Buying Property in Victoria: A Practical Guide

Finding a Property

Before house-hunting begins, work out the budget honestly — including the costs that sit on top of the purchase price. The largest of these is stamp duty (also known as land transfer duty), which scales with price. Other costs include legal fees, building and pest inspections, loan establishment, lenders mortgage insurance where the deposit is below 20%, owners corporation set-up where relevant, and the first year of rates and insurance.

Get a pre-approval from your lender before serious bidding starts. Pre-approval is conditional and is not a substitute for final approval, but it tells you what a lender thinks it is prepared to lend.

Section 32 Statements

Every Victorian residential sale must be accompanied by a section 32 statement (often called the vendor's statement). It is the vendor's disclosure document and includes:

• title particulars and any encumbrances;
• planning information and any planning permits affecting the property;
• services connected (electricity, gas, water, sewerage, telephone) — and what is not connected;
• rates, land tax, owners corporation fees and other outgoings;
• owners corporation information including rules, insurance and the most recent statement of accounts; and
• notices, orders or proposals known to affect the property.

Material non-disclosure can give the purchaser the right to rescind the contract and recover the deposit. Have the section 32 reviewed before you make an offer or attend an auction.

Contract Review

The standard form contract published by the Law Institute of Victoria and the Real Estate Institute of Victoria is heavily used but is frequently varied by special conditions. The special conditions are where the risk lives. Common areas for review include:

• the deposit (amount, timing and where it is held);
• the settlement date and any extensions;
• conditions about finance, building and pest inspections and the sale of an existing property;
• GST clauses and whether the margin scheme applies;
• chattels and exclusions;
• vendor warranties and limitations on them; and
• any provisions about repairs to be carried out before settlement.

A lawyer's contract review usually produces a short list of variations to request from the vendor. Most are accepted; the others inform whether to proceed.

Finance Approval

Finance is the most common reason purchases fall through. Pre-approval is conditional. Final approval requires the lender to value the property and assess your finances against the property securing the loan. A finance condition in the contract gives you a defined period to obtain unconditional approval and, if it cannot be obtained, to rescind without penalty. Use that period — do not allow it to lapse without speaking to your lender.

Where finance is not approved by the date in the contract, you must give the vendor formal written notice before the condition expires to terminate effectively. Missing the notice deadline by even one day can convert a conditional contract into an unconditional one.

Auctions

Auctions remove flexibility from the purchaser. The contract becomes unconditional on the fall of the hammer. There is no cooling-off period, no finance condition, no building inspection condition. Auction purchasers must do everything before they bid:

• have the section 32 statement and contract reviewed;
• obtain unconditional finance pre-approval against the specific property if possible;
• complete building and pest inspections;
• decide on a maximum bid based on a realistic valuation; and
• arrange the deposit so it can be paid on the day.

Private Sales

Private-treaty sales (sometimes called "sale by negotiation") usually offer a three clear business day cooling-off period under section 31 of the Sale of Land Act. Within that period, the purchaser can rescind the contract on payment of a small penalty (0.2% of the purchase price or $100, whichever is greater).

Cooling-off does not apply to contracts signed at auction or within three clear business days of a publicly advertised auction at which the property was passed in. It also does not apply to purchases by a body corporate or to certain rural properties.

Settlement Process

Settlement is the day the purchase price is paid and the title is registered in the purchaser's name. Victorian residential settlements are now overwhelmingly conducted on the PEXA platform, which allows the lawyers, lenders and the registrar to settle electronically.

The lead-up to settlement involves:

• completing pre-settlement enquiries with rates and owners corporation;
• calculating adjustments for rates, water and owners corporation fees;
• preparing a statement of adjustments and a settlement statement;
• signing transfer documents and verifying identity for PEXA;
• conducting a pre-settlement inspection; and
• having the lender ready to draw down on the day.

Common Mistakes

• Bidding without legal review. Auction contracts cannot be rescinded for issues that legal review would have flagged.
• Letting the finance condition lapse. Notice must be given before expiry; missing the deadline can lock you into the purchase.
• Ignoring the owners corporation information. Special levies, planned major works and disputes within the owners corporation can significantly affect your financial position.
• Assuming all chattels are included. The contract sets out what is included. Disputes at settlement about removed light fittings, blinds or dishwashers are common.
• Underestimating stamp duty. First home buyer concessions, off-the-plan concessions and the foreign purchaser surcharge can change the figure materially in either direction.
• Buying jointly without thinking about ownership structure. Joint tenants and tenants in common have very different succession outcomes; the choice affects your estate planning.

When Legal Advice Should Be Obtained

Legal advice is essential before signing or bidding. Once a contract is signed, your options narrow sharply. A relatively modest pre-purchase legal review can prevent the most common and most expensive problems.

For sellers, see our companion guide on selling property in Victoria, and for property issues arising from separation, our article on caveats over property after separation.

Frequently Asked Questions