Buying a home through an agent by alendar


Buying a home through an agent

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									          Government of
          Western Australia

Buying a home through an agent
Purchasing a home is one of the most important decisions many people
will make during their lives.

This fact sheet advises you of some of the issues that may be important
to you when buying a home.

In most cases there will be a real estate    •   Contract for the Sale of Land or
agent, or their sales representative,            Strata Title by Offer and Acceptance
involved in the marketing and sale of the        (commonly called the O & A); and
home you want to buy.                        • Joint Form of General Conditions for
                                                 the Sale of Land (also referred to as
 The selling agent is engaged by                 simply the General Conditions).
 the seller and must act in the best         This publication refers to the O & A
 interests of the seller, not you as         which is produced by the Real Estate
 the buyer.                                  Institute of Western Australia (REIWA).
                                             The General Conditions form is produced
However, the agent has a duty to tell        jointly by REIWA and the Law Society
you, as the buyer, relevant facts about      of Western Australia. These forms are
the property. Ask the agent precise          widely used in the real estate industry.
questions about the property. If the agent   The General Conditions were last
cannot answer your questions right           revised in 2002 and differ in some areas
away, then clearly ask them to find out      to earlier versions. It would be wise to
the answers within a specific time period.   ensure that your agent is using the latest
You can also contact the relevant local      version of the General Conditions when
council and other government                 drawing up a contract.
organisations yourself and ask them for
                                             The General Conditions cover important
the information.
                                             contractual obligations for both buyer
If you are not able to make all the          and seller including such matters as
appropriate enquiries yourself, or want      the paying and holding of a deposit,
someone to act on your behalf, you           settlement, adjustment of outgoings,
may appoint another agent as a ‘buyers       and other payment responsibilities such
agent’ who will represent you and act        as underground power and sewerage
in your best interests. A buyers agent       connections. It is possible to vary the
will negotiate with the seller’s agent on    contractual obligations. You can for
your behalf. If you decide to do this, you   instance, delete or amend existing
will need to enter into a contract with      contractual obligations that form the
the agent in the same way that a seller      General Conditions should you choose.
contracts with their agent. The REBA         The seller would have to agree with the
booklet Real estate fees – negotiating       changes if the contract is to be binding.
with an agent gives more information
                                             Note that special conditions can be
about contracting with an agent.
                                             added to the O & A to meet the particular
The standard property contract               needs of both buyer and seller. Special
                                             conditions may cover issues about
The standard buying/selling contract
                                             property inspections (such as building
for the transfer of property consists
                                             and timber pest inspections), who pays
of two sections:
                                             for necessary repairs (such as the repair

                                             The Forrest Centre, Level 6, 219 St Georges Terrace
       Real Estate and Business              Perth, Western Australia 6000 (weekdays 8.30am - 5.00pm)
                                             Real Estate and Settlement Advice Line: 1300 30 40 64
       Agents Supervisory Board              Post: Locked Bag 14, Cloisters Square, WA 6805
                                                                                                        Real Estate & Business Agents Supervisory Board

                                             Admin: 08 9282 0843 Facsimile: 08 9282 0869

    of a broken window, fixing plumbing), or        the upkeep of any lawns and gardens
    anything else important for either buyer        are other costs that should also be
    or seller.                                      considered.
    Any special conditions made to the              Home Buyers Assistance Account
    O & A should be as precisely worded as
    possible and you may wish to seek legal         The purchase of a property itself also
    advice to ensure this.                          involves substantial costs such as
                                                    settlement and establishment fees. If
    If the seller agrees to all conditions and
                                                    you are purchasing a property through
    the offer is accepted, there is a legal
                                                    a licensed real estate agent REBA may
    obligation to satisfy every condition
                                                    be able to help with some of these fees
    or the sale may not be completed.
                                                    through a scheme called the Home
    However, before signing the O & A, you
                                                    Buyers Assistance Account (HBAA).
    should carefully consider your financial
    situation and thoroughly inspect the            To be eligible to obtain assistance you
    property. These two issues are discussed        must meet a number of criteria, one of
    below.                                          which is to ensure that the purchase
    Capacity to pay                                 price of the home is within the prescribed
                                                    limit for dwellings purchased in Western
    Buying a home is generally a long-term          Australia. Ask your financial institution
    proposition and you need to think ahead         about the HBAA.
    financially. Make sure the home you buy
    is one you can afford.                          In addition to the HBAA, the Federal
    It is common practice to require a              Government offers first home buyers
    deposit, so ensure that you have                a financial incentive through the First
    the money for this. If you require a            Home Owners Grant.
    home loan, make sure your income                Further information: See the REBA fact
    is sufficient to enable you to meet the         sheet Home buyers assistance scheme
    repayments and that you can afford the          and application form. Visit the ‘Buyers
    establishment fee if one is required.           and sellers’ section of the REBA website
    Interest rates can vary up and down so for the current
    you should determine your borrowing             threshold figure. Contact the Office of
    capacity before looking at any properties.      State Revenue on 1300 363 211 about
    Financial institutions or mortgage brokers      the Federal Government’s First Home
    will help you consider various financing        Owners Grant.
    You should also be aware that property          Finance condition
    owners are required to make annual              If finance is to be arranged to purchase
    payments such as property and contents          the property a number of general
    insurance, local council rates on the           requirements apply. These requirements
    property and service charges for water          are shown on the bottom of the front
    and sewerage. Generally, agents                 page of the O & A. Make sure you
    provide written information on property         fully understand the implications of the
    costs. In addition to ensuring you have         general requirements.
    money for moving, there are also costs          Before signing an offer to purchase
    associated with connecting to and using         property you should be aware that there
    utilities such as electricity, gas and water.   are different finance conditions contained
    Water, power and gas consumption,               in various versions of the O & A. Some
    general house maintenance, as well as           finance conditions suggest an offer to

lend is the same as finance approval.          If a loan application is delayed, or likely
The implication of this is that you as a       to be delayed for any reason, you should
buyer would be legally required to accept      advise the agent as soon as possible
any loan offer even if the terms of that       so that the seller can be approached to
offer may seem unreasonable to you. To         consider an extension of time. Failing
avoid the possibility of having to agree       to obtain finance within the specified
to unreasonable conditions, you should         timeframe can result in the standard
inform yourself as to the usual terms          contract being terminated.
and conditions offered by a particular         If a loan is not required and you have
financial institution before making a          immediate access to funds representing
finance application. There is provision on     the purchase price, the finance section
the O & A form to specify the name of a        should be deleted and replaced with the
financial institution (ie lender) from which   word ‘Cash’. Those who sign the O & A
you intend to seek a loan.                     should then initial this amendment.

 Only after being satisfied that the           Property inspection
 finance terms and conditions are              Always inspect a property first before
 reasonable should you make an                 making an offer by signing an O & A.
 offer on the property.                        You can visit the property during a
                                               home-open opportunity, or arrange
                                               an inspection with an agent at a time
Alternatively, you may also wish to
                                               convenient to both you and the seller.
consider amending the finance condition
on the O & A, either yourself or with the      Adopt an objective approach during
assistance of your professional adviser,       the inspection, taking into account the
to suit your own particular finance            features of the home and its advantages,
requirements.                                  as well as disadvantages. Be prepared
                                               to put time into each inspection. You can
If unchanged and no financial institution
                                               miss important factors if you do not take
is specified in the O & A, the standard
                                               your time when looking at a property.
finance condition requirements that you
should be particularly aware of are:           Ask the agent detailed questions. Keep
                                               notes of the information the agent tells
• the ‘best endeavours’ of the buyer
                                               you and copies of all written documents,
    must be used to obtain finance by
                                               such as marketing material. Where
    applying to at least one lending
                                               possible, try to obtain information about
    institution (such as a bank, building
                                               the property in writing.
    society, credit union);
                                               It is advisable to have an independent
• if asked in writing, the buyer must
                                               expert (such as a building surveyor,
    provide written evidence that a loan
                                               registered builder, architect, independent
    application was made;
                                               valuer, structural engineer or plumber)
• if a lending institution makes a loan        give you a report on a property you are
    offer, the buyer must immediately          interested in. You can include the results
    notify the seller (or the seller’s real    of a building inspection as a condition
    estate agent) in writing; and              of the O & A. If you decide to include
• if a loan application is not approved,       a special condition about obtaining
    the buyer must immediately notify          a satisfactory written report on the
    the seller (or the seller’s real estate    structural soundness of the property in
    agent) and provide written evidence        the O & A then the inspection should be
    of the rejection.                          done to Australian Standard 4349.1
                                               of 1995.

    In addition, any timber pest (termite)
    inspection carried out should be done          If you have any doubts about anything
    to Australian Standard 4349.3 of 1998.         shown on the title documents, you
                                                   should seek legal advice prior to
    Further information: Contact the
                                                   signing the O & A.
    Consumer Protection Advice Line on
    1300 30 40 54 for a range of publications
    on buying real estate.                        If you have queries about any pertinent
                                                  information on the title that the agent
    What is a land title?
                                                  cannot answer then direct the agent
    In Western Australia there is a Certificate   to follow this up by obtaining copies of
    of Title for each separately owned portion    relevant documents. If the agent cannot
    of land. Generally, the title includes a      help you, you should seek legal advice
    land description, a diagram of the land       or contact Landgate. Fees will apply if
    (unless it is a strata title), the name and   you need to search for some records and
    address of the owner/s and details of         obtain copies of documents. Searches
    encumbrances, such as restrictions on         cannot be done by phone.
    the use of the property.                      Further information: Contact Landgate
    For instance, an easement might be            Title Searches and Survey Information
    shown on the title. An easement gives         on 9273 7333.
    permission for part of the property to be
                                                  Forms of ownership
    used in a particular way by another party
    such as Main Roads WA, electricity or         Where more than one person buys a
    water utilities, or a neighbour. Examples     property, they must elect whether to hold
    of easements are giving neighbours the        the land as ‘joint tenants’ or ‘tenants in
    right to use part of a property to gain       common’.
    access to a road, or allowing a utility       In a joint tenancy, each owner owns
    body access to pipelines passing through      all of the property jointly with any other
    the property.                                 owner and there is one title containing
    A restrictive covenant may also be            the names of all owners. If one of
    listed on the title. This imposes an          them dies, their interest in the property
    obligation on the owner not to use the        automatically passes to the other/s.
    land in a particular way. An example of a     Married couples often adopt this form
    restrictive covenant is an obligation not     of ownership.
    to use the land for the purposes of any       In a tenants in common situation, an
    business, or not to build above a certain     owner holds a set share of the whole of
    number of storeys. A caveat, indicating       the property, with the remaining owner/s
    that a person other than the current          holding the rest of the share. Tenants in
    owner may have a right or interest in the     common can sell their share or leave it
    land, may also appear on the title.           to someone else in their will.
    When inspecting a property, ask the           If you are considering these forms of
    agent about the title. The agent should       ownership but are not sure about the
    have copies of the title and any other        differences, seek professional advice
    relevant documents. Check these               about which is better for you.
    documents yourself prior to signing the
                                                  Further information: Contact Landgate
    O & A. Ensure that the copy of the
                                                  Title Searches and Survey Information
    title has been obtained recently, as
                                                  on 9273 7333.
    circumstances can change.

Strata title lots                           What else do you need to consider
                                            before signing an offer?
Special rules apply to strata title lots
such as units and duplexes. These rules     Extensions and future plans
can affect your rights on the property      Pay particular attention to extensions. If
and may lead to extra costs. Strata         extensions have been built (such as an
title properties may have common            extra bedroom, enclosed back verandah,
areas shared by the residents. A ‘strata    patio, garage, swimming pool etc) make
company’ made up of the owners of           sure these have been approved by the
the individual properties controls these    local council. Ask the agent if he/she
areas. As a strata title owner, you may     has checked council records to ensure
need to pay a fee which is commonly         that the property is approved. You are
called a strata management fee,             entitled to check council records yourself
which is usually paid quarterly. These      to be absolutely sure that any extensions
fees are used to cover the costs of         are legal. You risk making an expensive
repair, maintenance and management          mistake if part of the building is illegal
associated with the common areas of the     and blocks access to sewerage drains
property.                                   or power lines.
                                            If you are considering adding on rooms,
 Before making an offer on a strata         subdividing, or changing the use of the
 title property, the seller, through        property (eg from residential to office)
 their agent, must disclose to you all      you should check with the local council
 the strata title information outlined      to ensure that the Town Planning
 in Forms 28 and 29 as required             Scheme permits this to be done.
 under the Strata Titles Act 1985.
                                            If the home has a swimming pool, check
 This information will form part of the
                                            that its installation was approved by the
 standard contract. If these forms are
                                            local council and it complies with the
 not included, the contract can be
                                            council’s safety requirements.
 terminated even if you have already
                                            You should also check that the skimmer
 signed the O & A.
                                            box complies with product safety
                                            requirements by phoning the Consumer
Strata title properties also have by-laws   Protection Advice Line on1300 30 40 54.
that owners (or tenants) must abide by.     The local council can inform you if any
For instance, pets may not be permitted.    changes to zoning in the immediate area
A copy of the standard by-laws can          are occurring which may affect the value
be obtained from Landgate. Additional       of the property.
by-laws for a particular strata title
                                            Home indemnity insurance
property may amend standard by-laws
or add new requirements. These must         Under laws introduced in February 1997,
be registered on the Strata Plan to be      all residential building work over $12,000
legally enforceable. It is advisable to     requires home indemnity insurance to
obtain and read the minutes of previous     protect property owners against financial
strata company meetings.                    loss linked with building work.
Further information: Contact Landgate       In most instances, the insurance policy
Strata Advice Line on 9273 7044.            must cover the construction period plus
                                            six years from the date of ‘practical
                                            completion’. There are special insurance
                                            rules for owner builders who plan to sell.
                                            Ask the agent about this.

    Further information: Phone the                that the property is to be connected to
    Consumer Protection Advice Line               underground power and that a payment
    on 1300 30 40 54.                             is required, but the details of cost, time
    Electrical work                               and manner of payment have not been
    If the house has been re-wired, or
    extra lights or power points have been        However, the seller is required to pay
    installed, check whether a qualified          the costs of installing underground power
    electrician carried out the work. You         if before settlement Western Power has
    could ask for the name of the electrician,    formally set out the costs and manner
    or whether accounts have been kept for        of payment before the contract date.
    the work done.                                Alternatively, the seller can pay these
                                                  costs to the buyer on settlement on the
    If you are buying a house that was built
                                                  understanding that the payment will be
    before 1960, you may want to have an
                                                  made to Western Power.
    independent electrical inspection done.
                                                  The seller’s real estate agent should be
    Further, you may have to pay higher
                                                  able to advise of the property’s status in
    insurance costs, or have difficulty
                                                  regards to underground power.
    obtaining fire cover, if the house is very
    old and has not been rewired. This            These types of potential future expenses
    may also affect your ability to secure a      should be kept in mind when negotiating
    mortgage. Check with your insurer and         the purchase price. Contact your local
    financial institution.                        council for more information.
    Underground power                             Sewerage connection
    A project to put electricity lines            In some areas of Perth and in country
    underground is underway in some               towns, land was developed without the
    suburbs. The State Government,                provision of a sewerage system, and
    Western Power and local councils are          septic tanks were installed.
    sharing the cost of moving power lines        When sewerage connection becomes
    underground. The decision as to how the       available, the homeowner is legally
    councils will raise their part of the funds   obliged to connect to the sewerage
    is left up to each council. Some councils     mains within five years. A person who
    will pass the cost on to property owners.     purchases a property where sewerage
    The 2002 version of the General               connection is available, has 12 months to
    Conditions contains a clause which sets       connect to the service. Connection to the
    out who pays the costs for connecting to      sewerage mains could cost the owner
    underground power if a property is sold.      between $600 to $2,500 in plumbing
    The decision is based on what stage of        costs, depending on the property.
    the project Western Power has reached         If at the contract date the property is
    by the date of the contract. The ‘date of     connected to the sewer and there are
    the contract’ means the latest date and       any monies owing for that connection
    signature (or initial) by either the buyer    then the seller must pay that amount
    or the seller that appears on the O & A.      prior to settlement. The amount
    The buyer pays if Western Power               outstanding can either be paid to the
    decides the property should be                Water Corporation or credited to the
    connected to underground power any            buyer who must pay these monies to the
    time after the date of the contract.          Water Corporation immediately following
    The buyer also pays if, by the date of the
    contract, Western Power has decided

If at the contract date the property is not    •   no more than 60 days after there
connected to the sewer and the sewer is            is material change in the use of
available the buyer is solely responsible          the premises; or
for connection to the sewer system. The        • if foundations are going to be
cost to decommission any septics is also           built closer than 1.2 metres to the
the responsibility of the buyer.                   apparatus or a building is to be
Ask the agent for a Sales Disclosure               constructed above the apparatus.
Statement. The Sales Disclosure                Since these costs could be in the order
Statement is completed by sellers and          of $1,000 it is advisable to check that
specifically outlines the sewer line           the septic tanks or other sewerage
connection and septic tank status of the       apparatus have been decommissioned.
property. It can also include other special    Again, this can be done through the
conditions of sale. If a Sales Disclosure      seller’s Sales Disclosure Statement.
Statement is attached to the O & A then        The 2002 General Conditions state
it will be part of the standard contract. If   that the buyer is liable for the cost
it has not been provided with the contract     of decommissioning septic tanks.
delete the condition mentioning it on the
                                               Local councils are responsible for
O & A (ie Condition 4), then sign and
                                               enforcing the decommissioning
date the amendment.
                                               legislation, so council requirements
Given the importance of sewerage               can vary throughout Western Australia.
connections and septic tank
                                               Further information: Phone the
decommissioning, it is advisable to
                                               Department of Health, Waste Water
request a Sales Disclosure Statement
                                               Section, on 9388 4999, or contact the
before negotiating the purchase price
                                               relevant local council.
and signing the O & A.
                                               Roads and other reservations
Further information: Phone the Water
Corporation on 13 13 95.                       When purchasing a house, you can
                                               request a Clause 42 Certificate from
Decommissioning septic tanks
                                               the Department for Planning and
Under Regulation 20A of the Health             Infrastructure for about $25. This
Amendment Regulations 1998, after a            legal document certifies whether or
property is connected to the sewerage          not a property will be affected by road
mains, the owner of the premises must          reservation or public works.
‘decommission’ any septic tanks or other
                                               Further information: Phone the
sewerage apparatus (such as leach
                                               Department for Planning and
                                               Infrastructure on 9264 7777. Main Roads
Decommissioning means that the                 WA or the local council may also be able
apparatus must be emptied in                   to assist regarding information about any
accordance with environmental                  future road projects.
guidelines. Tanks must be removed (or
                                               Roads and rural properties
if this is not practicable the base broken
up) and the apparatus backfilled with          If you are considering buying a rural
clean fill. Decommissioning should occur:      property ensure that you will be able to
                                               have legal access. You may also choose
• no more than 60 days after a change
                                               to have a survey carried out to check the
     in ownership occurs and the person
                                               boundaries of the property.
     who was the owner of the property
     at the time it was connected to the       Further information: Phone Landgate
     sewer ceases to be the owner; or          Title Searches and Survey Information
                                               on 9273 7333.

    Tenants                                           Further information
    Unless otherwise stated, the General              For general inquiries about real estate
    Conditions require the seller to provide          and settlement matters, phone the Real
    a vacant house when the buyer takes               Estate and Settlement Advice Line on
    possession.                                       1300 30 40 64 for the cost of a local call
    Ask the agent if there is a lease                 from anywhere in the State.
    agreement with an existing tenant.                Other publications that could assist you
    If there is and it is a fixed term lease          when buying a home include:
    then the tenant is entitled to stay until         • Sale by offer and acceptance
    the lease expires. If the fixed term has
                                                      • Buying vacant land
    expired or the tenant is on a periodic
    tenancy and you want to take vacant               • Real estate auctions
    possession of the property, then the              • Real estate fees - negotiating with
    tenant must be given a minimum of                     an agent
    30 full days notice to leave.                     • Timber pest inspections and reports -
    If you want the tenant to stay on, you                a guide for home buyers
    will need to amend the O & A to waive             • You and your property manager
    the vacant possession condition. You              • Choosing a settlement agent
    should also check the tenant’s rental
    history and amend or sign a new lease             • Property settlement
    with the tenant. Consumer Protection’s            Solicitors can give you legal advice
    Bond Administrator will need to be                about the standard contract for the sale
    informed as to the new arrangement and            of property.
    can be contacted on 9282 0829. If the             If you are experiencing financial difficulty,
    seller has engaged a property manager,            places such as the Citizen’s Advice
    there is no requirement for you to use            Bureau and the Law Society’s ‘Law
    the same person. You are free to select           Access’ can provide discounted legal
    another property manager or manage the            advice.
    property yourself.
    Further information: Phone the
    Consumer Protection Advice Line
    on 1300 30 40 54.
    If you encounter problems
    During your search for information you
    may discover problems with the property.
    Make sure that you resolve these before
    signing the O & A.
                                                      This fact sheet contains general information
    If a problem becomes evident after
                                                      that was current at the time of publication.
    you have entered into a contract, it
                                                                                                                                                            DP0346/2006 / /May 09 / 6000

                                                      If you have specific inquiries about
    may be possible to withhold money                 matters relating to your situation then you
    from settlement to fix problems on                are strongly urged to seek independent
    the property. Your settlement agent or            professional advice. The producers of this
    solicitor can inform you about this option.       publication expressly disclaim any liability
                                                      arising out of a reader’s reliance on this
                                                      This publication was produced by the Real
                                                      Estate and Business Agents Supervisory

    National Relay Service: 13 36 77
    Quality of service feedback line: 1800 30 40 59
                                                      This publication is available in other formats on
                                                      request to assist people with special needs.          REBA
                                                                                                          Real Estate & Business Agents Supervisory Board

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