Pre-settlement inspections – what rights do buyers have?


By Hayden Groves – REIWA President     https://reiwa.com.au/
Purchasing a property is a substantial commitment that comes with myriad responsibilities for both buyers and sellers.
The REIWA Information Service, which provides information to the Western Australian public about property, receives thousands of calls each year. One of the most common questions they are asked by buyers and sellers is what rights the buyer has in relation to pre-settlement inspections.
Just prior to settlement occurring (usually within five business days of when you take formal possession of the home) the buyer is entitled to a ‘pre-settlement inspection’. The pre-settlement inspection allows the buyer to check the property thoroughly to ensure the seller has complied with the representations, warranties and special conditions.
Standard conditions and obligations are listed in the Joint Form of General Conditions which forms part of the overall contract for sale.
Often confusion arises at this stage due to one or both of the parties to the contract not understanding an important representation within the contract, which states the property “will be in the same state and condition at settlement that it was in immediately prior to the contract date”.
Another condition is that the seller is obliged to remove all rubbish, vehicles and chattels from the property prior to the buyer taking possession (unless the property is subject to a lease agreement).
The parties to the contract (the buyer/s and seller/s) may also add special conditions to the contract that are specific to that purchase. For example, they may agree the seller has to remove an old shed from the property prior to settlement.
If, upon inspection, the buyer discovers that a warranty or representation has been breached, such as the pool water changing colour, then this does not normally give the buyer the right to delay settlement. Accordingly, settlement would normally proceed, however the buyer is entitled to seek damages from the seller for costs incurred rectifying the breach post settlement.
On the other hand, if the buyer discovers a special condition (not merely a warranty) has not been completed, such as the seller hasn’t removed the old shed, then they are usually entitled to delay settlement until the outstanding condition has been satisfied. Thankfully, in most cases, a resolution is reached in such circumstances, although on occasion the buyer is able to cancel settlement and the contract ends.
Your real estate agent is an invaluable tool to help you navigate some of the parameters of a property sale. If you have questions about your rights, or those of the other party to the contract, speak to the REIWA agent managing the sale who will be able to assist you.

Mixed results for Perth rental market in latest quarter

 

by Hayden Groves – REIWA President    https://reiwa.com.au/

The Perth rental market produced mixed results during the June 2018 quarter, with reiwa.com data showing median rent was stable, leasing activity was subdued, listings for rent declined and average leasing times improved.                                                                                                                                                               Perth’s overall median rent price held at $350 per week for a fifth consecutive quarter. After experiencing free-falling rents between 2014 and 2017, the stability of the last 12 months is a welcome change and should provide landlords with confidence.                                                                 Pleasingly, while the overall median rent was unchanged this quarter, there were 102 suburbs which recorded median rent price growth during the June quarter. The five best performing suburbs were Attadale (up 75.8% to $580 per week), Jolimont (up 50.9% to $423 per week), Burswood (up 33.3% to $480 per week), Booragoon (up 28.4% to $475 per week) and Hamersley (up 28.4% to $430 per week).

There were 12,633 properties leased last quarter, which is 10.4% fewer than the March 2018 quarter and 4.1% fewer than the June 2017 quarter. This could be due to slowing population growth, with the latest figures showing migration into Western Australia has declined 5%. Additionally, with the median rent stable for a prolonged period, tenants are choosing to stay in their current homes, no longer able to negotiate a cheaper rent in an alternate property as readily as they were able last year.                                                                                                                                                                                               It is also worth noting the change in seasons has likely impacted activity levels this quarter, as the rental market often slows throughout winter before picking up again in spring.                          Despite the overall reduction in leasing activity, reiwa.com data shows there were 71 suburbs which saw leasing activity increase, such as Brookdale (up 88.9%), Ocean Reef (up 75%), Kallaroo (up 63.6%), Parmelia (up 48.3%) and Hamersley (up 46.2%).

Rental listings continued to decline in the June quarter, down 2.5% compared to the March quarter, and 22.9% compared to the same time last year.                                                                                            A key driver for this fall in listing volumes is the slowdown of new dwelling commencements. With less new properties coming onto the market, existing rental stock is being soaked up, putting downward pressure on available rental stocks.

And finally, it was two days quicker to find a tenant in the June quarter than it was during the March quarter, and six days faster than it was this time last year, which is good news for property owners.

Overall, the Perth rental market is a picture of stability, with rents no longer falling, listing stocks close to parity and vacancy rates falling back into line with long-term averages.

On its current trajectory, rents could begin to rise again by the end of the year.

Market trends favour buyers over renters

 

Sunday Times Editorial by Penelope Thomas

Prospective homebuyers are in luck, with the most recent REIWA Curtin Buy-Rent Index revealing it is currently the best time to buy in Perth since 2013.

A tool used to assess the viability of buying versus renting based on past and current economic trends, the March 2018 REIWA Curtin Buy-Rent Index found median house prices would need to grow by more than 3.1% annually by the end of the next 10 years for the purchase of a house to be considered more financially viable than renting.

REIWA President Hayden Groves said this figure had decreased from 3.3% in the previous quarter, which suggested an improvement for prospective homebuyers weighing up the decision.                “To put that is perspective, Perth’s annual house price growth rate has been 5.9% for the last 15 years,” he said.

Based on March 2018 quarter Index, house prices in Perth would only need to grow by more than 3.1% annually for buying to be considered more financially beneficial than renting. “This improvement in buying conditions can be attributed to the Perth median house price softening by 1.9% during the March quarter, while the median house rent price increased $5 to $360 per week.

“We also saw the annual 10-year average mortgage rate drop to 6.43%, which means homeowners are paying less on their mortgage repayments. “This is the most affordable buying environment we’ve seen in Perth for some time, so if you’ve been weighing up whether to buy, now is the time to take advantage of favourable market conditions,” Mr Groves said.

Curtin University School of Economics and Finance property researcher and senior lecturer J-Han Ho said the data indicated a continued improvement for the homebuyer in the near future. “Our analysis shows homebuyers gaining an advantage, largely due to the low interest rates for home loans, homeownership costs continuing to be affordable and the median rents stabilising,” he said.

Realmark Central director Josh Roberts said the market was indicating favourable prices for buyers. “Prices for inner-city apartments have reduced substantially over the last four years and are at levels not seen since 2004 or 2005,” he said. “By purchasing at what we believe to be the bottom of the market or close to it, you would expect to have positive capital growth if held over a long period of time – Lots of people prefer to have long-term security, which is what homeownership provides,” Mr Roberts said.

Dear downsizers, beware the devil lurking in details

 

by Nick Bruining – Your Money Weekend    https://thewest.com.au/business

Deciding when and how to downsize is one of life’s bigger decisions. When you’re in your 60’s, the “4×2 with BG pool” might otherwise be described as “big empty home with pool that costs a fortune to maintain”                                                                                                                                                                            Like thousands of others, you start to look around.                                                                                     You’ll soon discover there’s a world of choice where a poor decision could end up costing you thousands of dollars.                                                                                                                                                     Seniors, basically, have three options when it comes time to downsize. Your first will be to move to a smaller home or a strata-titled property such as a unit or villa.                                                                          In this scenario you have a direct interest in the property, with your name registered as proprietor with Landgate. While you wear the costs of maintenance and upkeep, you enjoy the benefit of being the property owner.                                                                                                                                                           If it appreciates in value, you or your loved ones will pocket the profits.                                                       Being real property, you can use it to take out a reverse mortgage or as security for the expanded Pension Loan Scheme, to apply from next year.                                                                                                        Neither of these is available if you select options two or three and use the proceeds of your home to enter a retirement or lifestyle village.                                                                                                                         Village promoters are experts at pushing the positives, so let’s spell out some other issues to consider. In this arrangement, you buy a right to reside in the village and to use the facilities on offer. Sometimes, this right-to-reside will cost hundreds of thousands of dollars, and the unwary might think they have bought a new but smaller home.                                                                                          But this is not a real estate transaction. You don’t own the land and while in some cases you might own a relocatable structure, where might you move it to if you decide to leave?                                      Your specific entitlements and obligations are spelt out in a multi-page contract.                               In reality, most of the contract seems to be dedicated to protecting the rights of the village operators.                                                                                                                                                                    The terms of the contract become apparent once you’ve signed up and moved in – maintenance may have to be provided by the operator at a price they have set, there are possible refurbishment costs on exit and also monthly fees which continue to rack up even if you’ve been forced to move out.                                                                                                                                                                                                   You may have to use the promoter’s agent to sell your place. If they are flat out selling “stage 5” of another village, don’t be surprised if it takes a while for yours to sell, and all the while, the fees can continue to erode your final payout.                                                                                                                              The staff at the Government’s Senior Housing Advisory Centre, say examples where a $500,000 outlay turns into a $300,000 payout is not uncommon.                                                                                           While that may affect your loved ones when you are gone, it can also have an impact on you because it reduces the amount you can contribute to aged care if needed.

Can you break a rental lease?

 

by Hayden Groves – REIWA President     https://reiwa.com.au/

Some of the most common property questions the REIWA Information Service receives from the Western Australian public is around breaking a property lease and the process that is involved.

The method of terminating your lease is determined by what kind of lease you have.

If you have a periodic lease, then terminating your lease agreement is straight forward. All you need to do is provide 21 days’ notice in writing to your property manager or landlord. Your lease will then end in 21 days.

Of course, if you are sending the notice by post, it’s best to add six working days to the notice period to account for delivery times, and if sending by email, you should follow up with the property manager to confirm they have received the email and are aware of your intent to end the lease.

Terminating a lease becomes significantly more complicated if you are on a fixed-term lease, as there is no automatic right of termination. In order to break a fixed term lease, you need the owner’s permission (via your property manager if the accommodation is professionally managed).

In this instance, the owner will often agree to a termination at a point in time when a replacement tenant commences a new lease. In other words, the owner is looking for a smooth swap, minimum fuss and no costs incurred.

If the owner is confident of quickly finding a new tenant, they might agree to a no-fuss, no-cost break lease – however, they are under no obligation to do this.

The Residential Tenancy Agreement is a legal contract and the owner is entitled to seek an outcome where their financial position is no worse off as a result of a tenant breaking their tenancy contract. Subsequently the owner is entitled to claim compensation for any financial loss incurred as a direct result of the breach.

If a replacement tenant is not found by the time you move out, you are liable to continue to paying rent until a new tenant has been found or the original end date of your fixed-term lease expires.

Additionally, if a tenant has been found, but the amount they have negotiated to pay per week is less than what you are currently paying, you may be required to pay the difference up until the point your original lease would have concluded.

Walking out of the lease agreement does not terminate your obligations – the owner is still entitled to claim compensation.

Where possible, my advice is to avoid breaking your lease. If you are in a situation where this is not possible, speak to the property manager about what costs you are likely to be liable for if a suitable tenant replacement cannot be found.

 

Should you sell your property in winter?

 

By Hayden Groves – REIWA President      https://reiwa.com.au/

In a city that thrives in hot summers, it’s no surprise Perth’s colder months see locals retreating inside. Naturally, this ‘winter effect’ has an impact on the real estate market, with activity tending to quieten between June and August as the cold temperatures and rain keep people indoors.

As a result, vendors often choose to hold off selling their homes until spring, when both the weather and dispositions of the Western Australian buying public improve.

In a balanced market, when opportunity is evenly spread between buyers and sellers, deciding not to sell during winter is a smart strategy. Improved weather conditions will often benefit a garden’s aesthetic, adding value to a property, and a more positive atmosphere will generally emerge once winter ends.

On the other hand, it would be foolish to avoid selling your property in winter if market conditions were short on supply and high on buyer demand – particularly if future trends indicated a move back towards market parity.

In today’s real estate market, where conditions – although improving – are relatively flat, buyers have more time to make a decision that if supply was low and demand was high.

The residential rental market in particular tends to ‘nod off’ during winter, with notably fewer tenants making enquiries for vacant properties.

REIWA statistics also suggest rental vacancy rates move with the seasons, even during periods of high demand from tenants.

For sellers, however, broader market conditions have far more impact on selling outcomes in WA than the change of seasons does.

One important consideration for would-be sellers in today’s market is the thought process of like-minded sellers. If they too are choosing to hold off listing their property for sale during winter, then spring brings with it an over-supply of available stock and competition between sellers increases.

In the current climate, a surge in the volume of houses for sale is not ideal and would likely stifle the signs of improvement we’ve been observing this year, putting downward pressure on sale prices.

While seasonal trends have some impact on sales and rental activity in WA, generally speaking, any time of the year can be a good time to buy and sell. This is especially true if you are buying and selling in the same market conditions.

If you’re unsure if it is a good time to sell, speak with your local REIWA agent about how your local market is performing and how well properties similar to yours are selling.

Preparation is the key to a smooth investment at tax time

 

by Hayden Groves – REIWA President       https://reiwa.com/

The start of a new financial year means one thing to most people – tax time. If you’re an investor who rents out your property, it’s important you take the time to gather all your records, expenses and paperwork in preparation for your tax return.

Being diligent with keeping records from when you first purchase your investment property will make this time of the year less daunting. Your property manager can also assist by providing financial year statements detailing all transactions relating to your property throughout the twelve month period.

You’ll need proof of all your expenses so you can claim everything you’re entitled to. If throughout the year you’ve carried out any maintenance or replaced a fitting or fixture at the property, such as painting or replacing light fittings, you’ll need to provide evidence of this expenditure.

It is vital records are kept for a minimum of five years and, in some cases, for at least five years after the property is sold.

In your tax return you must include the full amount of rent and rental-related income you receive, regardless of whether it is being paid directly to you or through your property manager. In addition to rent payments, rental income can include rental bond money you were entitled to retain, letting and booking fees you receive and any insurance claims that were paid.

Come tax time, you’ll be looking to claim deductions for related expenses for the period the property has been rented out. The Australian Tax Office (ATO) are thorough when it comes to checking expense claims, so it’s very important to be accurate and honest when making your claims.

Deductions can be made on things like management and maintenance costs, which can be claimed immediately, and borrowing expenses, depreciation and capital works spending, which are usually deducted over a number of years.

The important thing to remember is deductions can only be claimed if the property is being rented out or is genuinely available for rent. Being ‘available to rent’ references the period when the property is advertised for rent and receiving widespread exposure to potential tenants.

If you’ve sold your investment property or house in the past financial year, any capital gain made on your property will be subject to capital gains tax.

In this case, you’ll need to refer to records of the date and costs of buying the property so you can work out any capital gain, or loss, when you sell it.

If you’re a current investor or thinking of investing, find out more about how to lodge your tax return as a property investor on the ATO website – www.ato.gov.au – or from your registered tax agent.