Audrea and I moved into our new home over the weekend. The house is shaping up nicely, and aside from a few other bits of household items, we're mostly settled in.
But the entire process has been extremely trying and exhausting. And I think we're learnt a number of lessons, which will help if we ever move again in the future.
1) Making the offer, and signing the contract
We made an offer on the higher end of the price range, and perhaps that was a novice mistake. We were afraid that someone else would make a more attractive counter-offer. Making an offer of a reasonable amount to yourself is important.
I also made the mistake of not insisting on including "Subject to finance" in the terms of my offer. This would have given us an exit option, should things not work out. This is particularly pertinent when we were buying off the plan, which would take about 6 months till settlement.
Understanding the penalties is also very important. As I'll share later, we had a hard time securing the loan. And had we defaulted on settlement, we would have lost the house, forfeit our down payment, and paid the difference if the vendor was offered less on the re-sale. We didn't ask about the penalties in greater detail because we were so confident that securing a loan wouldn't be a problem, which in hindsight was a poor decision to make.
2) Not keeping an eye on the house
I think we placed too much trust on the real estate agent, the vendor and the builder to look after us. And as such, we didn't keep as close an eye on the building process as we should have. We didn't insist on being consulted with regards to the internal fixings, or even some of the larger aspects of the building (such as ducted cooling). We were lucky that the builder had a good eye, and picked the colours and materials that we otherwise would have. But we did end up with a couple of things we wished were included into the house.
3) Mortgage, brokers and lawyers
Because settlement was so far removed from the contract signing, we had a bit of time to secure a loan. And because of that, I think we both procrastinated a little bit. This was further compounded when advised by the broker in October that we still had plenty of time to secure that loan. Things did not turn out that way exactly.
The whole process took longer than it should have, taking almost one and a half months before we could confirm our loan arrangements. For some reason, the bank kept requesting for additional documents. And given there was a 6-8 day turnaround with each request, this greatly extended the time needed for the loan. And with our initial submission, we were assured by the broker that we had already provided sufficient documentation, so the constant delays caught us off guard. We only got final loan approval less than a week from settlement.
The lawyer we engaged was a great help to us, because his constant reminders to us emphasised the urgency of the situation. But I think we had different expectations on the services provided. His services were to prepare the required documents for settlement, and in a normal situation, this would have been sufficient. But given our particular scenario, I had assumed that he would also represent our interests in dealing with the broker, bank, and vendor. I guess I had slightly different expectations of what engaging a lawyer entails, so there were moments when I felt quite frustrated by a seemingly lack of assistance from all sides.
4) Stamp duty
One of the biggest shocks we received near the end of the whole process was the amount of stamp duty we had to pay. Buying an off-the-plan property often means a much lower stamp duty than buying an established one. And one is always told that the duty is based off the value of the land. This is close, but not exactly true.
What we've found is that the duty is calculated by taking away the value of the construction from the purchase price. So say that the purchase price is $10, the value of the construction is $4, and the land is $3. The duty is not calculated on the value of the land ($3), but rather on the purchase price minus the construction price ($10-$4=$6). As such, we were hit by a higher stamp duty that we previously assumed, which has left us in a undesirable position.
5) Final inspection of the house
It's important to do the final inspection of the house as early as possible. Because we hadn't secured our loan until the last week, we weren't confident that we would get the house. We found a number of issues with the house, and because it was so close to settlement, there wasn't much that could be done aside from putting a request to have the builder resolve the issues. However, if we had done this earlier, it would have been possible to have these issues resolved before we get the keys. As it is now, those issues are now up to us to resolve.
