Buying a home is a risk. Unapproved alterations, fraud, planning defects, the registration gap and mistakes from the Council all threaten a new home-owner. These risks can’t always be negated during settlement.

Title insurance is a new type of property insurance available to buyers and home owners which protects your ownership and use of the property by guarding against these risks.

Take this scenario:

A buyer buys a home marketed as having four bedrooms and one bathroom. They apply for a building license to add an en-suite to the main bedroom, but the Council’s reply isn’t what they expect: the bedroom is approved only for use as a storeroom. The shire won’t assess the en-suite application until they upgrade the room to comply with the standards for a bedroom.

The buyer was completely unaware of the breach of building code. After all:

• It was marketed and furnished as a bedroom,
• The Council was unaware, so there were no outstanding Council orders or requisitions found during the settlement process, and
• A building inspection had failed to uncover the breach.

Now, the buyer faces the considerable costs of upgrading the bedroom – including the costs of waterproofing the floors, erecting wall frames and raising ceiling heights.

If the buyer had taken out title insurance, the insurance company would have covered all upgrade costs necessary to satisfy the Council’s requirements.

Title insurance also covers losses like:

• The cost of demolishing and rebuilding an illegal extension inherited from the previous owner,
• The cost of repaying outstanding rates and interest that were not identified during settlement due to Council error, and
• The financial loss of a home due to fraud, forgery and identity theft.

While the settlement process is designed to minimise risk to the buyer and seller, there are some things settlement agents just can’t pick up – so there’s no guarantee that loss won’t be suffered and your title won’t be adversely affected in the future.

Title insurance is designed to provide cover for risks which, for whatever reason, aren’t discovered or are ‘hidden’ when the property is purchased.

A one-off premium with Stewart Title will provide protection forever. With the cost of the insurance far outweighing the potential risk, title insurance is one option in a buyer’s risk-management toolkit.

Note: Like all insurance policies, a Stewart Title Policy excludes certain risks from cover. For full details on cover and exclusions from cover, refer to a sample policy available on Stewart Title’s website: www.stewartau.com

This week, we’re getting a real estate agent’s perspective on the subject.

Peter Taliangis is a Perth real estate consultant with over 20 years of sales experience. Having begun using social media in earnest over the last 1-3 years, he’s now a prolific Twitter user and has a wide professional network on LinkedIn.

Below, he reveals his thoughts on online marketing, including which social media sites he find most useful.

Q. Why is online marketing important for people in real estate?

It is important if you want to connect with people.

People are using online to connect, to buy and to research.

Q. In your experience, what are the 3 most important social media sites out there?

1. Facebook – for one reason only: the number of people that use it and how much they use it
2. Linkedin – for business conversation and connection
3. Twitter – for increasing  your brand

Q. Particularly, what are the key ways real estate agents can benefit from using LinkedIn?

• Connecting with people
• Growing your personal brand
• The ability to bring more people in touch with you

Q. What benefit have you personally found in using LinkedIn (as opposed to other sites, like Twitter)?

On Linkedin you know you are dealing with professional people and you can determine who you are connected to. Twitter you can control who you are connected to but the people that follow you can come from anywhere.

Q. What are your 2 top tips for other real estate agents who want to begin using social media to promote themselves?

1. Get online – create and maintain a presence – update regularly
2. Be professional, positive and share

Thanks Peter. You can get in touch with Peter on his website and his LinkedIn account – or give him a call on 9313 9100 or 0431 417 345.

Selling a property? By ensuring you have RCDs and smoke alarms installed before settlement, you can save yourself up to $20,000 in fines.

Unfortunately, a recent settlement has revealed that not all sellers understand the implications of current state law. Our client, a seller, indicated that they had the correct RCDs and smoke alarms installed in their property – and we proceeded to settlement. (Due to the significance of smoke alarm and RCD legislation, we require all sellers to sign and return an official declaration that the correct devices are installed.)

But when the transaction was completed and the new owners moved in, they found that the house was only equipped with one RCD and one battery-powered smoke alarm!

Current state law requires that all houses for sale or rent have:

1. Two Residual Currency Devices (RCDs), and
2. At least one hard-wired smoke alarm, depending on the layout of the property.

These devices must be installed before settlement.

The seller now faces combined fines of up to $20,000 - up to $15,000 for improper RCDs and up to $5,000 for inadequate smoke alarms.

Don’t get caught out! Be completely sure that the correct devices are installed in your property before you sign the declaration and before settlement.

Modified from an article published in our newsletter for real estate professionals. If you’d like to start receiving helpful articles once a week, subscribe to our newsletter.

Image by Katy Warner via Flickr.

Settlement is largely dependent on the Offer and Acceptance. We’ve talked about the O&A on this blog before – things you should include, why clauses are important, and how incomplete O&As can jeopardise settlement.

But if you’re a buyer or a seller, there’s more you need to know about the conditions and warranties of Offer and Acceptances – known as clauses.

Here’s three basic, but important, facts about Offer and Acceptance clauses:

1. They’re legally binding

Once the buyer’s Offer is accepted by the seller, the Offer and Acceptance becomes a contract. That means you’re legally bound by the clauses on that Offer – so write them carefully!

2. They can be whatever you want

Which clauses are included on the O&A is up to the buyer and seller. It’s wise to include clauses that help the sale proceed in your best interest. For example:

• Buyers often include property inspection clauses that allow them to officially check that the property is in good condition before settlement, and
• Clarification of items that aren’t included with the purchase help the seller avoid conflict with the buyer over chattels.

While the buyer will naturally want to include clauses that ensure the transaction goes smoothly, too many seemingly unnecessary clauses may deter the seller from accepting the offer.

3. You need to take action

If settlement is to proceed, the clauses of the O&A need to be met. But some important clauses – namely, the finance clause and any clauses requiring property inspections be carried out – have an expiry date. If you don’t carry out the action specified by these types of clauses, you can – and often do – forfeit the benefit of the clause! If it’s an inspection clause, settlement may proceed without inspections, or if it’s a finance clause, the contract may be cancelled altogether.

Familiarise yourself with the clauses and their expiry dates before making or accepting an Offer. Knowing how clauses work and fulfilling your contractual obligations promptly will increase the likelihood of settlement proceeding smoothly.

Long before settlement and completion of the Offer and Acceptance, a seller must do all they can to attract the best price for their home – which means spending money on advertising.

But when it comes to real estate advertising, where exactly should a seller’s dollars go?

In a recent article, the Australian Financial Review pointed out that while most money would traditionally go towards print advertisements, a series of price rises by Realestate.com.au may mean that vendors need to put more of their spend into online ads.

As usual, there’s strong opinions on both sides of the print vs online advertising debate:

[Marshall White director John Bongiorno] said he won’t be cutting his print budget, and if anything he will be increasing it. While online works well for cheaper properties, print brings better results for those priced at more than $1 million.

but

[Bennison Mackinnon's Andrew McCann] said realestate.com.au brought the best results, so he would be encouraging his clients to make the extra spend. “It’s the number-one website for buyer enquiry based on our own research,”

Seeing an opportunity to improve upon current advertising methods, some sellers have even taken up social media as a grass-roots way of promoting their property.

Ultimately, how much is spent on each type of advertising is up to the vendor.

What do you think? Is print the most effective method of advertising – or is online the way of the future?

(Thanks to Maverick Strategies for sharing the Fin Review article.)

Real estate has been slow over the last year or two, and the current market could be described as a buyer’s market. With consumer confidence improving, however, it won’t be that way for long!

If you’re looking at buying a home, it pays to be attentive to the current market conditions – so here’s an overview of what a buyer’s market and seller’s market are, and how they’ll impact your search for a great property.

What is a buyer’s market?

A buyer’s market is how we describe a time when there are many more properties for sale than there are active buyers. Lots of sellers are trying to sell, and they don’t have many people to sell to – so as a buyer, you’re at an advantage.

A buyer’s market is great for a buyer, because:

• There’s typically lots of choice across all sectors of the market,
• Home open traffic is slow, so you won’t have to compete for the agent’s attention,
• You’ll probably have plenty of time to make a decision, and
• Competing against other offers is rare.

The key to doing well in a buyer’s market is to take your time. You have the opportunity to negotiate a good price, so don’t be rushed into making a decision before you’re ready

What is a seller’s market?

A seller’s market, on the other hand, is more difficult for a buyer. There’s few properties to choose from, and plenty of people looking to buy – so the seller is at an advantage.

Those properties that do suit, are well-presented and are priced reasonably often attract multiple offers (many of which are over the asking price!)

When this happens, it can be tempting to wait and ride the market out. The hope is that demand will settle down and prices will eventually fall. This rarely happens – but it occasionally has in the past, especially between 2007-2011 where property values fell. In some cases the falls were quite significant.

In most cases though, demand eventually slows temporarily and then settles into long term patterns that produce moderate property price growth.

To try to wait out a sellers’ market in the hope of a fall in property prices is risky – if the market keeps moving a first time buyer can find themselves priced out of the market.

So buying your ideal home in a sellers’ market is all about being prepared and acting fast. Get pre-approval, know exactly what you want – and when the right property comes up, act!

Whether you’re buying in a seller’s market or a buyer’s market, research the market and keep current market conditions in mind when looking at properties. It’s a smart move!

Image by Casey Serin via Flickr.

A recent settlement has underscored the importance of ensuring buyers use the right Offer and Acceptance clauses for their financial position.

In this case, our client made an offer on a property in a new subdivision, but needed to sell his existing three-bedroom home to do so.

Despite this, he made a cash offer. His Offer wasn’t subject to the sale of his existing home – and he didn’t have the funds on hand, either.

The Titles for the subdivision hadn’t been issued yet, so he figured he’d have plenty of time to sell his home before settlement began. But months later when the Titles had issued, he still didn’t have a buyer for his existing property.

Without the funds to proceed to settlement, the buyer was forced to make an agreement with the developer to cancel his contract and forfeit his deposit.

Unfortunately, things don’t always go as planned – but that’s where special conditions come in handy.

Real estate agents (and buyers themselves) can help prevent deals like this from falling over by ensuring either:

1. The buyer has sufficient funds to complete the transaction, or
2. The Offer is dependent on the buyer obtaining funds – ie. a finance clause or subject sale clause is included.

If the seller wants a cash offer but the buyer doesn’t have sufficient funds, they may not be the right buyer for the property.

By ensuring the buyer makes the right kind of Offer, you can help prevent a deal from falling over – saving the buyer’s deposit, and saving the seller the hassle of marketing their property all over again.

This article was originally published in our newsletter for real estate professionals. If you’d like to start receiving helpful articles once a week, subscribe to our newsletter.

A recent settlement faced delay after the buyer’s finances fell through, highlighting the risks associated with making cash offers - ie, an offer on a property that doesn’t depend on the buyer successfully getting approval for a home loan.

The buyer, a middle aged man purchasing his first investment property, was relying on a home loan from his bank to pay for the property.

But days before settlement, his bank declined his application for a loan. On a typical Offer and Acceptance with a finance clause, this would cancel the contract – but this buyer had written up a cash offer. Unfortunately, this is not an uncommon practice, as many buyers believe cash offers increase the likelihood of having their offer accepted.

The buyer’s only choice was to delay settlement while he struggled to find an alternate way of paying, forcing him to incur costly penalty interest fines.

This situation would have been avoided if the buyer had made his Offer conditional upon finance being approved – highlighting the importance of using the right contract for the job.

Advice for buyers

If you’re writing up an Offer and Acceptance and you’re depending on finance approval from a bank to pay for the property, include a clause that makes the offer conditional upon finance being approved.

It’s well worth it – if your finance falls through, you’ll have lost nothing. Fail to include it, and you may have to pay expensive penalty interest to the seller as compensation.

Advice for agents

If a buyer wants to write up a cash offer without having the appropriate funds on hand, make sure they understand the implications of a cash offer. Ensure they realise that:

1. Cash offers are ideal if they have the funds available – not if they still need a home loan approved, and
2. If their finance falls through, they will ultimately have to pay penalty interest for every day settlement is delayed past the due settlement date until they can obtain the necessary funds.

A contract with the right special conditions for the job will greatly aid in a property transaction occurring on time, leading to a more enjoyable settlement experience for all involved.

This article was originally published in our newsletter for real estate professionals. If you’d like to start receiving helpful articles once a week, subscribe to our newsletter.

Image by Dan Moyle via Flickr.

Pre-purchase inspections are a common, and necessary, part of the property settlement process.

They’re designed to check specific aspects of a home and show you exactly what you’re buying – very useful in uncovering nasty surprises like extensions that aren’t council approved!

Here’s 6 types of inspections buyers often choose to include on the Offer and Acceptance:

1. Structural

A structural inspection examines those elements of the home that might affect the structural integrity of the property. A structural report usually ignores maintenance items such as flaking paintwork and leaking gutters.

2. Maintenance

Maintenance inspections cover those items that require ongoing attention. They might include loose fittings, gutters that require replacement and paintwork that might soon require a touch-up.

3. Electrical

These usually comment on the serviceability of the wiring, power points and light fittings. Because it’s hidden from view, faulty wiring is easy to overlook – so an electrical inspection is a wise investment.

4. Plumbing

As with electrical appliances, plumbing is often hidden and can produce some nasty surprises! Unlike wiring, though, plumbing is harder to test and detect any potential problems. That said, a qualified plumber will be able to tell you how old the plumbing is and how long you could expect it to last.

5. Comprehensive building

These reports contain observations about both structural and maintenance elements. In some cases the company providing the report will have access to qualified plumbers and electricians and therefore can include these aspects on their report. These reports are popular with homebuyers because they take less time to organise and arrange.

6. Timber pest

Each year termites cause millions of dollars worth of damage to homes across Australia. And they’re not alone in their quest to destroy! Other pests are also at work attempting to destroy foundations, roof timbers and bathroom cabinets. Most timber pest inspections today also include a visual check for termites, wood decay fungi,  and wood borers.

Keep in mind that timber pest inspections can only be made on what is visible. For areas that are out of sight, such as sub-floor areas, trapdoors may need to be cut and this could be an issue with the seller.

In summary, decide which of these inspections are essential for you, and be sure to include them as special conditions on the Offer and Acceptance.

Once the Offer is accepted and settlement begins, you’ll need to have these inspections carried out by qualified professionals. When they’re done, and finance has been approved, settlement will commence in earnest!

Image by Wannaoreo via Flickr.

An open house, or home open, gives prospective buyers the opportunity to look around a property and assess how it meets their needs.

But as a buyer, what exactly should you do at an open house?

Here’s 3 things you can do to get more out of open houses:

1. Take notes

Don’t rely on your memory alone – once you’ve viewed several properties, they will all blur together in your mind.

Instead, take note of key features of the property, the number of bedrooms, bathrooms, the roof and wall construction and, of course, the asking price.

In addition, bring along a digital camera (or use your mobile phone), to take photos of key features, including things you really like or dislike – this is especially useful if you want to show the home to a partner who didn’t come along the the open house.

When you’re finished looking at homes for the day, you can review what you’ve seen and use your notes to help you make an informed decision about which homes you’re really interested in.

2. Remember the property

Don’t let your notes become jumbled and confusing – keep track of which property is which as you visit each open house!

Here’s my top tips for remembering open houses:

• Make a point of remembering the colour of the carpets or floor coverings – if you recall that one detail the whole home will come back to you,
• Take a photo of the letterbox and the front of the home as you walk in – this will help you keep track of home is which, and
• If you’re going to a lot of open houses, buy the Home Tracker iPhone app – it lets you gather all your notes and photos in one place for reviewing later.

3. Meet the agent

Real estate agents are your key to discovering great properties – develop a solid rapport with agents at home opens, and they may contact you later with the perfect home for you!

I recommend you:

• Be polite and friendly with the agent at the open house,
• Strike up a conversation – let them know what exactly you’re looking for in a home, and
• Give them your contact details, if they ask for them.

By getting familiar with the real estate agents and keeping track of what you see at open houses, you can make an informed decision and maximise the chance of finding your ideal home.

Image by Cathy via Flickr.