but either way it’s important that people seek professional financial advice before deciding on the big commitment of home ownership.

Unusually, first homebuyers in Western Australia, unlike many other states, are fortunate to have a good supply of available land on which to build. There are currently around 1,400 blocks of residential land for sale in the metropolitan area.

Our state retains its strong housing culture propelled by the overwhelming desire by most people to live on a green title lot with a stand-alone house. For example, whereas 50 per cent of all new dwellings in Sydney are group dwellings such as units, apartments, villas and townhouses, in Perth only around 20 per cent of new dwellings are in this category: houses dominate here.

Perth remains the most urbanised capital city in Australia because we have the least number of grouped dwellings as a percentage of overall stock than any other Australian city.

This article was originally published on reiwa.com.

Image by Rebecca Chai via Flickr.

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Buying through the winter months

May 30, 2013 by Leave a Comment

Buying a house in winter can be beneficial.

Seasonal weather patterns do have an influence on the real estate market.

The peak selling periods are generally late summer and early autumn from February to April and then the spring months of October to November.

During these periods the number of homes sold can be up to 20 per cent greater than other months. Home sales are historically at their lowest levels during the mid winter period of July and August and the holiday months of December and January.

Another factor influencing the seasonal pattern in real estate is the movement of people resulting from changes in employment or educational commitments and usually coincides with the end of summer.

Last week the number of properties on the market was around 8,700, which is below Perth’s long term average of around 12,000 properties and helps explain why the average number of selling days has been trending down over the last year.

Home opens are usually a good indicator of market activity.

In warmer months people are more likely to do inspections, while in winter the cooler conditions, shorter days and footy matches on the TV keep a lot of people indoors at weekends.

Despite fewer sales occurring in winter the average time taken to sell properties does not vary a great deal throughout the year. Fewer sales in winter is usually a result of fewer properties for sale.

Those who are serious about home buying aren’t too concerned about the weather, but interestingly it seems that those who make a decision about buying in winter do so after visiting fewer homes.

As we approach the winter months it’s important to adapt selling strategies accordingly. Advertising can be more important in winter to attract serious buyers.

If it is cold and wet on the day of a home open, it pays to take some sensible steps to keep the place warm, dry, well lit and welcoming. Have a stand for umbrellas by the front door and a decent mat to keep the floors tidy.

From a buyer’s perspective, a wet and windy day is a great opportunity to see how the home holds up, potentially exposing any faults with roofs and gutters or inadequate storm water drainage.

Such a day might also help a prospective buyer understand the home’s heating needs.

Homebuyers can sometimes find the winter months beneficial when negotiating on the terms and conditions for a property sale simply because the market is slower.

Now that the market is experiencing good turnover with modest price growth many owners are keen to sell.

This is an ideal opportunity for astute, organised buyers. It offers the chance to find an affordable home and negotiate a good deal on price during the quieter months.

This article was originally published on reiwa.com.

Image by Martin James via Flickr.

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How many days is right to sell a property?

May 13, 2013 by

How long to sell a house?

Most people wanting to sell their home hope that it happens quickly. One of the most common questions agents get asked when listing a property is, “how long will it take to get a buyer?”

In metropolitan Perth the long-term average for selling days is around 44 for an established home but there can be a large variance. For example, around 30 per cent of homes sell within 20 days while around 15 per cent take up to 80 days.

Currently in Perth the average is 57 days but this has been trending down from 80 since March last year.

Most sellers want to be in the target range for a quick sale and this usually comes down to two key factors: setting the right price and promoting the property successfully.

Sellers are strongly advised to discuss this with their listing agent and to trust in their selling experience and knowledge of the local market.

Even so there can be homes that take unusually long periods of time to sell irrespective of market conditions. In most cases this will be because they are over-priced or poorly marketed.

Properties like this which linger on the market make potential buyers suspicious and they will bypass it.

The lesson from the data on average selling time is that the best chance sellers have comes within the first few weeks of the campaign.

Most keen buyers notice a new listing right away but need a couple of weeks to properly consider a purchase.

This is why it’s terribly important that your home is priced correctly from the start. This cannot be overstated because today’s buyers have access to a lot of online data to inform themselves about market values.

It’s also crucial that the property is looking good and in its best condition.

Don’t wait for the agent to tell you that some potential buyers were critical of a few things here and there during a home open, when you as the seller could have fixed these things before the inspection.

Just tidying up a messy backyard and touching up some tired paintwork can be important.

Attention to detail will maximize your chances of being among the one third of West Australians who can sell their homes within 20 days.

The other option is to sell your home by auction.

This is a different process but which can bring out a larger number of more serious buyers on the day. The shorter campaign period for the property can focus the attention of potential buyers, some of whom might be keen to pounce on the day of the auction.

If the auction is passed-in your agent will still have a pool of interested buyers who can subsequently be approached.

This article was originally published on reiwa.com.

Image by Carley Comartin via Flickr.

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Selling before buying has risks and rewards

May 2, 2013 by

To sell, or buy first?

The surest way to upgrade to a new home is to sell your existing one first.

This gives you more control over your finances and places you in a stronger bargaining position when making an offer.

In the current market with strong turnover and lots of buyer interest, most sellers are looking for the least complicated sale.

Cash offers are more likely to win them over than a ‘subject to sale’ offer, even where the cash offer might not be as lucrative. So a buyer in a position to make a cash offer will have some advantage in the present housing market.

Be aware however, that there are some risks associated with this strategy and buyers should be cautious.

The real estate market may peak before you sell your current home and you may take longer to sell, which would require you taking out a bridging loan to cover the entire purchase price of your new home. This financing can be expensive.

The anticipated sale price for your existing home may not be achievable meaning that your end loan is higher than anticipated.

If you do decide to make an offer subject to the satisfactory sale of your existing home, regardless of the amount you offer the seller they may decide not to accept it on that condition.

The selling agent might advise their client that the buyer could not reasonably expect to achieve a satisfactory sale of their existing property within reasonable time.

So, if considering a ‘subject to sale’ offer it is advisable to prepare your finances as if making an offer subject only to loan approval.

This means you have an alternative strategy in place if the seller invokes the ‘48 hour clause’ on your offer.

A seller will usually impose a 48-hour clause to a ‘subject to sale’ offer, which will mean that if another buyer makes an offer for the home you must decide to make your original offer unconditional or withdraw it.

Typically, you will be required to decide this within 48 hours of receiving notice of another offer.

If you have prepared your finances in advance of this event you are saved from having to scramble for alternative finances within the two day timeframe.

If you decide to sell before you buy, begin by setting a realistic sale price for your home based on an accurate market appraisal by local REIWA agents. You should then discuss the best marketing campaign with the agent you choose to list with.

You might also consider obtaining pre-approval for a loan to acquire your next home based on the minimum amount of cash you could expect from the sale. This will ensure a smoother sale process.

This article was originally published on reiwa.com.

Image by Chris Henden via Flickr.

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Agents remove the risk

March 22, 2013 by

When selling (or buying) a house, real estate agents help remove the risk.

Anyone selling a home wants the best price the market will deliver and buyers want the reassurance that the sale price is appropriate.

This is why most people use a licensed real estate agent when buying and selling.

Agents are trained to arrive at a market sale price for a successful transaction.

Achieving the best market price is not easy without expert assistance. Private sellers, for example, tend to over-estimate selling prices and most private sales fail without significant price adjustments. This can result in a final sale price that is actually less than the price which was achievable had the property been marketed correctly.

While sellers want to receive the highest price, buyers are keen to pay the least amount and this creates an understandable conflict between the two that an agent will negotiate to the point of agreement. It can be very hard for a private seller to play this role without an intermediary.

The selling price is not the only area of conflict between sellers and buyers.

A real estate transaction can be a legal minefield and this is why state laws require licensed real estate agents to comply fully with the agent’s contractual obligations to the owner of the property. Agents also have a legal obligation to represent a property correctly and fairly to a buyer.

This legal framework is important because real estate transactions are open to challenges unless proper process is followed.

Take for example the sale of strata title properties which account for a quarter of all property sales. Every time a strata property is sold the buyer must be provided with a package of general and specific information related to that and failure to comply with this risks heavy penalties and may invalidate a contract.

The process of buying and selling strata title properties, in particular, can be so complicated that REIWA has developed specific training courses with detailed checklists for its members.

Another area of potential buyer-seller conflict is information about services and rights of access on properties, including sewers, drains and reservations by public utilities.

If you are a buyer you should know about these matters. If you are the owner there is a responsibility to convey such information, but with private sales these matters are often overlooked and can result in legal dispute.

These and other influences on real estate transactions are covered in the standard legal documents accessible by agents.

If a problem occurs a seller or buyer can seek assistance from REIWA and the state government. However, if you are involved in a private sale and something goes wrong the best you can do is meet in court which can be expensive and time consuming.

This article was originally published on reiwa.com.

Image by Joshua Ommen via Flickr.

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Check that everything works before you buy

February 25, 2013 by

Use the home inspection to check for working plumbing, electrical fixtures and other parts of the property.

First home buyers and those more experienced buyers can often forget to check whether all the mechanical equipment on a property works properly before they buy it.

Buyers must remember that it is a term of every contract that the property, at settlement, will be in the same state and condition it was in immediately prior to the contract date.

It makes sense therefore for the buyer to fully understand what is being purchased and to ask the real estate agent what items are not working.

The REIWA Offer and Acceptance Form used by our members has a section for buyers and sellers to agree to any special conditions. This might include representations that the plumbing and wiring be in safe working order.

If a door, shower screen or window is broken, these are also matters you can negotiate be fixed by the owner before you settle, however, the seller has no obligation to do this and may not agree to repairs.

If you add a special condition, be aware that it may jeopardise acceptance of your offer.

The purpose of the pre-settlement inspection (not the final inspection), which takes place one week before settlement and not during the purchase transaction, is to check that the property is in the same condition as it was when last inspected by the buyer and not prior to the contract date. It is also to ensure that any special conditions have been satisfied.

It is most important to remember that the purpose of a pre-settlement inspection is not to add new conditions or make requests of the seller for faults that existed at the time you made your offer.

Therefore it’s important to check some of the more common things to inspect prior to entering into a contract might include:

* The hot water system; learn how it works and whether it may need repairs. If it’s a solar hot water system ask about the booster switch and where to locate it.

* If the yard is reticulated, check that it works properly and ask to see where the sprinklers and solenoids, where they exist, are located.

* Check that any air conditioning is running smoothly or that ceiling fans operate safely.

* Where there is a swimming pool, look for any damage and become familiar with the pool cleaning equipment and filter. Ensure that the property has the required legal pool fencing.

* Check that the plumbing and lights work by operating all the taps and switches and run any exhaust fans in the kitchen and toilet.

* Test all the power points with a phone charger or hair dryer in each of the rooms.

* Inspect all the water drainage outlets from the roof. Be confident the guttering is sound and find out where any soak wells are located.

* If the property is on septic tanks for sewage, check that it works and locate the tanks.

* Test the locks and latches on all doors and windows and make sure that curtains and blinds are secure and operational.

After becoming familiar with the property you are then ready to make an informed decision on the purchase price. The price you offer may need to take into account items that you think will need replacement or repair in the future, but remember that in a tight sellers market the seller will be looking for the best offer and terms.

Image by ABC Open Wide Bay via Flickr.

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Be organised on moving day

January 8, 2013 by

Reduce the hassle of moving house by following a few sound moving tips.

Many people change their accommodation this time of year.

It can be a stressful and difficult exercise because moving house is always a hassle.

It pays therefore to hire a removalist to get the job done quickly and more easily. It’s worthwhile getting some quotes from reputable operators and checking the companies policy on breakages.

Professional movers take pride in their work and care with client’s possessions, but accidents can happen. There are a range of removalist company insurance policies from full insurance to limited policies for specific items.

Full value protection costs more but may be worth it if you are moving fragile goods over a long distance. If you’re just moving between suburbs a restricted policy limited to say, glassware and the TV might be all you need.

A removalist can organise the packing of boxes if required. This normally takes place a few days before the van is loaded. If you choose this option you can generally help and supervise.

Most households do the packing themselves and usually the removalist can provide the boxes at a cost. Check to see if the removalist insurance policy is affected by your own packing.

Number the boxes clearly so they refer to a more detailed contents audit kept by you.

Professional removalists are never rushed and work to a plan. Work out a floor plan for your new home so the movers can place beds, tables and other heavy items where you want them and label the boxes to be placed in particular rooms.

If you decide on moving things yourself, plan the operation carefully. You’ll need help from friends and family but you need to be firm and clear in your instructions.

Before you hire a truck or trailer work out how much stuff you need to move, where it’s going and what items require special attention. You may need trolleys, straps and blankets and you need to be prepared for how you might respond if a volunteer breaks a valued possession or injures themselves.

Allow plenty of time for the move and map out an order for the items to be loaded and unloaded to make the best use of the van, your time and the space. Remember, the items first loaded into the truck are the last ones to come out, so work with that.

Moving can be tiring so don’t rush to unpack. A good idea is to prepare a small overnight bag as if staying in a motel.

That can be a handy relief at the end of a long day, without having to rummage through boxes for your toothbrush or the teabags.

Take the stress out of moving with a little forward planning to enjoy your new home.

This article was originally published on reiwa.com.

Image by Paul Nicholson via Flickr.

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What is the right fee for an agent?

November 12, 2012 by

Agent fees are agreed upon between the agent and seller

One of the most common questions that consumers of real estate services ask, is what is the appropriate fee for selling my property?

It’s a good question and sellers should not hesitate to ask their agent the right questions and look elsewhere if not satisfied.

Over a decade ago, agents’ fees were regulated by the state government and published in a schedule. It was a sliding scale that capped the maximum fee in accordance with the sale price.

This was changed in 1998, so for the past 14 years the industry has operated in an open market place where commission fees are negotiated between the seller and the agent before a contract is agreed to. Some companies might charge a flat fee irrespective of the sale price.

Before an agent can perform any services for you, they are required by law to have a written agreement signed by you that authorises them to act on your behalf. This agreement is called a ‘Written Authority’, an ‘Appointment to Act’ or an ‘Authority to Act’.

Before you sign a Written Authority you should safeguard your interests by comparing the fees and services of several agents, much the same way as you might get several quotes before hiring a tradesperson.

You should also carefully read the conditions of the Written Authority.

As with any service, the cheapest fee does not necessarily mean the best service. Equally, a higher fee may not ensure the best outcome for you either.

Most sellers choose their agent based on reputation, recommendation, good local profile or a previous happy experience.

To be confident in choosing a real estate agent, it helps to ask some key questions about their level of service, expertise, sales record, marketing strategy and familiarity with the area or your style of house.

You should also ask how the agent will determine the selling price, if open-homes will be conducted (and how many), if the agreement allows for conjunctional sales and whether or not the fee includes costs for marketing and advertising. Most agents charge separately for this, so ask about this additional cost.

REIWA members will explain their business model, fees and charges and explain why they charge what they do. Within reason, most will consider some negotiation to meet your expectations and tailor the sale and marketing of your property to your budget.

Agencies may also decline your business if your proposed fee or conditions are unrealistic.

If you are a first time seller and perhaps not comfortable asking these questions, it’s quite acceptable to have a friend or family member sit with you in these discussions.

It’s an open marketplace, so shop around for comparison to find the agency right for you.

This article was originally published on reiwa.com.

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Do I have to pay stamp duty?

October 23, 2012 by

Stamp duty is a tax that is almost unavoidable.

When transferring property, stamp duty is or isn’t payable, depending on the transaction type and the family relationships of the people involved.

Conveyancing can be quite a complex area so it’s important to keep up by checking the fact sheets at the Office of State Revenue (OSR), website.

This complexity also illustrates the benefits for people buying, selling and transferring property in using the professional services of a qualified settlement agent.

To be clear about when stamp duty is and isn’t payable, let’s look at the payment and exemption rules as they exist currently.

Most people are aware that eligible first home buyers pay no duty providing the sale price is under $500,000, but what about other types of transactions? What happens when ownership changes between family members even if no money changes hands?

In general, every change in ownership, with a handful of exceptions, and regardless of the consideration, will incur duty.

Not only do transfers to related parties incur duty they may also incur Capital Gains Tax if the property being transferred is an investment property, even if no consideration is paid.

This means that parents who add children to an existing title on the family home will incur duty.

The most common example of where stamp duty is not payable is with a family home and couples.

For example, a home may currently be owned in a husband’s name and he wishes to add his new wife as a joint tenant.

This ruling also applies to de facto couples, including same-sex couples. Stamp duty does not apply here.

If a property is owned by a Family Trust and it wishes to transfer the property to a beneficiary of the Trust, providing certain requirements are met and all the OSR duty information requirements are satisfied, that may result in a nominal duty of just $20.00.

Some transfers between couples pursuant to Family Court Orders would also be exempt. The OSR fact sheet details this.

Transfers to remove persons from a title e.g: where that person has died or as a result of a marital separation, do not necessarily incur additional duty.

If people are in the contract phase of buying property and they want to add or delete names on the title, providing the nominee is related to the original buyer this does not incur stamp duty. However, doing this after the property has settled will attract duty, so it’s important to get the timing right.

As you can see, there is almost no avoiding this payment, so it’s important to factor these costs into any property transactions you may be undertaking.

For more details go to: www.osr.wa.gov.au

This article was originally published on reiwa.com.

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How much can you afford to borrow?

July 23, 2012 by

Loans; Image by Jeff Ferzoco

Many homebuyers don’t understand basic lending details, including how much they can borrow, until they actually apply for a loan. This is not ideal because an informed home buyer is in a much better position to make an offer.

Until about ten years ago the general ‘rule of thumb’ for buying a home was that you could borrow about three times your gross household income.

So, if a couple were making $130,000 between them each year, a lender might loan up to $390,000. However, this measure doesn’t apply terribly well today with house prices having grown so much.

If you are applying for a joint home loan with another person including your spouse or partner you must take into consideration their existing earnings and debts. Remember; both of you are legally liable for repaying the loan.

The key to a smooth start with a home loan really rests with the deposit. If you don’t have a ready deposit, it’s wise to start a regular savings program in preparation of home ownership.

Most lenders require recent evidence of three months of genuine savings before approving a loan. If the deposit is a gift then the lender will normally require it to be in the borrowers bank account for three months.

Talk to your financial institution about this. Most prefer a deposit of around 10 per cent the purchase price, but this has become unrealistic. Deposits of 5 per cent are now more common.

Banks are keen to lend, but following the GFC they are also more thorough about checking your capacity to service the loan and giving consideration to any other debts you may have. Normally, any existing debt is included in the total amount you can borrow.

When calculating this, the maximum limit on your credit card will be deemed as debt even if you never reach that credit limit.

Ask your lender to outline their policy in this regard and to detail all the fees that apply to the loan, including mortgage costs, mortgage insurance, stamp duty or anything else. These costs are added to your home loan.

Rather than looking at how much the bank will allow you to borrow, it makes more sense to concentrate on how much you can comfortably afford. Ideally you should aim for your weekly mortgage costs to be no higher than about 30 per cent of your household income. Don’t be a slave to your mortgage, allow for some disposable income so you can enjoy the other things in life.

Some lenders will not issue loans for more than 80 per cent of the purchase price, so buying a more modest dwelling might suit many buyers better as a lifestyle decision, both in terms of gaining access to a loan and for comfort of repayments.

This article was originally published on reiwa.com.

Image by Jeff Ferzoco via Flickr.

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