In Part 7 of our Brisbane Buyers Agent Case Study with Luke we talk about all of the tasks that need to occur between signing the contract and the settlement of the property purchase.
If you haven’t read the first previous instalments of the case study you can check them out here:
Brisbane Buyers Agent Case Study — Luke Part 1 — Introducing Luke
Brisbane Buyers Agent Case Study — Luke Part 2 — The Buying Criteria
Brisbane Buyers Agent Case Study — Luke Part 3 — Location Funneling
Brisbane Buyers Agent Case Study — Luke Part 4 — Target Location Analysis
Brisbane Buyers Agent Case Study — Luke Part 5 — Property Analysis and Inspections
Brisbane Buyers Agent Case Study — Luke Part 6 — Making an offer
Building and Pest Inspection
The first condition of our contract that needed to be met related to obtaining a satisfactory building and pest inspection. We spoke with and obtained quotation from approximately 5 providers in the area (as we always do) and decided upon a building inspection company to go with. Building and pest inspection reports these days tend to have so many words but say very little! By this I mean that the inspectors have to protect themselves from litigation and so it is sometimes very difficult to work out if you actually have a problem because the wording of a report is so…well…butt covering!
Wherever possible, I absolutely recommend to you that if you are purchasing a property and having an inspection then attend the inspection. You will learn a lot and be in a position to really understand the issues presented to you in the report and particularly understand the significance of those issues!
I attended the inspection of Luke’s property and learned a lot from the friendly and helpful inspector about building materials, termites, common problems found with residential dwellings in the area. I learned a lot about these issues but was pleased to find that with Luke’s property, no such issues were apparent.
You may have noticed in a previous section of this case study that we had one clause for building and pest inspection that had 14 days on it and another for finance which had 21 days on it. Getting your finance through in time can be a big stress for buyers and when buying in a self managed super fund, the issues here are even greater. There is a plethora of paperwork to complete and hurdles to jump through when one purchases in a SMSF and so allowing additional time for finance approval is a good idea. Even allowing a longer than normal time for settlement is a good idea as getting the actual loan in place and settled on time in a 35 day settlement period (often found up here in Queensland) can be a tough ask!
The paperwork that goes back and forth here is, for the most part, between the client, the broker, the solicitor and the bank. As a buyer’s agent there is very little that we can do to expedite the process other than ensure that all parties are moving along appropriately!
This is where, as a buyer, you really must be organised and move fast. Don’t be the bottle neck at any point in time. If someone requests paperwork then do everything that you can to get the completed paperwork to them as fast as you can. Time here is of the essence!
In Luke’s case, he as a machine! He completed and returned everything that was expected of him super fast! There was no way he was going to be the hold up – and lucky too, because, although we obtained the finance approval within our 21 days without a problem, when it came to the actual time settlement of the loan, the bank was unable to complete it within the allocated settlement period and we had to extend settlement by 2 days. In a circumstance like this things can be a little worrying, after all, the vendor had the right to charge penalty interest for those two days! We ensured that we communicated to the seller, via the agent, that Luke had done everything he possibly could to settle on time and it was out of his hands and we were fortunate as the seller did not charge penalty interest in this case and we were able to settle 2 days later.
In Queensland a property is the buyer’s liability once they have entered into a contract to purchase the property. This means you must insure the property as soon as you have it under contract. Now theoretically if something were to happen to the property in the ‘conditional’ period you could pull out of the contract based on one of your conditions, however, for the sake of getting a cover note, it’s best just to get yourself some insurance straight away.
We obtained some quotes to assist Luke, however, he had a company that he had used previously, who provided a very competitive price and he elected to use this company for building and landlord insurance on the property. This was also great for us as we now have another good company that we’ve learned off providing competitive pricing for property investors!’
Management and Tenant
Don’t you love a property that comes with a tenant in place? Particularly one who is paying a good market rent, keeps the property in an immaculate condition and would like to stay on! That’s exactly what we had here and we were more than happy for that arrangement to continue. The management of this property was being handled by a rental manager located some distance from the property, which is not usually something that I would recommend, however, both myself and Luke spoke with the manager on the phone and thought she seemed ‘on the ball’.
It’s standard practice for us here at Property Zest to still obtain comparison quotes and information from other agents, which we did, however, Luke decided to keep on the existing manager and see how things went.
Another thing that I don’t usually recommend is a tenant on a periodic lease. Contrary to popular believe, it can actually be quite difficult to remove someone on a periodic lease and it also gives you little certainty over future tenancy. In this case the tenant was on a periodic lease and Luke planned to address this issue with the rental manager.
So in terms of management and tenancy, it was a pretty easy transition to ownership for Luke, with just the signing of some paperwork (which of course, he diligently reviewed) he had a manager and a tenant, just like that!
As discussed previously, standard settlement time up here in Queensland is very fast in comparison to the other states. This doesn’t mean it has to be though, so if you are entering into a property contract in Queensland, don’t be afraid to negotiate the settlement that suits you.
Settlement on Luke’s property came and went (2 days later than first planned) and he is now the proud owner of the property, well, his superannuation fund is!
In the next instalment of this case study we’ll summarise Luke’s purchase from start to finish!