Archive for June, 2009

By REIQ

Buying a home is often a once or twice in a lifetime expense and, apart from the obvious cost of the property, the buyer may incur other associated costs.

Buyers of real estate may incur costs including stamp duty payable to the State Government, conveyancing costs and other legal fees, building and pest inspection reports, a valuation report, and costs payable to a financial institution. Buyers who terminate a contract under the five-business day cooling off provision may also have to pay a cost to the seller.

The REIQ suggests the following when budgeting the costs of buying real estate.

1. Price of the property

You are able to put in an offer on a property that is less than the advertised price. The real estate agent then presents the offer to the seller and they will either accept or reject the offer. The price that the buyer and seller agree upon is countersigned on the contract of sale.

1. Borrowing costs

When borrowing money from a financial institution, buyers are likely to encounter costs such as the loan establishment fee and mortgagee insurance (if borrowing more than a nominated percentage of the property’s value).

Buyers will also need to budget for ongoing fees and interest repayments on top of the loan amount borrowed. Fees will vary between financial institutions and buyers should shop around for the loan that best suits their needs. All financial institutions must now publish a comparison rate for their loans which takes into account all fees and charges and any introductory loan rates.

It is a good idea to obtain pre-approval (or at least have an idea of how much the bank with lend you) for a loan before starting the search for your dream home.

1. Valuation report

An independent valuation report on a property can be of assistance to the buyer to indicate a property’s current market value. Sometimes the seller will obtain this for the buyer at his or her own cost. In Queensland, contact the Australian Property Institute by phoning                07 3832 3139         for the names of licensed valuers.

1. Transfer (Stamp) Duty

Stamp duty is a tax imposed on written documents that record or affect certain types of financial or legal transactions.

Stamp duty is chargeable on documents or statements if they are either:

• Signed or executed in Queensland; or
• Signed or executed outside Queensland but relating to property situated in Queensland or to some act, matter or thing to be done in Queensland.

State Government charges the buyer stamp duty when they purchase a property – the percentage scale will vary according to the amount of the sale price and whether or not the buyer intends to live in the property or rent it out to tenants as an investment. Depending on the nature of the transaction, certain concessions and exemptions are available.

Your solicitor will obtain the appropriate rate. The buyer pays the solicitor the amount payable who then arranges payment to the Government authority.

The State Government introduced legislation in 2008 to ease the financial burden of stamp duty on first home buyers.

Under the legislation:

• From 1 September 2008, first home buyers pay no stamp duty on:

a home valued up to $500,000

• First home buyers also pay no stamp duty on a vacant block of land up to $150,000.

For the current transfer duties schedule or for more detailed information, visit the website
for the State Government’s Office of State Revenue website at www.osr.qld.gov.au.

Alternatively, you may first wish to refer to Buying Real Property in Queensland which addresses specific provisions under the Act.

For more information about stamp duty, go to the Office of State Revenue website or phone                07 3227 8733         or 1300 301 342.

1. Land tax

The Office of State Revenue (OSR) collects land tax in Queensland and administers the Land Tax Act 1915. Land tax is levied by the Queensland Government on freehold land owned in Queensland as at midnight on 30 June each year.

For land tax purposes “land” includes vacant land, land that is built upon, building unit plans, group title plans, time shares and home unit companies.

Land tax is payable by the owner of any interest in freehold land in Queensland if the aggregate value of all land interests exceeds the relevant threshold.

There are various classes of taxpayers including residents (natural persons who ordinarily reside in Australia), absentees (natural persons who do not ordinarily reside in Australia), companies (includes clubs, associations etc.) and trustees (includes trustees of deceased persons’ estates).

Depending on the use of the land, certain deductions may be available to reduce the taxable value of the unimproved land. Land tax is not payable on land used by the owner solely as their principal place of residence if a deduction has been claimed on the relevant form and allowed.

To see the the current land tax schedule or for more detailed information, visit the website for the State Government’s Office of State Revenue.

1. Legal costs and searches

The REIQ strongly encourages buyers to seek independent legal advice before signing a Contract for Sale.

Issues that need to be understood by the buyer are: the appropriateness of accepting or waiving the five-business day cooling off period, seeking assistance with understanding the State Government forms, the Selling Agent’s Disclosure to the Buyer Statement (Form 27b) and the REIQ Contract of Sale. It is recommended that the buyer seek legal advice relating to these forms.

After a buyer has signed the appropriate forms and the Contract of Sale, they are advised to undertake certain searches. These include a Title search verifying the ownership of the property, a local government building report on the legality of existing structures on the property, and a local government search on the zoning of the property indicating any restrictions on the property and encumbrances on the property easements.

Solicitor’s fees are negotiable. It is advisable to compare the fees being charged by a few different solicitors. Good referrals and past experience is valuable when choosing your legal representative.

It is possible for a buyer to undertake these activities on their own, however, the REIQ strongly recommends using qualified solicitors for conveyancing. Contact the Queensland Law Society for further details about how to contact a qualified solicitor: www.qls.com.au

1. Building and pest inspection reports

Buyers can make their Contract of Sale conditional on the basis of a satisfactory building and pest inspection report from a licensed professional. See the Building Services Authority website www.bsa.qld.gov.au for more information.

The cost of these can vary but it is required under Queensland law that the inspector must be licensed by the Building Services Authority.

1. Termination of a Contract under the five-business day cooling-off provision

If a buyer terminates a Contract of Sale at any time during the stipulated 5-business day period, they will have to pay the seller 0.25% of the property price on the Contract. There is no additional GST payable on this amount.

If the buyer has elected to waive the cooling off period provision they will not incur any cost and consequently cannot terminate a Contract.

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The REIQ has put together a comprehensive outline on the methods available to sell your property.

Please view below and decide which method you are most comfortable with.

1. Sole or exclusive agency

The Real Estate Institute of Queensland (REIQ) recommends sellers use the exclusive agency method to sell residential property as it is the most effective.

The REIQ recommends the exclusive agency method, where the sale of the property is in the hands of only one party, over an open listing, where the seller lists their property with a number of real estate agents.

An exclusive agency is advantageous to the seller as the appointed agent will be dedicated to selling the property. This saves the seller the confusion of having to liaise with more than one agent.

Furthermore, this method will save the seller the time and money involved in advertising and marketing costs when a number of agents are trying to sell the property.

Under the Property Agents and Motor Dealers Act (PAMD) 2000, a seller can only appoint an agent under this arrangement for up to 60 calendar days. During those 60 days the seller may decide not to renew the appointment if the property has not sold.

The seller can agree to make a further appointment up to 60 days, but the renewal cannot be made earlier than 14 days before the term expires.

Under any selling arrangement using a real estate agent, the seller and agent must sign a PAMD Form 22a – Appointment of Real Estate Agent (Sales and Purchases) in order to legally set the terms of the selling agreement.

2. Auction

Selling by auction is also an exclusive agency agreement and is therefore also subject to the 60-calendar day agreement period. The auction process requires the seller to pay the agent to arrange effective marketing and advertising plans to maximise exposure of the property and the auction date to potential buyers.

Under the auction system, the seller agrees to pay commission to the listing agent if the property sells before the date of the auction, at the auction or in an agreed period after the auction.

The same conditions that apply to the auction process will also apply to the tender process.

There are many advantages to selling a property at public auction, in particular:

An auction is a three-pronged marketing push. The vendor has the opportunity to sell their property before auction, on the day of auction, or in the event the property is passed in, directly after auction.

There is an ability to set a reserve price and a settlement date to suit the seller.

As the reserve price is not disclosed it gives the seller a chance to test the market.

A written marketing plan with pre-agreed appointment times enables the sellers to arrange their lives during the lead up period.

The auction process by its very nature creates a sense of urgency; buyers have a definite time frame in which they must act. Buyers see the purchasers as competition rather than the seller. Auctions create a competitive environment.

With sale by auction in Queensland, all contracts are unconditional and no cooling-off period applies.

Auctioneer:
The first step in selecting the right person to conduct the auction is to consider who has the most to gain.

Choose someone with local knowledge of the area with the support of an agency that is keen to make a sale.

Auctioneers today are highly trained in their field having attended courses and sat written and practical professional examinations with the REIQ. Furthermore they hold current registration under the Land Agents Act.

When your auctioneer is a member of the REIQ you have the additional benefit of dealing with an auctioneer who is bound by the high ethical standards of the Institute as well of their profession.

Agreement:
Legislation requires that a written agreement must be signed between the seller and the auctioneer. In this, the auctioneer will require an exclusive agency for a specified period, which cannot exceed 60 days but by mutual agreement can be renewed.

Promotion:
This is considered by many to be the key to a successful auction by creating interest. There is a legal obligation to clearly explain to the seller where and how monies will be spent and show examples of the advertising mix. At this stage the seller’s input is very important to help identify the probable market.

Arriving at a reserve price:
It is the sellers right to set the reserve price, below which the auctioneer is not permitted to sell. Consult with your agent when setting the reserve price, as they will be familiar with recent sales of similar property in the area. Remember to be realistic when making your appraisal, bearing in mind supply and demand in the area as well as other general market considerations.

Selling before the day of the auction:
It is not uncommon for interested buyers to make offers on properties prior to auction day. Some will be on fishing expeditions of course, to try and find out the reserve. However, most will be genuine, in such cases the agent will discuss the offer with the seller, and a decision can be made to either consider the offer, or continue with the auction as planned.

It is not unheard of for the seller to sell the property prior to going to auction. In this case the agent will generally – on the seller’s instructions – invite all potential buyers to also make an offer. The seller then accepts the most appropriate offer and contracts are signed prior to the auction date.

Auction day:
On auction day, buyers will be held to the conditions of sale by public auction. In the course of conducting an auction there are a number of possible outcomes:

Should the highest bidder reach or exceed the reserve price – the property is sold and the auctioneer will conclude a binding contract between the buyer and seller. The auctioneer may sign the contract on behalf of either or both parties if instructed to do so.

In the event that the highest bid falls short of the reserve price the auctioneer will usually ask for the seller’s instructions before passing the property in. This means the seller has the opportunity to accept the last bid, by placing the property “on the market” so that it may definitely be sold “under the hammer”. This factor often creates more excitement, which can encourage further bidding, and a better price may be achieved.

It can be that the highest bid does not reach the reserve price and the property is passed in – the highest bidder is generally informed of the reserve price and may be given the initial opportunity to buy. Failing this, the property is placed on the market for sale by private treaty, at which time anyone may negotiate with the sole agent.

Tips for a successful auction

• Work out the appropriate advertising budget to ensure your property is widely advertised taking into account the identified market.
• Make sure the property is well presented because a potential buyer’s first impressions are crucial to a successful sale.
• Your agent will require that the contract and the accompanying statutory searches be available well in advance of your marketing campaign. Confer with your agent about this matter as they should be able to provide a tick list to help.
• Allow the agent to arrange as many inspections with prospective buyers as possible – it all creates interest. At a local level this could have a significant effect on the turnout on the day.
• For most, the spectacle will be the main draw as well as the eventual selling price so confidentiality is of the upmost importance. The REIQ suggests that you do not disclose or discuss your reserve price with anyone except your agent/auctioneer.
• Advertising material should only refer to the general area of price, not the reserve price.
• A sale by public auction is arguably one of the most exciting, effective and rewarding methods of buying and selling real property.

The REIQ has produced a Bidder’s Guide for residental property in Queensland, which seeks de-mystify and simplify the auction process and provide clarification on the roles and responsibilities of auctioneers and bidders.

3. Open Listing

An open listing is where the seller lists their property with a number of real estate agents in the local area.

Under an open listing agreement, each agent can sell the property individually or work with another agent to sell the property.

Only the agent that introduces the buyer to the property will receive the commission from the seller.

However, the REIQ recommends using the exclusive agency method to sell your property the most effectively.

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Outlined below is an article published in the Australian on June 15, 2009

THE nation’s sluggish housing market may not be in the doldrums for too much longer, with industry forecasts suggesting a sharp rise in property prices over the next three years.

House prices in Sydney, Melbourne and Adelaide are expected to lead the way, with each market tipped to grow by up to 19per cent by 2012, according to new research by economic analysts BIS Shrapnel.

Even Brisbane’s slow market is set to rebound, as overseas and interstate migration are forecast to push prices up 16 per cent over the next three years.

The positive outlook was reinforced by the weekend’s auction clearance rates, which hit 52-week highs in Sydney, Melbourne and Brisbane.

However, the national housing rebound won’t be immediate. The BIS Shrapnel research suggests much of the price growth will come in the 2011-2012 financial year as the economy recovers and unemployment falls.

“From here, the recovery in housing demand is expected to broaden and deepen,” according to BIS Shrapnel senior project manager Angie Zigomanis.

“By the end of 2009, strong turnover of the most affordable properties will be flowing through into the bulk of households positioned towards the middle of the market, as people who have sold their existing dwellings to first-home buyers upgrade to their next home.

“Housing affordability in both Sydney and Melbourne is at its best for 10 years.”

Sydney agent Ric Serrao from Raine and Horne, said the recovery was across the board. “As agents we’re all thinking, ‘What the hell just happened?’ It just went bang. The investors are bouncing back, buyers who were sitting on their hands are attending inspections.”

Sydney’s weekend’s auction clearance rate spiked 10 percentage points from the previous weekend to 74 per cent, 29 points higher than the same weekend in 2008. Melbourne’s clearance rate was 81 per cent, up 13 points on the previous weekend and 23 points higher than last year.

The clearance rate in Brisbane exceeded 50 per cent for the first time this year. At 68 per cent, it was 21 points higher than the previous weekend and 40 points higher than last year.

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This appears to be the year of consolidation. While some will need to carefully massage their existing portfolios others can take advantage of any discount opportunities that may come their way.

Opportunities will present themselves where there is:

1. Population growth
2. Infrastructure growth
3. Employment growth

As our baby boomers continue to mature and their Gen X and Y kids start entering the real estate purchasing market, there will be a change in the style of property being sought.

With the above in mind it’s best to stick close to the city. Suburbs that’ll perform best in 2009 would include:

• New Farm
• Paddington
• Auchenflower
• Kelvin Grove
• Greenslopes
• Woolloongabba

If you’re in the first home market and are looking for something more affordable but not too far from the city, consider Acacia Ridge. With improving infrastructure, solid employment opportunities and located just 12 klm from the CBD, Acacia Ridge could very well be Brisbane’s best real estate performing suburb in 2009.

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