The Deposit (5% or 10% of the Purchase Price) is not the only cost that you need to budget for when you buy a property.
You should consider the following other hidden costs:
Stamp Duty
Other Banking Fees from your Mortgagee Bank such as application fees
Registration of the new Title Deed Fees
Adjustments at settlement such as council rates, water rates, and/or strata levies
Fees related to due diligence such as a building and pest report or strata report
Your Solicitor’s Professional Fees & Disbursements (Search Fees)
To break it down in detail:
Stamp Duty
Stamp Duty is a state imposed tax incurred from transferring ownership of certain assets such as real estate and motor vehicles. You can calculate the stamp duty payable on the Revenue NSW website under Duties.
You should also consider whether you are entitled to a full or partial exemption to stamp duty. This is normally applicable for first home buyers and new homes subject to a maximum value of the property. Details of eligibility for grants and exemptions are found on the Revenue NSW website.
Other Bank Fees
Most people need to borrow money from a bank to purchase a property. Banks will normally charge an administrative fee for the settlement of the property. Speak to your bank or mortgage broker about the anticipated fees.
Normally a bank will pay their fees using the loan amount. Ask your bank or mortgage broker for the available funds for settlement and advise your conveyancer/solicitor. They will assist you by checking that there are enough monies for settlement.
If you have not borrowed sufficient funds for settlement, your conveyancer/solicitor will advise you of the shortfall. You should deposit the shortfall in the account nominated by your conveyancer/solicitor at least 2-3 business days before the settlement date. This will ensure enough time for the funds to clear in the nominated account.
Registration Fees
At settlement, you will need to pay for the registration fees for the Transfer and Mortgage for the bank. Normally the banks would have arranged for the payment of the registration fees at settlement. The banks will also attend to the electronic lodgement of the documents with the title deeds office, Land & Registry Services.
Adjustments
At settlement, your conveyancer/solicitor will prepare a document called a "Settlement Sheet" or "Settlement Adjustment Sheet". It calculates the adjustments of council rates, water rates, water usage, strata levies, and any other payments so that each party is paying their share of the bills at the cut off date of the settlement date. The Settlement Sheet is necessary as the abovementioned bills are issued on an annual or quarterly period. Most settlement dates do not fall exactly on the last day of the billing period. As such, adjustments are needed to calculate the number of days that each party is responsible for payment.
If the seller had a mortgage on the property, the fees for the discharge of mortgage will also be paid at settlement. However the seller will reimburse you (the purchaser) at settlement. This should be reflected in the Settlement Sheet.
Due Diligence
With the increasing property prices in the Sydney market, the average property price is now $1,060,000 (as of March 2021). It is one of the largest and most expensive purchases that many people will make in their lifetimes, with some people only paying off their mortgages in their 50s. Therefore we strongly recommend that all purchasers do due diligence before purchasing a property.
If you are inspecting a stand alone property like a house or even a duplex, you should obtain a building and pest report. The report tells you about the condition of the house and identifies any issues such as mould, structural damage, illegal works, presence of asbestos, water damage etc. Engineers or land surveyors usually prepare building and pest reports. They will need to gain access to the property to conduct the inspection. Depending on the property, their fees are usually from $300 to $500.
If you are inspecting a townhouse or apartment unit, you should obtain a strata report. The report is a record of the meetings and minutes of strata meetings. It will tell you about any issues with such as anticipate repairs and works which require funding through a special levy, ongoing litigation with neighbours or developers etc. Their fees are usually $300 to $500. It has become common practice that selling agents anticipate buyers requesting for the strata report and may have obtained a copy to circulate to prospective buyers. So ask the selling agent whether they have a strata report for you to read.
From our experience, our clients have not regretted their decision to obtain reports for due diligence. Some of our clients chose not to proceed with a purchase because of the issues identified in the due diligence report. For example, a client ordered a strata report for an apartment he was thinking to purchase. The strata report revealed an upcoming special levy of over $20,000 for each unit owner in an apartment block. The client quickly withdrew his offer to the agent and they did not wish to proceed with the purchase.
Conveyancer/Solicitor Fees & Disbursements
Most law firms or conveyancing practices charge a standard fee for their professional services plus disbursements. Conveyancers' fees are usually from $900 and solicitors' fees are usually from $1,500 onwards. Call some of your local solicitors or conveyancers to obtain a quote for their fees. Disbursements are expenses incurred in the course of the conveyance such as ordering searches, settlement PEXA fees etc.
The above information is based on properties in NSW.
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*** Disclaimer:
Information on this website or post does not constitute legal advice and that electronic dialogue with readers does not constitute any form of client engagement unless specifically agreed.
The information is provided on a general basis only. We strongly recommend that you seek your own independent advice from a lawyer about your situation.
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