Guide to buying an apartment
When buying an apartment, it’s likely to be one of the largest purchases you will ever make. You’ll will need to arrange & talk to your professional team Mortgage Adviser, Lawyer, Valuer, Property Inspector and deal with the Real Estate Agent.
It can be a pretty big deal.
Whether you’re a first time buyer, a property investor, moving up as your family grows, or you’re looking for something smaller now the kids are gone, there’s a lot to think about.
So don’t rush it. Take time to look around. Do your homework e.g. due diligence. Let us help you arrange a professional team & work out your ‘due diligence’ and what you can realistically afford to spend on a mortgage. And the chances are that you’ll end up buying an apartment that’s right. Here's a few more things to consider before running out and purchasing an apartment.
1. Disclosure, disclosure
As a prospective purchaser you must be given the following, from the seller / Real Estate agent, containing important ‘due diligence’ details that can impact your buying decision
A pre-contract disclosure statement (PCDS) either before entering into a Sale & Purchase agreement or at least 5 working days before settlement, &
An Additional Disclosure Statement (ADS) within 5 working days from the purchaser request.
The disclosure contains the following annual body corporate levy, funds held by the body corporate, upcoming maintenance on the complex, and whether it has any weather tightness problems.
NBS rating
Before settling on the property you get another disclosure statement covering things like any fees and charges relating to the unit and whether there are any proceedings pending against the body corporate.
2. And more disclosure – especially Body Corp insurance
On top of that you should ask for additional documents, such as the body corp minutes of meetings, financials and information on insurance e.g. National Building Standard (NBS) rating for the apartment. Some apartments are difficult or very expensive to insure that are included in the body corp fees. The seller / body corp is entitled to charge you for this.
3. Sanitised body corporate minutes
Bodies corporate have a tendency to keep things out of their meeting minutes that may reduce the attractiveness of the property e.g. maintenance that has not been done & deferred. That is why it’s important to get copies of the minutes, the financials and the budgets going back three years.
4. Upcoming general meetings
If a unit goes on the market just before an extraordinary general meeting or an AGM at the complex, ask why the owner is selling at that time. There could be looming issues that they’re aiming to avoid.
5. Check there’s an adequate long-term maintenance plan (LTMP)
Complexes must have an LTMP, but it only has to be for a minimum of 10 years, and it doesn’t have to be funded. A decade is not long enough because most of the big-ticket items such as the roof or the cladding won’t need replacing within that time. Owners should also be contributing to a long term maintenance fund so that the cash is there when this work needs doing.
6. And if you’re buying off the plans
As house prices continue to skyrocket, securing a property while it’s still in the pipeline is tempting. But lobby group Consumer says get excellent legal advice first. Check if there have been any problems with other projects the developer has done, and find out if it has the necessary resource and building consents before paying anything. Check your contract has a “sunset clause” which allows you to cancel and get your deposit back if the developer hasn’t made sufficient progress within a certain timeframe. Also look out for “entire agreement” clauses which are usually designed to prevent you from relying on anything you were told by the sales rep. Make sure final payments are tied to the developer getting a Code of Compliance Certificate for the completed development.
7. Leaky buildings – how do you tell?
Apart from the obvious of considering the era of the building – early 1990s to mid 2000s is the danger zone – and getting a property inspection done, there are often clues in the body corporate minutes. Problems with individual units are one sign. You’ll quite often see discussion about maybe a deck that’s leaking, and it would be portrayed as an isolated issue for one unit. Where you see that happening, that generally should raise a red flag.
Remember there's plenty more to purchasing property than just these few tips above. Get in touch to talk in further detail and let us guide you through the process.
Stephan Jagers