Tag: auction

Steps to buying real estate

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Steps to buying real estate

Buying a home in many parts of Australia can be a competitive process.  Many buyers are often competing for the same property, not to mention the rise of property buyers who are experts at buying homes.  Understanding the process is vital and may mean the difference between being the successful owner of the property or missing out to someone else more experienced. 

Here is a look at the steps involved in buying, the different ways to buy, where to search for a property and understanding contracts and the settlement process.  

Different ways to buy a property in Australia

There are 4 primary ways you can buy real estate in Australia and depending on where you are looking to buy often determines the method. 

Private treaty

A standard residential property transaction is known as a Private Treaty sale. This is when the vendor, or home owner sets the price they would like to sell their property for and their real estate agent negotiates individually with prospective buyers to achieve a sale as close to this price as possible.

Buying at auction

An auction is a public sale conducted by a licensed auctioneer and are governed by strict rules. There is a reserve price, which is essentially the minimum the home will sell for – if bids surpass the reserve and you are the highest bidder, you have to sign the contract right there and then.

Buying by tender

Buying property by tender is a process wherein you submit a single offer, usually accompanied by a 5 or 10 per cent deposit, and it is accepted or rejected by the vendor. 

Buying off the plan

When you buy property off the plan, you are paying for something that hasn’t been built yet. The home can end up slightly different from what you were told. However, it does offer you a lower price point than many other properties.

 

How to work out your budget

By working out a budget, you will able to track how much money you have coming in, where how it is being spent and where you may need to cut back to help save for a deposit or allocate towards your home loan repayments. Essentially, it should paint a pretty clear picture of what you can afford to buy.

When doing a budget, it is best worked out on a monthly basis by starting with your income after tax then any share dividends, term deposits or any other forms of income you may receive.

Next work out your monthly expenses, which should include things like food and entertainment, car expenses, health and well being, clothing and utilities, credit card repayments, personal loans, school fees, holidays etc. It is easier to calculate your monthly expenditure if you divide it into fixed and variable expenses. Fixed expenses are those that stay more or less the same every month. It comprises of your monthly debt repayments (such as, home loan payments and credit cards etc.) along with your other fixed day-to-day expenditure. Variable expenses are those that vary from one month to another. It includes your grocery bills, medical bills along with the money you spend in entertainment. This is an important category that requires careful monitoring so that you can prioritise and reduce your expenses if necessary.

Once tallied up in a spreadsheet, you should have a pretty clear picture of your spending habits and financial position. Make sure you are completely honest, it is risky to over stretch yourself when it comes to borrowing money, especially if you are not willing to cut out a few luxuries you may have become accustomed to.

If your income is looking healthy but you have a few credit cards that need paying off or a personal loan, it may be a good time to consolidate your debts, which can save you a fortune in interest. Speak to an LJ Hooker Home Loans Specialist, your bank, home loan broker or financial advisor about consolidating these debts with your home loan. Any existing debt you have is likely to reduce the amount of money you can borrow to buy your new home, however you will save money on interest repayments.

Typically, financial advisors and institutions will recommend that your home loan repayments do not exceed 30 percent of your before-tax income. Check out LJ Hooker’s borrowing calculator to get an idea as to how much you will be able to borrow. LJ Hooker’s How Much Can I Borrow calculator is another great way to see what your repayments will be depending on the amount borrowed.

Lifestyle factors to consider when doing a budget

A good budget is made to last throughout the years. It has to be flexible as your circumstances and spending changes over time so it is wise to review your budget periodically. Monitoring it every month and perhaps at the start of each new financial year is the best way to make alterations where necessary and ensure you stay on track.

On paper you might be entitled to borrow a certain amount of money, however it is important to consider the future and any changing circumstances which may affect your ability to service your home loan. Living in your dream home will not make you happy if you cannot afford to pay for it.

It is a good idea to plan for the unexpected by having a savings fund as part of your budget expenses. Ideally, this should be an automatic contribution you make each month. Make sure the funds are accumulating in a high interest bearing account.

It is important to think about what the years ahead may hold and how much they will impact on your financial position, which in turn may affect your ability to service your home loan. Retirement, job stability, career change or the hopes of starting a family are just some of the factors that can have a substantial impact on your financial position. Forward planning can lessen the impact the loss of income or extra expenses will have on your home loan commitments.

Where to look for a property

Research

It is important that you spend time researching the area you are looking at buying in. Here is a short list of resources that will help you:

  • LJ Hooker Local Market report for a neighbourhood snapshot of the property market contact your Local LJ Hooker office
  • Australian Property Monitors and CoreLogic RP Data are excellent online providers of property data and information.
  • Websites like domain.com.au, realestate.com.au and agent sites like ljhooker.com.au will show you what is on the market. 

From there, you can settle on what kind of property to buy – existing homes, off-the-plan units, apartments or houses, or perhaps something else altogether. The Department of Housing’s A-Z of Buying is also a useful guide.

Where to Look for Properties

As for the actual property search, contacting your local LJ Hooker real estate agent is a great place to start. They know the local market intimately and would love to help you find your dream home. 

As well as the sites like ljhooker.com.au, realestate.com.au and Domain.com.au, local and state newspapers can be very useful for finding more information. 

Importance of inspections

Make sure you spend time thoroughly inspecting the property. It is also recommended to have a pre-purchase building / pest inspection on all properties you are serious about buying as it can save you thousands in the long run.  To help you we have created inspection checklists you can download.  Get our Apartment Inspection Checklist here and our Open House Inspection checklist here.

 

The buying process

Negotiating by Private Treaty

If you have found a property you love and want to make an offer. Make sure you have carefully considered how much you are willing to pay, how much you can afford, whether you go in with your highest price or prefer to go in low.

All offers and counter offers must be made in writing and signed by you. The agent is legally obliged to pass on all offers to the vendor as soon as possible. The seller then decides whether or not to accept or reject the offer. In many cases, the sale price is negotiated until both parties agree to a final price. If your offer is accepted you have a five day cooling off period during which you can withdraw from the sale.

Auction

Auctions are governed by strict guidelines and vary in each state in territory. In most cases to participate you must register with the vendor’s agent and you will be given a bidders number. The auctioneer oversees the process and all bids from potential buyers are recorded. Before the auction commences the seller will normally nominate a reserve price and if the bidding continues beyond the reserve the property is sold at the fall of the hammer.

The seller is also permitted to make one bid called a vendor bid which the auctioneer will announce. If you are the highest bidder, you have to sign the contract of sale right there and then and pay your deposit (normally about 10 per cent). Also be aware, there is no cooling off period.

Pre-Contract

Before you buy a property it is very important that you review the contract in conjunction with your solicitor and if need be other experts such as your financial advisor. 

The pre-contract stage is an important time to review the purchase and carry out investigations including searches into the property, this is important to ensure you are actually buying the property you believe you are.  The search will also highlight if there are any issues with the property and any restrictions on usage that may impact the value of the property or limit what you want to do with it. Understanding your rights or liabilities you have under the contract is very important and all part of this stage.

This is the time to negotiate the elements in the contract such as price, settlement date, inclusions, deposit etc. 

Contract Signing/Exchange

If you are satisfied with your pre contract investigations, have obtained expert advice from your solicitor, and have negotiated a deal with conditions that you are happy with, then you can go ahead and sign the contract documents.

Contract Conditions

If the contract is subject to any conditions, you need to ensure they are satisfied by the date agreed.  This may include work that the seller needs to do by settlement date or ensuring your finance is approved and in order by set dates in the contract.  Making sure each condition is delivered by the due date will help ensure the contacts can be exchanged on date specified in the contract.

Pre-Settlement

Before the settlement date approaches, you and your solicitor should be preparing everything for the big day. This includes ensuring the required loan money will be available from the bank on the agreed day, signing any bank loan documentation. Your solicitor will also ensure the transfer documentation is in order, that any other documentation for the transaction is ready (ie. lease documents), and that all parties have agreed upon arrangements for settlement (ie. time and place).

Settlement of the sale

Usually 6 weeks after the contracts were exchanged, if everything has progressed as planned and all conditions in the contract have been you should be ready to settle the sale.  This is essentially when your solicitor (or your bank) will hand over the money to the seller in exchange for the transfer documents to the property.  If you get to this stage –  congratulations a you have just bought a property.

For any further questions or to find out how you can get into the Australian property market, contact Jane Doogan on 0413 872 972


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    How to set a reserve price for auction

    Posted on by jacintaj

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    real estate | local news | events

    HIGHLAND PARK | NERANG | CARRARA | GOLD COAST

    How to set a reserve price for auction

    As part of our on-going series on ow to sell your property by auction, this month David Holmes, National Manager, LJ Hooker Auction services, looks at how to set a reserve price and what factors you should consider.

     

    What is a reserve?

    A reserve is the minimum figure you would be happy to sell the property for.  If the bidding reaches the reserve the property it will definitely sell to the highest bidder.  The good news is any bids achieved above the reserve is essentially bonus money in your pocket!
     
    In some instances, if bidding doesn’t go over the reserve, then a sale is negotiated between the vendor and any interested buyers.

    When setting your reserve make sure you consider the following:

    1. Your initial appraisal

    At the beginning of your campaign your agent would have appraised your property.
     
    To get to this figure they would have conducted a comparative market analysis and looked at similar properties that have sold within the last 90 days.  They would have considered current competition, wider market trends and your properties structure and conditions to arrive at a value that they believe you could achieve if you sold your property at that point in time.

    2. Buyers sentiment

    Auctions often achieve high sales prices because 2 or more emotional buyers keep bidding against each other, motivated to buy the property.  Understanding buyer sentiment is important when setting your reserve.  Talk to your agent and see if there are any passionate buyers, what does the agent think they would be willing to spend, what is the general feeling at the open homes?

    3. Advice from your agent

    Your agent is at the coal face of your marketing campaign, they are hosting open homes, fielding calls, sending contracts, following up attendees after inspections.  They know how much interest there is in your property plus any positive or negative feedback.  They know what the market is thinking about your property and are an important resource to tap into when setting your reserve.

    4. Any offers and market feedback

    It is important not to get sentimental about your property and set an unrealistic reserve.  It is very important to talk to your agent, to review any pre-auction offers and listen to market feedback from your agent.
     
    Over the course of the auction campaign, which is normally 3-4 weeks, the property market can fluctuate and it’s important to factor these changes in when setting your reserve.  You want to be “in the market” not “on the market”.  Consider carefully – are you prepared to sell for what the market is prepared to pay?


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      Selling? Do you understand the key auction terms?

      Posted on by jacintaj

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      HIGHLAND PARK | NERANG | CARRARA | GOLD COAST

      Selling? Do you understand the key auction terms?

      You may have heard many of terms below, but you many not know what they mean.

      Here is an overview of the main auction phrases:

      1.    Opening bids & bidding

      After the auctioneer has run through the property being auctioned, detailed the features and an overview of the what is included with the property one last time, they will invite the buyers to put in an opening bid – or in other words for someone to place the first bid on the property.  Other interested parties will then bid on the property in increments until either the property is sold or it is passed in (not sold).

      2.    Vendor’s Bids

      A vendor’s bid is used to encourage bidding from buyers. Think of it as a momentum bid…..a bid to keep buyers interested, to keep the process flowing.  This is placed by the auctioneer on the vendor’s behalf to assist the property reaching its reserve price.

      The amount of the bid needs to be below the reserve price and must be disclosed to all buyers in the interest of transparency.

      3.    Dummy Bids

      A dummy bid on the other hand is a false bid made by a non-genuine buyer.  All dummy bids are illegal and attract significant penalties for the vendor, the dummy bidder and in some cases the agent.  Professional auctioneers will not engage in dummy bidding.

      4.    Bidding increments

      This is the amount by which bids increase during an auction and is usually dictated by the auctioneer.

      5.    On the Market and Passed In

      If the bidding does not reach the reserve price or a price the seller is happy with, the property may be passed in. In this case your agent will encourage interested parties to stay behind to negotiate a sale with the agent.   Don’t panic, in my 12 years’ experience a sale is normally made soon after the auction.

      If the bidding doesn’t reach the reserve price, the auctioneer will ask you if you are willing to adjust your reserve and sell the property for the highest price. If you are, the auctioneer will announce to the crowd that the property is on the market or in other words, that it will be sold to the highest bidder.

      The final and usual scenario is when the bidding has reached the reserve price.  The auctioneer will briefly stop the auction and confirm with the seller that they are happy to sell at that price.  If they are the property will be sold to the highest bidder.

      Pre-Auction Offers

      When you list your property for sale by auction, you still have the ability to accept pre-auction offers before the auction day deadline.  All pre-auction offers need to be submitted in writing to your agent who in turn will present it to you for consideration.

      However, in order for this to be rewarding, the offer needs to be solid and stand out to catch your attention. Otherwise, it may be a good plan to allow your property to go to auction and see what the market will give you for your home.


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        What to expect on auction day

        Posted on by jacintaj

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        HIGHLAND PARK | NERANG | CARRARA | GOLD COAST

        What to expect on auction day

        Over the last couple of months David Holmes, National Auction Manager for LJ Hooker Auction Services, has been sharing his insights into how best to sell a home by auction. This month he discusses the auction day itself and what exactly will happen. Knowing how the day will flow will help keep your nerves in check…. Which is very important as auctions can be quite stressful.

        OK…so the big day has arrived. To keep the nerves under control, think of the auction as a process, a process that will get your property sold in a great time frame with a great result. Being process focused, not out come focused is key here.

        1. Meeting the agent and advising reserve
        Two days before the auction you should meet with your agent to go through the auction day strategy and set the reserve. During this meeting you will confirm the following important information:

        • Any offers and market feedback
        • Your reserve price
        • How many bidders are expected to attend?
        • How and when you will communicate with the agent and auctioneer during the auction
        • What happens if the reserve is not met?
        • How any vendor bids will be used?
        • Run of the day

        2. Pre-auction inspection
        Most agents will open your property for one final inspection. Frequently we have buyers turn up on auction day for the first time so make sure your property is looking spotless and well-presented. You never know you may pick up a buyer at the last minute and you certainly don’t want to deter buyers that are there to bid.

        If the auction is on-site, set up a suitable area to hold the auction. Usually it is held in the garden or on the front footpath, however your agent and auctioneer will be able to guide you.

        3. Registration of Bidder

        In most states, all interested buyers are required to register before the auction commences in order to receive a bidder’s number. This protects you, the seller from people who may not complete the auction process.

        4. Start of the Auction
        At the start of the auction the auctioneer will detail the positive attributes of your property and outline the state laws and settlement terms applying to this particular property including whether vendor bids will be used.

        5. Bidding
        Now things are really start to heat up….. The auctioneer will call for an opening bid or in other words the first bid from the crowd.

        From this point onwards the auctioneer will control the flow of the bidding and will encourage bidders to go higher, but at the end of the day, each bidder decides how much they are prepared to pay and the seller decides whether they’re prepared to sell at that price.

        6. If the property doesn’t sell under the hammer
        If your property doesn’t sell under the hammer don’t panic, the great news is both you and your agent have an overwhelming amount of intelligence as to what the market will potentially pay to purchase your property, plus your agent has a book of potential buyers to talk to. In my 12 years’ experience a sale is normally made soon after the auction so don’t be alarmed if it doesn’t sell under the hammer.

        7. Completion of Sale
        If your reserve price is reached during the auction, the hammer will sell to the highest bidder. The winning bidder will sign the contract there and then, pay a deposit which is normally 10% of the winning bid…… and you can pop open the champagne!


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          The auctioneers job and rules of auction

          Posted on by jacintaj

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          real estate | local news | events

          HIGHLAND PARK | NERANG | CARRARA | GOLD COAST

          The auctioneers job and rules of auction

          Auctions can be daunting – but they don’t need to be! 

          An auction can be a great way to buy or sell, as the bidding process is transparent. This series of blogs will help explain the auction process.

          Essentially the role of the auctioneer is to control a public negotiation process where potential buyers are competing to buy a property.

          The auctioneer has to make sure the process takes place in an orderly and legal manner and they must always conduct themselves professionally. A good auctioneer though stands out from the rest as they use tools like humour and wit to make the buyers feel more comfortable.  I’ve found the more relaxed they are, the better the results.

          Auctioneer announcements

          Before the auction commences the auctioneer will introduce themselves and the agency they work for and they will announce terms and conditions in accordance with state law and any rules that surround your auction in particular.

          Following this the auctioneer will give a detailed description of your property and list its valuable features and benefits.

          Rules of auction

          Terms and conditions of the auction are on display before and during the auction and are always available from the agent throughout the campaign.   
           

          Bidding at the auction

          Following the introduction from the auctioneer, the auction will get under way.  The auctioneer will call for an opening bid or in other words the first bid from the crowd.  

          From this point onwards the auctioneer will control the flow of the bidding and will encourage bidders to go higher, but at the end of the day, each bidder decides how much they are prepared to pay and the seller decides whether they’re prepared to sell at that price.

          All bids must be acknowledged and recorded, so there are no misunderstandings over who has bought the property and for how much.  And no bid can be accepted after the hammer falls.

          Auctions by nature are often emotionally charged, but a good auctioneer knows how to take the pressure out of this very serious process by making the buyers feel comfortable.  They have the ability to get the best out of the buyers and to achieve the best possible price for the seller.

          We can’t stress enough the importance of choosing a professional auctioneer with a commanding presence as they are the decider in all disputes.


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