Reference
Hidden costs and red flags when buying property
The money nobody budgets for, and the warning signs that turn up in the paperwork long before they turn up in your bank account.
12 min read
There are two kinds of surprise in a property purchase. Costs you did not budget for, which are annoying and survivable. And red flags you did not see, which are the ones that turn a good purchase into a bad one. This page covers both, because they usually arrive together.
The costs at the transaction itself
- Stamp duty or transfer duty - the dominant cost, varying by state, price and buyer type
- Conveyancing or solicitor fees, typically $800-$2,000
- Searches and certificates, a few hundred dollars
- Building and pest inspection, $400-$800 per property inspected, including ones you do not win
- Strata report for an apartment, $200-$400
- Lenders mortgage insurance if your deposit is under 20%, which can run into tens of thousands
- Loan application, valuation and settlement fees
- Mortgage registration and transfer registration fees
- Adjustments at settlement for rates, water and strata levies the vendor has prepaid
The costs in the first year
The ones that arrive after settlement, when the budget is already spent.
- Council rates, water and, for apartments, quarterly strata levies
- Building insurance, required from exchange in most states, not from settlement
- Land tax, which for investment properties depends on your total holdings, not this one
- Immediate repairs - the things the building report found that you decided to live with
- Connections, removalists, cleaning, and the furniture that does not fit
- For an apartment, a special levy that was being discussed in the minutes when you bought
Red flags in the paperwork
These are ranked roughly by how much they tend to cost, and every one of them is visible before exchange.
Serious enough to walk away over
- A vendor right to rescind without stating reasonable grounds, or without specifying them in the notice
- The deposit released to the vendor before completion, uncapped and unsecured
- A deposit or balance that does not reconcile with the price on the front page
- Sold as-is with no right to object, requisition or claim, combined with no survey and no building certificate
- Unapproved structural work, with the obligation to comply with any future work order passed to you
- A contract date inconsistent with the searches attached to it, which can put completion in the past
Worth a requisition and usually a price conversation
- A compensation threshold reduced from the standard percentage
- Penalty interest on late completion, particularly where trivial fixed fees are made essential terms
- An easement or covenant on the plan that the title register does not record
- A block at exactly the council minimum lot size, which removes any subdivision value
- Pool or spa present with no certificate of compliance and no vendor warranty
- A strata scheme with a capital works fund well below what a building of that age and size needs
Red flags at the property
- Fresh paint in one room only, particularly a bathroom wall or a ceiling corner
- New flooring in a single area, which can be covering a moisture problem
- Doors and windows that do not close square, suggesting movement
- A strong air freshener at every inspection
- Downpipes discharging at the base of a wall rather than into drainage
- A renovation that stops abruptly, which often means the approval did too
- Neighbouring vacant land or an obvious development site, which is a planning search question
Red flags specific to apartments
- Capital works fund far below the scheme's ten-year plan
- Repeated discussion of the same defect across several years of minutes with no resolution
- Legal proceedings by or against the owners corporation
- A high proportion of lots owned by one entity, which controls the vote
- Combustible cladding, or a building on a state rectification register
- Recent large special levies, or a levy struck immediately after settlement dates
Where these actually get found
Almost every item on this page is discoverable in documents you are given before you sign. The obstacle is not access, it is that the pack is long, dense and arrives late.
TrueBuy reads all of it and reports each finding with the quote and the page number, and prices the ones the documents support. That turns a vague worry into either a question for your conveyancer or a number in a negotiation.
Find the red flags before they are yours
Upload the contract, strata report and building report. Every finding comes back quoted and paged, free while we are getting started.
Common questions
How much should I budget on top of the purchase price?
In Australia, plan for roughly 4% to 6% of the purchase price in transaction costs, dominated by stamp duty. First home buyer concessions can reduce that substantially, and they vary by state and by price bracket. Then add a moving and immediate-repairs buffer on top.
What is the biggest single cost people forget?
Stamp duty, when they are not eligible for a concession they assumed they would get. The thresholds are specific, they change, and being $10,000 over one can cost far more than $10,000.
Are strata levies a hidden cost?
The ordinary levies are disclosed. What catches people is the special levy - a one-off charge for major works, which can run to five figures per lot. It is usually visible in the committee minutes long before it is formally struck.
What is the most serious red flag in a contract?
Any clause letting the vendor rescind without stating reasonable grounds. It is usually created by deleting a few words from a standard condition, it is easy to miss, and it means your commitment is binding while theirs is not.
Where these figures come from
- NSW Revenue - transfer duty and surcharge purchaser duty
- Consumer Affairs Victoria - due diligence checklist
Grants, thresholds and duty rates change. Always check the current rules with the relevant state revenue office or Housing Australia before you rely on a number here.
Information, not legal advice. Confirm with your conveyancer before acting.