Buying and selling a house

Contributed by AlisonO'Neill and current to 1 November 2017

This section aims to be a general guide to buying and selling a house and does not contain enough information for a person to draft their own contract or do their own conveyancing.

Conveyancing is the process of transferring title to real property within the Torrens System of land registration. Under the Torrens System, titles to land are held at the Land Titles Office (LTO). Before the Torrens System was introduced titles would be kept by the owners, creating breakdowns when a title was lost. A solicitor or a licensed conveyancing agent should be consulted over any legal uncertainties in a property transaction.

In the NT, the buying and selling of property is governed by, among others, the Law of Property Act 2000 (NT), and the Land Title Act 2000 (NT), and in the case of units the Unit Titles Act 1979 (NT) and the Unit Title Schemes Act 2009 (NT).

Houses in the NT are bought and sold between parties through real estate agents, although it is becoming more common to buy or sell a house privately. The Real Estate Institute of the Northern Territory (REINT) is the representative body for real estate agents (see Contact points) and The Australian Institute of Conveyancers (NT) represents conveyancers (see Contact points ).

To sell or buy first?

It is easiest to sell an existing house before buying a new property. When a person buys a house before selling their existing one, they should make sure that the terms of the purchase agreement are incorporated into the sale contract for their existing house. That way any delay with settlement on the house they have sold will not likely result in interest penalties, and will enable the seller of their new house to, at best, rescind the contract of sale if their present house does not go through to settlement.

Penalty provisions apply when contracts are not settled in time, and these are set out in the Contract of Sale. Standard provisions include penalty interest for late settlement. These provisions can be negotiated prior to exchanging contracts.

Who can do the conveyancing?

Conveyancing services

Conveyancing services are offered by conveyancing companies and many solicitors. The fees of solicitors and conveyancing agents are negotiable, so it is worthwhile phoning around to obtain a range of quotes. Professional indemnity insurance, which protects a client if their solicitor or conveyancing agent is negligent, is mandatory. Both solicitors and conveyancing agents are also covered by fidelity funds, which are a sum of money available to reimburse clients for misappropriated trust money.

Do-it-yourself conveyancing

Some people prefer to complete their own conveyancing. This involves assembling all the relevant documents and finding out the relevant information about the property from various departments and authorities. Some of the information that should be checked includes:

• caveats and covenants attached to the property
• illegal extensions - those that have not been approved by the Building Authority
• building status - whether the improvements comply with the Building Code (see Building )
• actual property size - whether it differs from the measurements on the title
• pest - reports on any pest infestations such as white ants
• any changes to the property, such as damage or missing items, that may have occurred prior to the final inspection.

People often do their own conveyancing to save money. However, it is highly recommended that professional advice be sought. There is a standard contract for sale which is available from the REINT, conveyancers or the Law Society. Legal advice should be obtained in relation to the contract terms and conditions before using the contract.

Understanding the language of buying and selling houses

ABA: Australian Bankers' Association. ABIO: the Australian Banking Industry Ombudsman provides an avenue through which customers can make complaints about their bank and have them dealt with independently. Accrued interest: interest earned or incurred that is yet to be paid or charged. Additional repayments: extra funds paid into the loan over and above the minimum prescribed repayments. Adjustments: the process of allocating expenses (council, electricity, phone, water rates) on settlement day that the seller has paid but not used, and which the buyer has not used but will be billed for. Affordability: housing affordability is measured by an index known as the Housing Affordability Index (see entry) Agent: person or body authorised to act on behalf of a client in the sale, purchase or management of property. All-in-one-loan: a loan, generally variable, that allows a person to deposit all of their income into the loan account and then withdraw money from the loan account for all day-to-day purchases and transactions; the longer spare funds stay in the account, the greater the interest savings. Allottment: a block of land created out of a larger area. Amortisation period: the period of time a person has to repay a loan at the arranged terms. Appraised value: estimate of the property being used as a security for a loan. Annual percentage rate: (APR) the advertised rate of interest per annum. Assets: money, property or goods owned. Auction: public sale of property with ownership going to the highest bidder, subject to a reserve price being reached. Basic variable: a variable home loan at a reduced rate but generally with fewer features than a standing variable. Bill of sale: a written agreement whereby ownership is transferred but the original owner is allowed to retain possession. Break costs: penalties charged when a loan is paid off before the end of its term. Generally applies to fixed loans. Bridging finance: a short-term loan that covers a financial gap between the purchase of a new property and the sale of an old property. Building inspections: an inspection generally carried out prior to the purchase of a property to ensure the building is structurally sound. Building regulations: the standards formulated by local councils to control the quality of buildings. Capital gains tax: a Federal tax on the monetary gain made on the sale of an asset bought and sold after September 1985. Capped loan: a loan where the interest rate is not allowed to exceed a set level for a period of time, but unlike fixed rate loans, is allowed to drop. Certificate of title: this document details the land dimensions and ownership details, and whether there are any encumbrances on it. Chattels: personal property, of which there are two types: real chattels, which are buildings and fixtures; and personal chattels which are clothes and furniture. Collared rate: a variable rate loan with a set upper limit beyond which the interest rate cannot move past. Combination loans: where various loans come under the same banner to form one loan. May have a portion variable, fixed or even a portion as a line of credit. Also known as split loans. Commission: a fee payable to the real estate agent, by the seller, for the sale of property. Compound interest: interest that is paid on both the accumulated interest as well as on the original principal. Construction loans: a loan specifically granted for the purpose of funding the building of a new dwelling. A borrower is generally able to draw money as required, so they can pay as necessary. Contract of sale: a written agreement outlining the terms and conditions for the purchase or sale of property. Contract: a legally enforceable agreement between individuals and entities. Conveyancing: the legal process for the transferral of ownership of real estate. Covenant: terms and conditions that specify the usage of a block of land or the buildings on it. CRAA: Consumer Reference Association of Australia which is the body that holds credit details on everybody. Daily interest: interest calculated on a daily basis, therefore varies according to daily account balance. Deed: a legal document that states an agreement or obligation regarding a property. Default rate: failure to meet debt payment on a due date. Deposit bonds: guarantees that the purchase of a property will pay the full deposit by the due date. Institutions providing deposit bonds act as a guarantor that payment will be made. They are often used as surety when cash is not readily available at short notice. Early termination charges: any fees and charges that are incurred when a loan is paid out early. Easement: a right to use a corridor or passage of land which is owned by another. Encumbrance: an outstanding liability or charge on a property. End loan: pertains to bridging finance - it is the loan amount left after the borrower has sold their existing home and paid the proceeds towards a bridging loan. Equity: the percentage or amount of an asset actually owned. Equity loan: a loan secured by the part of an asset (usually house) owned. Equity mortgage: a loan secured by the part of an asset (usually house) owned. Establishment fees: lending body fees which may or may not be charged to set up a loan. Exchange of contract: the legal point of time when the seller and the buyer swap a copy of the contract signed by them. Fixed interest: an interest rate set for an agreed term. Garnishee: to legally divert a part or whole of someone's money or property to someone else. Gazumping: when an offer to purchase on a home has been accepted (but contracts have not yet been exchanged) and another party comes in at a higher price and secures the sale. Gearing: the ratio of borrowed funds to a person's own money and in an investment. If a property is 'highly geared' then it has a high ratio of borrowed funds compared to ownership. Holding deposit: a refundable deposit based on the intention of the buyer to go ahead with the purchase. Housing Affordability Index: the ratio of average household disposable income to the income required to meet payments on a typical dwelling. The higher the number, the more affordable the property. Interest: a lending body's charge for the use of funds or the return on deposited funds. Interest only loan: a loan where the principal is paid back at the end of the term and only interest is paid during the term. Loans are usually for a short term of one to five years. Introductory loan: a loan is offered at a reduced rate for an introductory period (usually no longer than 15 months) to new borrowers. Lien: the right to hold property as security against a debt or loan. Loan maintenance fee: a loan management fee charged over the life of the loan. Often referred to as an ongoing fee. Mortgage: a form of security for a loan usually taken over real estate. The lender, the mortgagee, has the right to take possession of the real estate if the mortgagor fails to repay the loan. Mortgage protection insurance: not to be confused with mortgage insurance, this covers borrowers' loan repayments in the event that they are not able to meet them for example through illness or redundancy. Off the plan: the purchase of a property, often an apartment unit, before it has been completed; that is, after only having seen the plans, not the finished product. Offer to purchase: a legal agreement that details particulars and terms including a specific price for the purchase of a specific property but is subject to a subsequent contract of sale. Old System Title: (common law title) consists of a 'chain' of the title documents stretching back to the original owner. Option to buy: a legally binding document that gives a person, for a fee, the right to buy something usually within a specific time frame at a specific price. Passed in: a property is 'passed in' at auction if the highest bid fails to meet the reserve price set by the seller. Private sale: the sale of a property without an estate agent. Private sale treaty: a property sale where the buyer negotiates on a price set by the seller. Reserve price: specified minimum price acceptable to a seller at auction. Right of way: can be either somebody's right to cross other property or a general pathway across your land. Seller statement: a statement by the seller to the buyer detailing material particulars regarding the property in question. Settlement date: date on which the new owner finalises payment, is registered on the title and assumes possession (if not given earlier). Stamp duty on property purchase: a tax assessed on the selling price of the property. Strata title: this title gives a person ownership of a 'unit' of a larger building which they may sell, lease or transfer. Also, entitles them to membership of the body corporate. Stratum title: a title that records a person's ownership of a 'unit' of a larger property. Unlike a strata title, the owner becomes a shareholder in the company that manages the common area, not just a member. Title fees: payable to the State's LTO for the title search, transfer of property ownership, registration of the new mortgage and discharge of the old one. Title search: a search of the record maintained at the LTO. Torrens Title: records a person's ownership of a piece of property. They are lawfully entitled to lease, sell or dispose of the property as they desire. Also known as certificate of title. Transfer: a document registered with the LTO that confirms the change of ownership as noted on the certificate of title. Unencumbered: a property free of liabilities, encumbrances or restrictions. Valuation: a report by a valuer of the property's value

Edited and reprinted with permission from Your Mortgage Magazine

Buying a home

In the NT there is limited legal protection for people who buy property. The legal maxim caveat emptor or buyer beware applies. In a standard contract of sale a seller (vendor) is not required to disclose any matters that may affect the saleability or value of a property or to give any warranties. Attempts to introduce disclosure legislation in the form of the Sale of Land (Rights and Duties of Parties) Act 2010 (NT) which would have made it mandatory for a seller to disclose such matters were suspended indefinitely in 2012. However, the new contract of sale contains some warranty clauses and special conditions to assist the purchaser. A buyer should therefore make sure that certain conditions are included in the contract to protect them should they discover that they have bought a 'lemon'. Special conditions in the contract should only be drafted by a solicitor and/or conveyancing agent.

Houses are sold either by private negotiation or by public auction (see Buying at auction ). In either case, the buyer should decide what they can and would be willing to pay and be prepared to walk away if that price is exceeded. The best protection the buyer has is the ability to walk away from a proposed contract as there is always another suitable property.

Normally, a sale contract on a house is a cash contract; that is, the seller receives the full amount for the property at settlement. On payment of the full price at settlement, the buyer receives from the seller a transfer of land (see Documentation ). The settlement date is negotiable, but normally 30 to 90 days from the date of the contract.

Real estate agents

When buying a home it is important to remember that real estate agents act for sellers, not buyers. An agent is not allowed to act for both a buyer and seller in the same transaction.

Real estate agents must be licensed. In the NT the licensing body is the Agents Licensing Board (see Contact points). Members of the REINT are also bound by the REIA's Code of Practice and must deal fairly with all parties.

An agent is obliged to present all offers to a seller (see Section 65 of the Agents Licensing Act 1979 (NT).

What they can say about a property

Under section 65 of the Agents Licensing Act 1979 (NT) agents are required to disclose anything they know about the property and present the property as it is. An agent who does not may be found guilty of a breach of the rules of conduct for agents. Contracts of sale documents may include clauses that exempt agents from liability for misrepresentation; however, this may not assist them if an innocent or fraudulent misrepresentation is made during negotiations amounting to a contravention of section 18 of the Competition and Consumer Act 2010 (Cth).

Buyers and sellers should read contracts very carefully and seek professional and/or legal advice, if necessary, before signing.

Complaints

Complaints about agents can directed to the REINT or the Agent's Licensing Board (see Contact points ).

Things to consider before making an offer

Building inspections

It is important to obtain the services of a registered building certifier or a competent experienced builder to investigate the property prior to signing an unconditional contract. A registered building certifier can be found by contacting the Building Advisory Services branch, which is part of the Department of Infrastructure, Planning and Environment (see Contact points ). Information can also be downloaded from their website at https://nt.gov.au/property/building-and-development/about-occupancy-certification/introduction.

The Department provides building notes on improvements and alterations to buildings that are 'deemed to comply' with the building requirements in certain circumstances. These notes can be obtained from the Department's office or on their website.

Clause 26 of the new standard contract provides an opportunity for the purchaser to obtain inspection reports from a variety of professionals regarding the improvements to the property, including building certifiers, engineers, pest controllers, plumbers, electricians, swimming pool companies, and body corporate managers. It is important to get advice from your conveyancer or solicitor as to what reports may be in your interest before the cooling off period in the contract has expired. Normally you would have 10 working days to obtain the reports and avoid the contract if they are unsatisfactory.

Leased premises and vacant possession

If you are buying a property which has a fixed term tenancy in place you take the property subject to the lease. There is no provision in the Residential Tenancies Act 1999 (NT) for early lawful termination of a fixed term lease when that property is sold. This is important to consider if you are purchasing a property which you wish to move into immediately upon settlement as this will not be possible until the lease expires or is otherwise lawfully terminated. If the property being sold is subject to a lease, clause 3 of the standard contract of sale requires a copy of the lease to be attached to the contract.

Zoning

The zoning of a property tells a buyer what use any block of land can be put to. This means that certain types of uses are not allowed in a particular zone. There are a number of usages, including business, recreational development, industry and so on. The Development Consent Authority has a list of the zones and uses land can be put to (see Contact points ). If a person buys a house with plans to run an office from the building or open a cattery for example, they need to check first whether an approval from the Authority is required.

Some of the residential zones in Darwin & Palmerston include:

• SD: Single Dwelling Residential
• MD: Multiple Dwelling Residential (2 storey)
• MR: Medium Density Residential (4 storey)
• HR: High Density Residential (not exceeding 8 storey).

Easements

Before buying, it is a good idea for a buyer to make themselves aware of any easements on the title. Brief details of registered easements are found on the title search.

An easement is the right given by an owner for another person or authority to use part of their land. The main easements that arise in relation to residential property are sewerage, property, water, power, drainage and access. A sewerage easement usually means that the sewerage pipes run along the rear boundary of the property; an owner is advised to not build on the three metres of land to the perimeter. Water easements allow for access to water pipes; a power easement is usually over larger rural blocks and is taken out where the power lines run across a property, and an access easement may have to be for entrance to battleaxe blocks (a block where no boundary makes contact with a road). Disappointed would be the person who buys a block and then later discovers there is an easement where they planned to put their shed, or worse still, where they've already built it!

Neighbours

When buying a house it is a good idea to do a brief check of the neighbourhood, to look at the gardens in the street and immediate surrounds. Good neighbours can be a real asset; difficult neighbours can be a real headache, especially in a strata-titled townhouse or unit.

Strata title

The current legislative regime for shared ownership of land in the Northern Territory (eg strata title) is governed by the Unit Titles Act 1975 (NT) and the Unit Title Schemes Act 2009 (NT). Both enable many owners to hold separate titles to their property on the one piece of land.

The word strata is used in the context of layer. Each owner owns their own piece of the land, or in the case of a multi-storey building, their piece of one layer of a building. The rest of the land, including the outer shell of the building is owned as common property by the body corporate, a corporation set up under the Corporations Law to own the property, and composed of all the owners of units on the property (see Shared ownership ).

The Unit Titles Act 1975 (NT) was enacted in 1974 and continues to apply to unit developments built prior to 2009. The Unit Title Schemes Act 2009 (NT) was enacted in 2009 and has application to unit developments constructed thereafter. This dual legislation has proved confusing and unsatisfactory and moves are afoot to consolidate the two into a single legislative instrument towards the end of 2016.

It is advisable to do some thorough research before signing a contract for a strata title. Some hints include to obtain copies of the minutes of body corporate meetings, which may reveal any problems occurring within the body corporate or significant projected maintenance projects which may require members to contribute lump sums in the form of a special levy; to obtain a 'Statement of member's liability to corporation'; and to apply to examine books and records of the body corporate under section 37 of the Unit Titles Act 1975 (NT) or section 81 of the Unit Title Schemes Act 2009 (NT).

Swimming pools

The registration and safety of swimming pools is regulated under the Swimming Pool Safety Act 2004 (NT) which is controlled by the Registrar General of Land through legislation under the Land Title Act 2000 (NT).

You cannot transfer the title to a property under 1.8ha in area without a certificate of compliance from the Swimming Pool Fencing Authority or a statutory declaration signed by a licensed real estate agent stating that there is no pool on the premises or that the premises are excluded under the Swimming Pool Safety Regulations 2004 (NT). For information regarding Compliance Certificates contact the Pool Fencing Unit on 1300 301 059.

There are community standards and Australian standards, the application of which depends on whether the pool was constructed before or after January 2003. The parties to a contract for the sale of property have to agree on what standard and who is responsible for the compliance of the pool. It is important to sort this out before going to contract as there may be considerable cost involved, and a conveyancing transaction may be delayed considerably by a non-complying property both in penalties under the contract or costs for the parties.

Smoke Alarm Legislation

Smoke alarm legislation in the Northern Territory is governed by Part 2A of the Fire & Emergency Regulations 1996 (NT) which came into force in November 2011. Regulation 13A(2)(b) of the Fire & Emergency Regulations 1996 (NT) mandates the confirmation of the presence of an approved smoke alarm one day before the date of settlement of the contract of sale. An approved smoke alarm means a photo-electric smoke alarm which complies with AS3786 and is either hard wired or in a sealed 10 year lithium battery unit. Residential leased premises including caravans must also contain an approved smoke alarm.

Making an offer

Before submitting a written offer, a buyer should remember the agent is paid by the seller, usually on commission at a percentage of the sale price. A buyer should not be deterred from making an offer for less than the amount the agent says the seller will accept because the asking price can be substantially higher than the one the owner is really willing to sell for.

When signing the offer to purchase, a buyer relying on a loan or the sale of an existing house should make sure that their offer is subject to finance or prior sale, and that the agent is aware that it will only be available for a specific time.

An agent is obliged to present all offers to a seller. A written offer, if presented on an offer to purchase form, is not legally binding. In the wording of the offer to purchase it usually mentions that the offer is subject to the signing and exchange of a formal contract of sale. If an offer is presented on a contract of sale, it becomes legal and binding when all parties to the contract have signed, and contracts have been exchanged. Only a formal contract of sale, signed by both parties and exchanged, is binding. Before an offer to purchase form is signed it is important to ensure it includes a condition that a future formal contract will be entered into.

In the NT, real estate agents commonly get both buyer and seller to sign a standard sale contract. A contract made in this way is subject to a cooling off period of four days. The cooling off period is to allow the parties to discuss the matter with their conveyancer or solicitor. Whether they are a buyer or a seller, a person should obtain legal advice from a solicitor or conveyancing agent before signing a contract.

Some agents try to conduct a 'dutch auction' by playing one potential buyer off against another. There is no way to be certain other offers are genuine, so to prevent 'being played' the buyer should set a tight deadline for the acceptance of their offer. Most agents working under the Code of Practice will, if they find themselves in this situation, ask all bidders to submit their final offers in writing, to be given to the seller to choose. A buyer risks losing the property with this strategy, but suffering the loss may be better than paying above the market price.

The buyer can withdraw an offer to purchase at any time until contracts are exchanged. However, a purchaser cannot withdraw from a contract after the cooling off period has expired without a right to do so which is typically written into the terms of the contract. Common 'subject to' clauses include 'subject to finance' and favourable responses from such standard reports as pest (termite) inspections and building status reports.

Both the offer to purchase and the sale contract that follows contain the terms of the purchase, details of the parties, the purchase price, how it is payable, the day of sale, when possession is available and a description of the property and chattels.

Finding the money

Most people obtain the money to buy a home by combining any of the following:

• savings
• proceeds from sale of an existing home
• a loan secured by a mortgage over the property
• vendor finance
• government assistance.

Borrowing money

Loans for houses are available from first-tier and second-tier banks, building societies, mortgage providers, cooperative housing societies, credit unions, life insurance companies, and finance companies. Other sources of credit include the seller, trustee companies and solicitors' trust funds.

Many institutions and their mortgage brokers lend money for home purchases, with each having its own lending criteria, interest rates, terms and conditions. Loans often have a group of fees attached, such as application and establishment fees and loan insurance. Building societies, unlike banks, may also require a borrower to pay their legal fees. Under the Credit Act it is compulsory for financial institutions to advise borrowers of the costs incurred during the lifetime of a loan. All fees should be discussed with the lending institution when finance is first sought.

Housing loans are usually secured over the property purchased, giving the lending institution (the mortgagee) title to the property until the loan is paid off. However, unsecured loans are not unknown.

Generally, lending institutions impose penalties if a home loan is repaid earlier than scheduled, even where they force a sale.

There are lots of different loan products on offer, so a buyer should shop around. Lenders operate in a competitive environment so are usually willing to negotiate aspects of a loan. Many lenders use a very low interest rate offered for a short period to attract borrowers. However, a loan product should be selected because it is cost-effective over the whole term. Remember that over the life of a loan interest rates can fluctuate dramatically.

When comparing loans, a borrower should obtain precise information about:

• the cost of establishing the loan
• when and how payments are to be made, including any charges for debiting an account or sending a periodic bill
• rate of interest and expected fluctuations
• other periodic charges
• methods of repaying the capital early
• whether extra instalments of capital can be repaid during the period of the loan
• whether interest on advance payments is saved, and how much
• whether the loan can be fully repaid at any time and any penalty for early repayment
• the policy of the lender on late payments, and whether mortgage loan insurance is required (see Mortgages ).

Interest on loans can be calculated daily, monthly, quarterly or yearly. The more frequent these rests or calculations, the cheaper the loan. Quite a lot of money can be saved by making repayments fortnightly instead of monthly.

It is a good idea to compare loans from at least three different lending institutions.

All lenders determine how much to lend by taking into account:

• the value, position and condition of the property to be purchased - the value of a house is assessed by a valuation, not based on the price paid for it
• the amount the borrower is to pay toward the property (the borrower's equity)
• the financial position, age and credit history of the borrower
• any additional security the borrower can offer.

One should also be wary of a salesperson who claims to have 'inside contacts' or to be able to arrange 'favourable' loans. Loan applications are assessed on their merits.

Mortgages

When a lending institution lends a borrower money to purchase a home, it places a mortgage on the home. Mortgages have two principal features: they enable finance to be provided to the buyer, and they give security to the mortgagee (the lender) over the property. If the buyer defaults with loan repayments, the property can be sold by the mortgagee. In the event that the proceeds of the sale are less than the remaining loan debt, the buyer must pay the difference.

Terms of loans vary considerably. The more common ones are as follows:

• bridging loan: a short-term loan that covers a financial gap between the purchase of a new property and the sale of an old property.
• variable rate mortgage: this is the typical home loan. It allows the lender to change the market interest rate (and thus the repayments) as the market rates change. Instalments are calculated to pay off the loan in an agreed period, usually 15 to 30 years. Repayments can be increased and the loan paid out without excessive penalty.
• fixed rate mortgage: this kind of loan allows the lender to charge a fixed rate for a period, usually one to five years. If the borrower wants the loan to continue, they must renegotiate the terms. Penalties are charged for early repayment.
• capped rate mortgage: this loan imposes a ceiling on the interest rate. The rate a borrower pays rises and falls with standard interest rates, except that it cannot be higher than the nominated capped rate. Lenders sometimes offer capped rates for part of a loan period to attract new borrowers.
• second mortgages: these loans are available from finance companies, banks, credit unions and other sources, usually at higher interest rates, and are usually repaid first. The consent of the first mortgagee must be obtained before a second mortgage can be arranged. From a buyer's perspective, apart from higher interest rates, there is no difference between a first and a second mortgage, as both must be repaid according to the mortgage contract.

Lenders

A number of institutions lend money to home buyers. Some of the most common institutions are:

• banks: these take deposits and provide loans to customers. Most banks have loans officers on staff to provide advice and assistance to prospective home buyers.
• building societies: these operate in a similar fashion to banks. Customers are usually 'members' of the society.
• insurance companies: these provide loans and usually require borrowers to take out life insurance.
• credit unions: these are cooperatives owned and controlled by the people who use the services, which are similar to those of banks.
• finance companies: these lend on first and second mortgages. Interest rates are higher and loan periods are shorter than on bank and building society loans.

Mortgage loan insurance

Mortgage loan insurance is provided by independent insurance companies and can be required by a mortgagee. It covers a mortgagee's losses if they cannot recover the full debt and any expenses incurred in selling a property when a buyer is in default.

The premium can be a considerable sum and must be paid by the buyer in a lump sum, one-off payment when the loan is granted. The premium is charged on a sliding scale, depending on the loan to value ratio; that is, the amount of money borrowed compared to the actual value of the property. A loan for 90% of the value of the property will demand a high insurance premium.

Mortgage loan insurance enables a person who is unable to raise a large deposit to obtain a loan. If the money borrowed compared to the actual value of the property is 80%, the borrower will usually not be required by the lender to obtain mortgage loan insurance.

Life insurance

Some lending institutions require borrowers to take out life insurance as security. A borrower should make sure that the cost of any insurance required over a property or their life is sold at a fair market price. Information about comparative insurance premiums can be obtained from all insurance outlets.

Government assistance

Government schemes are sometimes available to assist a person purchasing a home. Schemes vary considerably and advice should always be sought on eligibility (see Government housing assistance ).

Buying at auction

Auctions are becoming an increasingly popular way of selling houses. They present special problems for the buyer in that the buyer has to do all the necessary checks before bidding at auction. They need to ensure their finance is adequate to cover the purchase as auction contracts are unconditional and become binding when the final bid is accepted and the contract is signed then and there and exchanged between the parties.

The fact that the contract is unconditional can work in a buyer's favour as they can go ahead to make plans for moving and do not have the uncertainty of waiting for contracts to become binding. Offer to purchase forms are not used at auctions.

Prior to the date of auction a potential buyer should:

• read the contract carefully: obtain legal advice if unsure as to the legal implications of any of the clauses. Immediately after the auction, when the contract is signed, the buyer has to pay a deposit according to the terms of the contract (usually 10% of the purchase price).
• arrange finance: banks can give pre-approval for a loan to buy a house at auction. A bank will want to sight a building valuation and inspection reports before they pre-approve a loan. These loans are usually valid for up to three months (see Finding the money ).
• conduct a title search: a search at the LTO can uncover any encumbrances, such as sewerage and electricity easements (see Easements ).
• survey the land: ensure the title corresponds to the land for sale.
• inspect the building: ensure the building complies with the Code and the necessary certificate(s) have been issued (see Building ). It is also wise to obtain an independent report about structural soundness. An inspection can be carried out by a builder, engineer or an architect. Arrange for a termite inspection.
• check the fencing: there is a liability on the owners of adjoining land - they are liable to contribute equally to the construction of a fence to divide the land (see Common problems in neighbourhoods).
• have arrangements in place to insure the property immediately in the event you are the successful bidder.

An offer to purchase made prior to the auction can be put to the seller through their agent. An agent is obliged to put all offers to a seller.

At the auction

Buyers should set themselves an upper limit to ensure they are not tempted, in the heat of the moment, to bid higher than they can afford or more than the credit provider will loan.

A buyer can bid on their own behalf, appoint a bidder to accompany them to the auction or give power of attorney to someone they trust (see Legal documents ).

Most sellers set a reserve or minimum price that must be reached before the property can be sold. If the property has reached its reserve, the person who made the last bid before the fall of the auctioneer's hammer is entitled to sign the contract of sale. If a property does not reach the reserve, it is passed in (not sold) and negotiations may then commence between the seller and prospective buyers.

If the property is passed in, buyers do not have to put in an offer above the last bid and can make a lesser offer.

Not all bids at auctions are made by potential buyers. Under section 15 of the Auctioneers Act 1935 (NT), a seller or their agent cannot bid at auction, unless the conditions of sale specifically permit it. Where it is permitted, the auctioneer reads through the conditions of sale to all present at the auction, informing prospective bidders that the seller reserves the right to bid themselves or through an agent. This is usually done to protect the perceived value of the property in case it attracts no other bids or if the bids are too low.

A successful bidder is bound to sign a contract - a bid is not a contract, it is an offer. However, the agent expects the successful bidder to sign the contract as soon as the auction is completed. Any bid at the reserve price or above is an offer to purchase and the fall of the auctioneer's hammer is acceptance of that offer. A buyer who does not sign the contract and thus fails to complete the purchase can be sued by the seller. The buyer must give the agent a cheque for the full deposit on signing the contract.

It is important for a buyer to note that no cooling-off period applies to an auction.

Buying by private treaty

To buy by private treaty, a buyer makes an offer to the seller via their agent by completing a standard offer to purchase form. Real estate agents who are members of the REINT can provide these forms. Others use their own forms.

Chattels, fixtures and fittings

A chattel is property not fixed to the land and can be included in the sale. The definition of chattel is open to debate, so it is essential to set out in the contract all items in doubt.

Fixtures and fittings are always included in a sale, unless specifically excluded in the sale contract. Examples of fixtures and fittings are light fittings, floor coverings, curtains and tracks, blinds and stoves. Sometimes integral household items, such as stoves, air conditioners and other apparent fixtures, are not included in the sale if they are still being paid off. The financier of a chattel often has the right to repossess it, even from a purchaser in good faith.

The deposit

The total deposit required for a property purchase is usually 10%, required before contracts are exchanged. The amount depends on what is agreed between the parties. However, the smaller the sum the buyer can negotiate, the better.

If a preliminary deposit has been paid, the balance of the deposit is paid on exchange of the contract of sale. The amount of the deposit is the extent of the liability for liquidated damages payable by the purchaser if they breach the contract. If you are a vendor, that is important, to cover real estate commissions and legal fees.

The deposit is usually held by the agent or, if there is no agent, the seller's representative, until the contract is settled. The Agents Licensing Act 1979 (NT) requires an agent to place a deposit in trust or in a special bank account or, if the seller and buyer agree, into an interest-bearing account where any withdrawal requires the signature of both parties. Agents cannot use deposit monies for their own purposes. Sometimes a contract provides for the deposit to be paid to the seller's representative or the agent for investment in an interest-bearing account until settlement. The contract of sale should state who is to receive the interest, a term that is negotiable.

The deposit must be returned to the appropriate party if the contract falls through. If the buyer breaches the contract, the seller is required to give to the buyer a written notice of intention to forfeit the deposit. If the buyer remains in breach of the contract, the seller is entitled to terminate the contract, keep the deposit, and sue for any losses that may be incurred.

Documentation

The contract of sale

The contract of sale is usually drafted by the seller's conveyancer or solicitor. A standard form contract approved by the Law Society and the Australian Institute of Conveyancers, and adopted by the REINT, is often used (see Contact points). Advice should be obtained as to the interpretation of the contract of sale prior to signing (see Legal help ).

A buyer's conveyancer or solicitor should be given the opportunity to peruse the contract before it is signed or becomes legally binding. If a buyer has been asked to sign a contract instead of an offer to purchase, providing it is a standard approved contract of sale, it will contain a cooling off clause to allow the buyer time to consult with their conveyancer. A buyer is allowed to rescind the contract at any time within the cooling off period without giving a reason.

Whose name on the title?

If property is bought by two or more people, decisions need to be made about how the title will be shared. All owners should have their names on the certificate of title. To this end, they may become joint tenants, meaning that the survivor receives the entire property if the others die first, regardless of any contrary provisions in their wills. The presumption in law is that joint owners are tenants in common unless nominated otherwise in the transfer of title to the property - see section 33 Law of Property Act 2000 (NT).

Otherwise, land can be owned as tenants in common, where shares are held on the percentage basis outlined in the title. The shares in common need not be equal (see Shared ownership ).

Transfer of lot

The memorandum of transfer signed by the buyer and seller is used to note the transfer of the land on the certificate of title at the LTO. This form is drawn up by the buyer and endorsed by the seller. While not forming part of the contract of sale, it is a legislative requirement that the form be completed and lodged. A transfer comes in many forms, and the correct one must be used. Land titles forms can be obtained from the LTO's website: http://www.nt.gov.au/justice/bdm/land_title_office/forms.shtml.

Settlement statement

A settlement statement is a statement of account to complete the financial aspect of the transfer. The seller must prepare a settlement statement and send copies to the buyer and any mortgagee before settlement. Council rates and sewerage charges are adjusted before settlement. Charges for all utilities such as sewerage and council rates are adjusted so that the unexpired portion of any payments made in advance is refunded to the seller by way of charging the buyer for that part of the year that the buyer will own the property. Also, any unpaid costs incurred in the sale, such as the conveyancing fees, are accounted for in the statement. It does not form part of the contract but is essentially an accounting of the costs involved.

Vendor terms contracts

A standard contract to purchase a home is normally settled within 30 to 90 days. The delay between contracting and settlement is generally to enable all necessary searches to be carried out, finance to be arranged and the completion of the other terms of the contracts of sale and purchase. The full purchase price is paid on the date of settlement.

A vendor terms contract allows the buyer to pay the money over a period, usually three to five years. The title to the property is transferred to the buyer when the price is fully paid. Payment arrangements can vary, but usually the buyer pays a preliminary deposit of 10% when the contract is signed and about one-third of the price on possession. The remaining balance is paid off according to the terms of the contract. The seller can charge an agreed rate of interest on the balance and must provide information about the rate and balances owing by providing a vendor's statement at various stages.

As the seller keeps the title until the full purchase price has been paid, to prevent any other person claiming the land, the buyer should lodge a caveat (a special notice lodged in the LTO) on the title as soon as the contract is made.

A seller cannot deal with land that is the subject of an instalment contract without the buyer's consent, and a buyer not in default can require the seller to convey the title to them, at the same time giving a mortgage for the instalments outstanding. A buyer may also require the seller to deposit the title to the land with the Public Trustee, who must hold it until the terms of the contract has been performed, and collect all the instalments on trust for the seller. The seller may also require the buyer to convey the title to them, but must take the mortgage back and also pay the buyer's stamp duty and legal costs.

Duties of the buyer's conveyancer or solicitor

Conveyancers are regulated by the Agents Licensing Act 1979 (NT) and by a national code of conduct imposed by the Australian Institute of Conveyancers. Solicitors do not have a code of conduct for conveyancing and are regulated by the Legal Profession Act 2006 (NT).

The duties of a buyer's conveyancer or solicitor include:

• advising the buyer before the contract is signed about any special conditions included and the effect of signing the contract
• checking the contract and the vendor's statement
• conducting searches and reports, such as building status, pest and pool reports, and making applications for certificates, and reporting to the buyer - the buyer is expected to examine the property
• exchanging contracts with the seller's conveyancer
• preparing the transfer of land
• providing all the information that the lender requires about the title
• checking the mortgage documents and advising the buyer
• arranging and attending settlement on the buyer's behalf
• notifying the council and other interested institutions of the purchase
• arranging for the payment of stamp duty and lodging documents for registration.

Settlement

The purchase is finalised at settlement, which usually takes place at the LTO, and is organised and attended by the buyer's representative, usually a settlement's clerk from their conveyancer or solicitor's office. At settlement the seller sights the certificate of title and discharges documents required to clear the title. In most instances, the seller has at least one mortgage over the property, which must be discharged prior to settlement.

At settlement, the buyer produces the stamped transfer of lot and the balance of the purchase money, adjusted to take into account any rates on the property paid in advance or in arrears (see Settlement statement ). In most instances the purchase is financed by a mortgagee, such as a bank, so the balance of the purchase money is paid by the mortgagee at settlement.

If the rates and charges are paid, the seller is reimbursed for rate payments covering the period of the rating the year the buyer owns the property, and the final balance of the price is increased accordingly. If the notices show rates or charges are unpaid, the buyer pays the amounts due and subtracts from the balance payable at settlement the proportionate amount for the part of the rating year or charging period the seller owned the property.

The certificate of title, with discharges, is then handed to the incoming mortgagee or, if no mortgagee is involved, to the buyer. Since 1 December 2000 certificates of title have been electronically held rather than printed in hard copy. To get a copy a person is required to lodge an application signed by all parties with the LTO. The balance of the purchase money is handed to the seller. The transfer of lot, certificate of title (if it is in hard copy) with all discharges, and the new mortgage are handed to the LTO to be registered and noted on a new certificate of title.

If the property is sold in vacant possession, it is handed to the buyer unoccupied. If the property is sold subject to a tenancy, the buyer is entitled to receive the rent from the day after settlement.

The buyer should arrange for reconnection of power and water and the telephone in the buyer's name.

Fees and charges

Fees and charges involved in the transaction are paid by each conveyancer on their client's behalf and appear on the bill as disbursements. Sometimes the representative asks the buyer for expenses in advance.

The buyer must pay:

• their conveyancer's fees
• LTO search fees and fees for certificates and reports and bank cheque fees
• registration fees to the Lands Titles Office on the transfer and mortgages
• stamp duty on the contract of sale and transfer of lot.

Stamp duty

Stamp duty is a general purpose tax that is imposed on various types of documents and transactions relating to property acquisitions. Stamp duty is payable on the acquisition of land and on fixtures (buildings) and chattels (furniture, window treatments and so on) that are acquired with the land.

Stamp duty is required to be paid within 60 days after the contract is signed, whether the contract is conditional or unconditional, otherwise late payment penalties apply. However, an extension of time to lodge and pay applies to eligible conditional agreements. The Territory Revenue Office (TRO) website (http://www.nt.gov.au/ntt/revenue/index.shtml) provides guidelines for eligible conditional agreements.

The rate of stamp duty is an escalating rate for dutiable value up to $525,000. The dutiable value of the property is the greater of the purchase price paid or the unencumbered value of the property. Where the dutiable value is $525,000 or more, the rate of duty is 4.95% of that value. For an estimate of the duty payable, telephone the TRO on 1300 305 353 or use TRO's website calculator to calculate the stamp duty payable on the contract: http://www.treasury.nt.gov.au/TaxesRoyaltiesAndGrants/StampDuty/Pages/Duty-Types-and-Rates.aspx

The TRO also administers a number of home incentive schemes:

• The First Home Owner Grant (FHOG) scheme was introduced on 1 July 2000 and provided Territorians purchasing a home, or land to construct a new home, a grant of up to $7000. Note: From 1 January 2015 the scheme has been modified so that it now only applies to the purchase or construction of a new home and the grant is $26,000. There is no concession for established homes.
• The First Home Owner Concession (FHOC) scheme provided Territorians purchasing a home, or land to construct a new home, on or after 4 May 2010, that is their first home in Australia, a concession of up to $26,730 off the duty payable. This represents the duty on the first $540 000 of the purchase price of the property. Note: This scheme was discontinued on 4 December 2012 and replaced with the First Home Owner Grant (see immediately above).
• The Principal Place of Residence Rebate (PPRR) scheme provides Territorians purchasing a home, or land to construct a new home, on or after 4 December 2012 that is not their first home in Australia, a concession of up to $7000 off the duty payable. Note: This scheme is no longer available to persons eligible for FHOG.

For further guidelines regarding eligibility for the above schemes, application forms and further information, contact TRO on 1300 305 353 or download the information from their website: http://www.treasury.nt.gov.au/TaxesRoyaltiesAndGrants/Pages/Contacts.aspx

Goods and services tax (GST)

GST is not applicable on private homes or units. GST is only applicable on commercial properties. A person buying a commercial property should seek advice from their accountant about the GST implications.

Selling a home

Selling the family home can be a stressful and emotional experience. For many people, their home is a place full of memories. A strong emotional attachment sometimes causes an owner to overvalue their asset. A seller should always prepare themselves mentally and emotionally for the sale process.

Selling privately

Anyone can sell their home privately; a seller is not obliged to hire a real estate agent. A solicitor or conveyancer can draw up an offer to purchase or the contract and provide advice and assistance through the negotiation process. Most newspapers, including the NT News, include advertisement space for private home sales. The best place to advertise is on the internet, which is used extensively by real estate companies (for example https://www.realestate.com.au/).

Real estate agents

Because there is a great deal of work involved in selling a home, such as arranging advertising, finding a buyer and handling paperwork, most people prefer to employ a real estate agent. Real estate agents must be licensed. In the NT the licensing body is the Agents Licensing Board (see Contact points). The board regulates the activities of real estate agents, administering the guarantee fund that repays clients when agents or their staff steal money held in trust, and investigating complaints.

The REINT's role, as part of the REI Australia, is to act as a professional body to represent its member agents' views and interests, and to preserve and maintain their standing and reputation by imposing strict rules of conduct and honourable practice. It is also a nationally accredited training authority, and is the peak provider of training to the industry.

Shop around

A seller should shop around before choosing an agent. Conduct thorough negotiations before appointing an agent. Negotiations should cover the type of appointment, commission to be paid and advertising costs.

A seller need not nominate the price they are willing to accept for the property; they can put 'to be advised' in the authority, and add any other special conditions. Putting a price on the property does not mean that the seller is offering the property for sale at that price. It simply means that they are putting out an 'invitation to treat' and offers at around that figure may be considered.

The following points should also be noted:

• A seller should not allow their agent to prepare a vendor's statement. These statements are technical legal documents and an error can allow the buyer to avoid the sale entirely.
• A seller should not sell their property to the agent, anyone employed or related to the agent, or a company associated with them, without the agent first producing a form which discloses the agent's interest in the property. This is required of the agent under section 121 of the Agents Licensing Act 1979 (NT).
• A seller should not sign a contract note or contract of sale that sees their property sold for a price less than the value of loans secured on it without first consulting their lender and solicitor or adviser.

A seller should not sign a contract note or contract of sale that contains terms they are unhappy with. They should ask their agent to re-negotiate the agreement with the buyer.

Appointing an agent

All dealings in real property have to be in writing. An agent needs a written agreement setting out their appointment for audit purposes. An agent can be appointed in one of two ways:

• general sale authority: this makes the fee payable only if the agent is the effective cause of the sale.
• exclusive sale authority: this makes the fees payable if the property is sold by the agent, or by any other person including the seller, to a person who was introduced to the property during the authority period or up to 180 days after the end of the period, and who buys as a result of the introduction.

These authorities must contain specific information about an agent's fee and the seller's contribution to advertising by giving each one a general sale authority (which entitles only the selling agent to commission). However, most homes are sold through exclusive sale authorities because these give the agent the greatest incentive to earn the fees. Careful reading of the agency agreement is required. Often such agreements remain in force after the period of the agency expires, and they must be terminated in writing by the owner, otherwise commission on a subsequent sale by the owner may incur the cost of commission being paid because the purchaser may have been 'introduced' by the agent by previous advertising or a chat at the local.

Fees

For their services, agents usually charge a percentage of a property's sale price plus advertising at cost. In the NT the commission agents charge usually ranges from 3% to 5%, but there is no limit. Commission fees are not regulated and can be negotiated. A seller should read the sale authority carefully, make sure they understand it, and consult a solicitor if they have any doubts. There have been quite a few local court cases involving disputes over agents' commissions.

Advertising costs

Usually a seller is required to pay for the cost of advertising their home. Auctions generally involve quite an expensive advertising campaign; advertising in a private treaty sale is usually much less expensive. A seller should ask their agent for a detailed schedule of expenses, including the cost of flyers and signs. Agents are compelled to account to the seller for all money paid by the seller towards the expenses including advertising.

The sales agency agreement states how much the seller is expected to pay towards expenses involved in the promotion and selling of their house. Advertising costs can be billed to the seller but are usually paid to the agent up front. Agents are obliged to pass onto their clients any discounts they earn for bulk advertising. A seller should always ask to see copies of the tax invoices issued by the newspaper that carried the advertisement.

On sale or termination of the agreement any unused money is to be returned to the seller. Unless their authority says otherwise, an agent is entitled to be reimbursed for advertising expenses actually incurred.

Duties of the seller's conveyancer

The duties of the seller's conveyancer or solicitor include:

• preparing a contract of sale (unless the agent has the buyer and seller sign the contracts) and exchanging contracts with the buyer's representative (see Documentation )
• preparing a statement of adjustments and settlement statement (see Documentation ) showing how cheques are drawn and paid
• checking the transfer of lot (see *Documentation*) and arranging for the seller to sign or execute
• arranging for discharge of the seller's mortgages, if any, and for a clear title to be available at settlement
• attending settlement on the seller's behalf
• notifying the council, where applicable
• reporting to the seller.