First home buyer, upgrader, investor, expat: how the process differs

The mechanics of buying are broadly identical for everybody: find, check, offer, exchange, settle. What differs is which step is likely to hurt you, and buying advice written for a generic buyer is consequently written for nobody.

The first home buyer

Binding constraint: deposit, and inexperience.

Everything is happening for the first time, which means the process itself consumes the attention that should be going on the documents. It is also the group with the most government assistance available and the most complicated eligibility rules attached to it.

• ✓Concessions and grants are cliff-edged in several states - $10,000 over a threshold can cost far more than $10,000
• ✓Lenders mortgage insurance applies below a 20% deposit, and guarantee schemes can waive it if you qualify
• ✓Pre-approval is not approval - it is an indication, and it is not enough to bid at auction
• ✓The emotional risk is real: this is the group most likely to bid past a written limit
• ✓Read the special conditions. It is the step everybody skips and the one with the most money in it

Start at where to start and work through the numbered guide in order.

The upgrader, buying and selling at once

Binding constraint: timing, and bridging risk.

The hardest part is not either transaction, it is the join. Buy first and you may carry two loans; sell first and you may be renting with your deposit in the bank while prices move.

• ✓Settlement alignment is the whole game - a matching date is worth negotiating hard for and often worth paying for
• ✓Simultaneous settlement is possible but fragile: a delay on one side cascades
• ✓Bridging finance is expensive and assessed on your ability to carry both loans
• ✓A longer or shorter settlement is a genuine bargaining chip that costs the vendor little
• ✓Selling agents will push you to buy first, because it makes you a committed seller

The investor

Binding constraint: serviceability, then land tax.

The property is a cashflow instrument, and the documents matter in a different way. A defect is a line item; a tenancy is an asset you are inheriting on its existing terms.

• ✓Whether the sale is subject to existing tenancies, and whether the lease is actually attached to the contract
• ✓A below-market lease transfers with the property and can run for its remaining term
• ✓Strata capital works fund health, because a special levy comes straight out of net yield
• ✓Compliance obligations with deadlines - smoke alarms, pool fencing, minimum rental standards
• ✓Land tax on aggregate holdings, which is why portfolios often spread across states
• ✓Ownership structure decided before exchange, because changing it later usually means paying duty twice

More on the sequence in building a portfolio.

The expat and the foreign purchaser

Binding constraint: approval, surcharges and distance.

This is the group where a single overlooked clause has the largest consequences, because the obligations are essential terms rather than ordinary ones.

• ✓Foreign investment approval where required, before exchange rather than after
• ✓The contract warranty that no approval is required, which is usually an essential term - breaching it can entitle the vendor to terminate and to be indemnified
• ✓Duty and land tax surcharges, assessed per purchaser, which can apply where only one of two buyers is affected
• ✓Restrictions on buying established dwellings, which vary and change
• ✓Identity verification at settlement, which is materially harder from overseas
• ✓Timezone and distance mean you rely on documents rather than on walking through

The downsizer

Binding constraint: strata knowledge, and timing.

Often moving from a freestanding house into an apartment or a retirement scheme for the first time, and bringing decades of house experience to a completely different legal structure.

• ✓Strata is a new legal world - by-laws, levies, unit entitlement, common property
• ✓The capital works fund matters more on a fixed income than on a salary
• ✓Retirement village and land lease contracts are different again, with exit fees that can be very large
• ✓Pension and asset test implications of releasing equity
• ✓Settlement alignment with the sale of the family home

Start with buying an apartment and reading a strata report.

The same person, a different country

Each of these personas changes again depending on where the property is. The contract structure, the searches, the point at which you are bound and the protections you have all differ.

• ✓Australia - binding on exchange, cooling-off in most states but never at auction, vendor discloses by attaching prescribed documents
• ✓United States - offer and acceptance with contingency periods, escrow, title insurance, and disclosure obligations that vary sharply by state
• ✓United Kingdom - not binding until exchange of contracts, so gazumping is possible, with searches ordered by your solicitor
• ✓New Zealand - conditional offers are the norm, with a due diligence condition doing much of the work
• ✓Canada - conditional offers with a defined removal period, and provincial variation in disclosure

The full comparison is in buying property in another country.

The common thread

Every persona above ends up at the same place: a stack of documents, less time than the decision deserves, and a person across the table who does this professionally. What changes is which clause matters to you.

TrueBuy reads the pack and reports everything with the quote and the page, so the clause that matters to your situation is in front of you rather than buried in an annexure you did not reach.

Common questions

Information, not legal or financial advice. Rules differ by jurisdiction and change. Confirm with your conveyancer before acting.