1. The eight steps a property buyer
takes after an offer is accepted
By C McEvoy
Wednesday, 20 June 2012
Today I am writing with the intention of contradicting myself. Yes, I am encouraging people to spend time
on an element of the property investing process that I just recently advised people not to spend too much
time on! Let me explain. While I did write about the “purchase” itself being the area where you actually
invest the least amount of your time in (compared with pre-purchase due diligence and post-purchase
ongoing management, of course), I'd like to take some time to address the actual purchase process itself,
and give an overview of what to expect once you've done all your due diligence, crunched the holding
cost numbers, made an offer and had the offer accepted.
Once your offer has been accepted, you'll need to act very quickly to meet a lot of deadlines, which can
be very stressful, not because the work needed to reach them is hard, but because there are just so
many little things to do, so many people to engage with (and sometimes chase up when they don't act)
and little deadlines to meet, all before that “holy grail” of the process: final settlement.
An acceptance of offer can be stressful for new investors because there are so many hard and fixed
deadlines to meet – yet there are “unknowns” that need to become “known” , ducks to get in line and new
processes you'll need to learn in order to achieve them. And all the while you'll be questioning yourself.
Questions like: “is it normal for a solicitor to ask for this form?” or “why does this part have to take so
long?” are common, along with more stressful questions like “what am I getting myself into?”, or even
worse “I didn't budget for that cost and I've maxed my borrowing capacity, but it's too late to back out –
what do I do?!”.
So to best illustrate this I thought I'd run you through the typical steps/actions/stages that I tend to go
through my offer has been accepted on an investment property. I do not have all the answers, but I think I
can shed some light on some of the hoops you'll need to jump through, some things to look out for, and
why time really is your enemy during the process. It's a pretty specific part of the overall process and is
actually one of the most stressful.
1) The first deposit. To secure your offer and prevent being gazumped, you'll need to get to the
agency very quickly, sign contracts, and put down a 0.25% deposit. Let's say your property
purchase amount is $350,000. This means a deposit of $875 will need to be supplied to the

2. agency. You sign contracts (of course, assuming you've had your solicitor/conveyancer already
review and discuss this with you) and are now entered in to a “cooling off period” of five to 10
business days. Please be wary that some states such as Tasmania have a completely different
approach for offer acceptance, so you should Google your state's policies on this. But the most
populous states tend to follow this process. Additionally, if you didn't already do this at previous
inspections of the property, ask to see it again, taking notes, pictures and videos, along with
measurements where needed. It might not seem that relevant now (even if you don't have any
renovation or works plans upon purchase), but once you get it tenanted at ownership, it is very
difficult for you to get future access.
2) Prevention of being gazumped Upon signing, my recommendation is that you ensure the agent
agrees to label the property as being “under offer” in any online or print advertising immediately.
This deters other enquiries and subsequent offers from coming in. You also reduce the risk of
being gazumped (this is where someone places a higher offer than yours after you've entered
into cooling-off period, and the vendor “rescinds the sale” with you in favour of the higher offer).
Gazumping is frowned upon and measures have been taken in some states to prevent it
occurring, however some agents still practise this – remember, they are motivated purely by the
best possible selling price.
3) Due diligence checks and cooling-off extension During the cooling-off period, you are
obligated to do further due diligence. Triple-checking that your finance is all in order with your
lender or mortgage representative is critical. If you back out of the sale during this stage, your
$875 deposit is not refundable, and the property can be listed back on the market for sale. Also, if
you find yourself on day eight or nine in a position where you are still awaiting much-needed
information, you can extend your cooling-off period (in most states/territories). Don't think that you
can't; your solicitor will help make this happen for you, if needed. Ensure the front page of the
contract featuring the “included items” are ticked as per your inspection. For example, if you saw
a dishwasher in the kitchen during inspection, make sure that box is ticked. Sounds small, but
you'd be surprised how many overlook these details.
4) Full deposit payment On the last day of cooling off, you are now contractually obliged to buy the
property. As such, you'll be required to pay a 10% deposit of the property to the estate agency.
But you deduct the 0.25% initial holding deposit, so the amount you pay is actually 9.75%.
Oftentimes agencies won't accept personal cheques so you may need to get a bank cheque
made out. Be aware of how many days this may take to clear and factor this in.
5) Additional upfront payments Having done all of your due diligence already, you'll know your
precise amounts for other payments that are required at this point. These will include lenders
mortgage insurance (only if you must pay it, depending on your loan-to-value ratio and also if it is
rolled into your mortgage product or not) and apportioned strata, council, and water costs for the
calendar quarter during which you purchase (for instance, if your settlement occurs in the middle
of a three-month quarter, you'll need to pay that six weeks' worth of strata/council/water
apportioned to the time you've started to 'own' the property, during that quarter). Other fees like
lender fees, account fees, etc, may become relevant.
6) Final payments in the week prior to settlement. Most purchases have a 42-day (six-week)
standard settlement period. This time allows for all other stakeholders (solicitors, councils,
government departments and other stakeholders) to work behind the scenes to ensure all details
are completed prior to payment. At this time you'll need to pay any additional difference in sums,
should your loan amount come to less than 90% of the value of the property. You'll be required to
pay whatever this difference is, just before settlement. For example, If your loan is for 75% of the
value of the home, you'll need to pay $350,000 - 0.25% - 9.75% - 75% = 15% which equals
$52,500. Again, a bank cheque will be required, not a personal cheque. You need to send this
with enough time for the funds to clear, otherwise settlement date will be delayed until it clears.

3. 7) Final inspection before settlement This should take place 24 to 48 hours before settlement
date. The purpose of you inspecting the property again is to ensure it is in a reasonable condition
similar to when you first exchanged contracts six weeks prior. Obvious things to look for are
missing or suddenly damaged or missing items that weren't in that condition when you first
inspected. (sometimes air-conditioners, dishwashers, etc, magically “disappear” before
settlement!), stains or damage on walls, etc, magically “appear”, and (more often in houses than
units) rubbish may be present that was not there when you inspected. Especially with houses,
check to any garages/sheds/under-house storage does not contain rubbish from previous tenants
or owners. Its removal is the vendors’ responsibility, not yours. If refuse, you can delay settlement
until they remove it.
8) Collection of keys on settlement day Most states don't “action” the settlement until about 2pm
on the day of settlement. Confirm this with the managing agent. You don't want to assume you'll
have keys at 9am when it could be halfway through the day. It makes a big difference if you've
booked a leasing agent to see the property for rental appraisal.
Cameron is a NSW-based property investor and maintains a blog, Property Spectator.
We hope the attached information is valuable to you in making any decision on the purchase, sale or
lease of your property.
Best regards,
Linda Jane Debello LREA & Carlos Debello
http://www.ljgrealestate.com.au
http://VictoriaPtBunkerGillandRealEstate.com
http://au.linkedin.com/in/lindajanedebello
http://twitter.com/GillandDebello
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