You have recently sold your house. Or perhaps you have bought a house. To save money, you are thinking of doing your own conveyancing. Would it be too difficult? How much would you save? How would you go about it?
Conveyancing is not difficult. All it needs is a minimum of clerical ability. If you are capable of obtaining your own passport or registering a Business Name or completing your Tax Return, then you are capable of doing your own conveyancing. If you get into difficulties or you are unsure of anything, you can usually get help from the staff of your local Land Titles Office. Also, in most States, it is now possible to purchase a conveyancing kit at a cost of about $70. This includes all the forms necessary and instructions on how to do the conveyancing.
How much will you save by doing your own conveyancing? This very much depends on what State you live in. For example, if you are buying a house for $150,000, conveyancing scale fees can range from $1,350 in Queensland to $400 in Western Australia. Other States could be anywhere in between. However, these are scale fees and are recommended fees only and it is often possible to get a "discounted" fee. A "discounted" conveyancing fee of $250 is not unknown. The fees quoted above do not include expenses.
What exactly is conveyancing? Conveyancing is the transfer of ownership in land and buildings. Today, the ownership of 98% of land and buildings in Australia is registered at the Land Titles Office. I shall not bother about the remaining 2%. Each owner gets a certificate of title to his property. The Government guarantees that the person named on the title certificate is the legal owner of the land and property. Any member of the public can find out who the owner of a property is by enquiring at the Lands Titles registry. Where there is an outstanding mortgage on a property, this is also recorded at the Land Titles Office. Normally, an owner of a property will keep his certificate of title at home in a safe place or in a bank deposit box. However, if there is a mortgage outstanding on the property, the lending authority such as a building society or bank will retain the certificate of title until the mortgage has been paid off.
If you are SELLING your property and doing your own conveyancing, what are the main things to watch out for? The main thing that a seller of property should watch out for is to make sure that he is paid the purchase price in full.
If you BUYING a property and doing your own conveyancing, what are the main things to watch out for? A buyer of property has to be more vigilant than a seller. Basically, he must make sure that he gets the land and buildings that he bargained for. He must make sure that all mortgages have been paid off and removed from the certificate of title. If you were to buy a property with an existing mortgage, then you personally would have to pay off the mortgage if the previous owner defaulted. Otherwise, the building society or bank would step in and sell the property and pay themselves out. It would be like buying a vehicle that is subject to an existing Bill of Sale. Of course, in this case, I am not talking about a mortgage that you yourself would raise to obtain a loan.
The buyer must make sure that he gets a certificate of title from the Land Registry and that he is registered as owner. As mentioned, he must make sure that the only mortgage appearing on the certificate is his own mortgage.
The buyer must make sure that he gets the keys of the property with vacant possession at settlement date. He must also make sure that all the furniture and fittings and fixtures that he bought with the property are still there.
There are certain expenses in relation to a property that must be paid by the owner, irrespective of whoever that owner might be. If the previous owner has not paid them, then the new owner must pay them. These expenses usually include Council rates, water rates, land tax, body corporate levy and possibly the gas bill. On the other hand, expenses like electricity and telephone are payable only by the person who incurred the cost. When a person is selling a house, it would be in his interest to leave all the first-mentioned expenses unpaid. When the new owner moves in, he will be hit by demands from the Council, Water Board etc for unpaid rates and charges which he will have to pay. Consequently, a buyer must find out what expenses are outstanding on the property. If there are any unpaid bills, these must be deducted from the purchase price of the house. On the other hand, if any bills have been paid in advance, then these must be added to the amount payable to the seller. For example, suppose settlement date is the 1st July and the seller has paid Council rates of $1200 which cover the period 1st January to 31st December. The seller has therefore paid $600 in advance and he should be paid $600 in addition to the purchase price.
The buyer must make sure that he can use the property for the purposes for which he bought it. For example, if he intends carrying on a business in the property, it is most unlikely that he will be allowed to do so in a residential area. The intending buyer should contact his local Planning Authority to find out the zoning applicable to his proposed house purchase.
The buyer should find out from his local Council or other authority what plans (if any) that they have for the area surrounding his house. It may that the local authority has plans to convert the road in front of the house into a four-lane highway.
The buyer should also contact the Building Board to make sure that the building is in accordance with the building code.
The buyer should also consider hiring an engineer to examine the house and report on its condition. The engineer would also check the boundaries.
The buyer would also be well advised to hire a pest exterminator to examine the house.
Now, let us go through the conveyancing steps that a seller of a house would take in a typical case.
You have put your house up for sale and the estate agent has told you that he has found a buyer. A 10% holding deposit has been paid, "subject to contract". Alternatively, you could have advertised and found a buyer by yourself.
The first thing that you, the seller, must do is to prepare the Contract of Sale. This is not as daunting as it sounds. In almost all States, you can buy a preprinted Contract of Sale from your local Real Estate Institute or law-stationers. The contract is in duplicate and all you have to do is to fill in the blanks. But before you do this, you must ferret out your Certificate of Title. If you have a mortgage, the lending institution will be holding this document and they will not release it. In that case, you will have to go to the Land Registry Office and obtain a copy of your Certificate of Title. Armed with these details, you can now complete the Contract of Sale.
Send one copy of the Contract to the purchaser's solicitor when completed. Next, you must write to your lending authority and ask them how much you will have to pay them at settlement date to pay off the mortgage. The next thing to happen is that the purchaser's solicitor is likely to send you a preprinted questionnaire requesting answers to standard questions. Answer these as best you can. Some questions you will find are not very relevant. When the purchaser's solicitor is happy with the Contract, he will get his client to sign it and he will then post it to you. You examine the Contract, you sign your identical copy of the Contract and you post it to the vendor's solicitor. This completes "exchange of contracts".
You must now agree a Settlement date with the buyer. When you have done this, you must prepare a Settlement Statement. The bottom line of the Settlement Statement shows the amount that the buyer must pay you. Suppose you sold your house for $150,000. The buyer had paid a 10% deposit of $15,000 which is being held by the estate agent. You calculate that you have paid Council rates in advance of $320 and that water rates are in arrears to the tune of $140. On Settlement Day, you would like two bank cheques from the buyer. One is to be in favour of the Savealot Building Society for an amount of $87,065. This will be handed to the representative of the Savealot Building Society to pay off your existing mortgage. The other cheque will be payable to yourself and it will contain the balance of the purchase price. Your Settlement Statement would look like this.
|Sale price, as agreed||150,000|
|less deposit paid||15,000|
|less water rates paid in arrears||140|
|Add Council rates paid in adance||320||320|
|AMOUNT DUE FROM BUYER||135,180|
Bank cheques required at Settlement:
1. Savealot Building Society $ 87,065
2. Yourself $ 48,115
You send a copy of this to the purchaser's solicitor.
Sometime later, the purchaser will send you a completed Memorandum of Transfer. Check it to make sure all details are correct and then sign it. It must be returned to the buyer to have it stamped and then returned to you.
In some States, it is common for settlement to take place at the Land Registry Office. Often, the Land Registry has a special room set aside for this purpose. If this is not possible in your State, then probably the next best place for settlement to take place is at the buyer's solicitor's office.
On the appointed day, the following persons will meet at the arranged place. You, your Building Society's representative, the buyer's solicitor and a representative from the buyer's lending institution (if any). The buyer or his representative hands you the following: 1) two bank cheques totalling $135,180 made out as stipulated in Settlement Statement and 2) an authority to the Estate Agent to pay the deposit of $15,000 to you. You, in turn, hand to the buyer 1) the Certificate of Title, 2) the stamped Memorandum of Transfer and 3) the Discharge of Mortgage and 4) the keys to the house. You hand the cheque for $87,065 which you received to the representative of the Savealot Building Society. He, in turn, will arrange to have the mortgage noted as discharged on your certificate of title. You go the estate agent and collect the cheque for $15,000 and then you go to your bank and bank that cheque together with the cheque for $48,115.
Now, let us assume that you are the buyer and let us go through the steps that a buyer would take in a typical transaction.
You have been to see many houses and you have finally found the one that you want. The price is $150,000. You have paid the estate agent a deposit of 10% i.e. $15,000. You have signed a document which states "subject to contract".
You should now go along to the Land Registry and do a "search" of the title. This will tell you a) who the registered owner is, b) if there is any mortgage outstanding, c) whether there is a "caveat" on the property etc. If you are unsure of what any item on the certificate means, ask the Registry staff. If you require finance to purchase the property (as most people do), you must arrange a mortgage loan with a financial institution. They will probably insist that you have the property valued. You should consider hiring an engineer to check out the property at the same time. You should also arrange for a pest exterminator to examine the property. You should contact the Planning Authority to find out the zoning of the property. You should contact the Building Board to make sure the building has complied with the building code. You should contact your local Council or other appropriate authority to find out what plans it has (if any) for the immediate neighbourhood. A personal visit will often yield more information than writing a letter. Searches and registration fees (excluding Stamp Duty) will cost you about $120.
Within a few weeks, you will receive a Contract of Sale from the seller's solicitors. Check this carefully. Make sure that the particulars are identical to those on your title search. Make sure that it states that the contract is subject to your obtaining finance. Otherwise, you could lose your deposit if you were unable to obtain finance. If you are buying the house furnished, it is a good idea to have a list of the furniture, fixtures and fittings included on a separate sheet in the Contract. In any case, if you require any further information, do not hesitate to write to the seller with your queries. When you are happy with the contract, you sign it and return it to the seller. Sometime later, the seller will send you his copy of the contract signed. Contracts have now been exchanged.
You must now draft the Memorandum of Transfer. This is a standard form and you must fill in the blanks. The Memorandum can be obtained from law stationers. If you have any difficulty in obtaining it, consult the Land Registry Office or your local Real Estate Institute. If the property is to be held in joint names, the Memorandum asks whether it is to be "joint tenants" or "tenants in common". The difference is that when a joint tenant dies, the other inherits his share automatically. When a tenant-in-common dies, his share goes according to his will. Husband and wife normally opt for "joint tenants". Send the completed Memorandum to the seller's solicitor. Ask him to send it back to you when signed. When he does, take the Memorandum and Contract of Sale along to your local Stamp Duties office. Stamp Duty will have to be paid on both. The Stamp Duties office will tell you much you have to pay. Often, if you are a first-home buyer, you will have less Stamp Duty to pay. Send the Memorandum back to the seller.
Next, you will receive a Settlement Statement from the seller. Check it carefully. You might phone the Council rates section etc to confirm that all amounts owing are included. Next, contact your lending institution and 1) give them the necessary details to prepare a mortgage document and 2) arrange to have the bank cheques required at Settlement Day available. On Settlement Day, before settlement, you should inspect the property once more to make sure that you are receiving vacant possession and that all furniture, equipment and fixtures are still there. At the appointed time and place for settlement, you turn up with your lending institution representative. If settlement is at the Land Registry, you make a last-minute search of the Register to make sure that there are no caveats against the title and that no further mortgages have been lodged. You hand over 1) the bank cheques and 2) the authorisation to the estate agent to pay the deposit to the seller. In exchange, you get 1) Certificate of Title, 2) a stamped Memorandum of Transfer, 3) Discharge of Existing Mortgage and 4) the keys to the property. If you are buying with the aid of a mortgage loan, your lending institution will hold the Certificate of Title. They will also lodge the Memorandum of Transfer with the Land Registry Office. They will also lodge the Discharge of Mortgage of the existing mortgage. They will also lodge their own mortgage.
You should check that your lending institution has done all of the above. It is a good idea to do a search at the Land Registry some weeks later and get a copy of your Title Certificate (not the original). This will show that all of the above has been carried out. After settlement, you should write to the rating authorities and advise them of the change of ownership.
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