Buying a Home Smart Guide

5. Buying your home

What youll learn in this step: Nothings guaranteed until contracts are exchanged.

When youve found a property you want, contact the vendor through the real estate agent and make an offer regardless of whether the property is for sale at a set price (known as private treaty) or going to auction.

Even if your offer is accepted, though, neither you nor the vendor is legally bound to proceed with the deal until a contract is signed. While the agreement is only verbal, the owner can still accept a higher bid you're in danger of being gazumped.

You may have spent a small fortune in surveys, solicitor's fees and other costs in the meantime, but thats not their problem. The only recompense youll get is the return of any non-binding expression of interest deposit youve paid.

The answer is to get things in writing, quickly (but still with care). If youve got a building and pest inspection already to hand and youre sure youll proceed, you could offer to waive the five-day cooling off period to get things moving straight away.

When you exchange contracts, you're not only agreeing to buy the property, you're also agreeing to be bound by the terms and conditions of the contract so make sure you've read every page. Look to see whats included in the price; those fancy blinds and the dishwasher could be excluded.

After contracts are exchanged, you usually have four to six weeks to settle or finalise the sale, perhaps longer. You'll need this time to insure the property, sign mortgage documents, pay stamp duty and complete arrangements with your lender.

If youre selling an existing property, the various lawyers involved should be able to juggle settlement dates so everyone moves home at about the same time.

Auctions

An auction pits a number of buyers against each other at a specified time and place. The main difference between a private treaty sale and an auction is that private treaty generally allows for a cooling-off period, whereas an auction doesnt.

If the property you want is being auctioned, youll need to have your finances in place beforehand. When the hammer falls on your bid, youll have to pay a 10 per cent deposit on the spot. (This is when a deposit guarantee bond can come in handy.)

Most properties being sold at auction have a reserve price that is the lowest amount the vendor is prepared to accept. Its not usually revealed, but if the highest bid falls short the property is usually 'passed in'. Generally, the highest bidder is then offered first opportunity to negotiate with the seller, through their agent.

Once bidding is under way, it is up to you to decide in what increments youll bid. Even if the auctioneer wants bids to rise by $10,000 a pop, you can chip in with any amount you like $1000, for example.

Some people suggest standing at the back of the room, so you can see what's going on. If theres a bidder you cant see, ask the auctioneer to identify them. You dont want to be the victim of dummy bids being made by parties friendly to the seller.

In NSW, new rules require bidders to register upon arrival at an auction to guard against dummy bids. However, the seller has the legal right to make one bid.

See the website of the consumer rights body in your state for local rules.