Buying a home is often a once or twice in a lifetime expense and, apart from the obvious cost of the property, the buyer may incur other associated costs.
Buyers of real estate may incur costs including stamp duty payable to the State Government, conveyancing costs and other legal fees, building and pest inspection reports, a valuation report, and costs payable to a financial institution. Buyers who terminate a contract under the five-business day cooling off provision may also have to pay a cost to the seller.
The REIQ suggests the following when budgeting the costs of buying real estate.
- Price of the property
You are able to put in an offer on a property that is less than the advertised price. The real estate agent then presents the offer to the seller and they will either accept or reject the offer. The price that the buyer and seller agree upon is countersigned on the contract of sale.
- Borrowing costs
When borrowing money from a financial institution, buyers are likely to encounter costs such as the loan establishment fee and mortgagee insurance (if borrowing more than a nominated percentage of the property’s value).
Buyers will also need to budget for ongoing fees and interest repayments on top of the loan amount borrowed. Fees will vary between financial institutions and buyers should shop around for the loan that best suits their needs. All financial institutions must now publish a comparison rate for their loans which takes into account all fees and charges and any introductory loan rates.
It is a good idea to obtain pre-approval (or at least have an idea of how much the bank with lend you) for a loan before starting the search for your dream home.
- Valuation report
An independent valuation report on a property can be of assistance to the buyer to indicate a property's current market value. Sometimes the seller will obtain this for the buyer at his or her own cost. In Queensland, contact the Australian Property Institute by phoning 07 3832 3139 for the names of licensed valuers.
- Transfer (Stamp) Duty
Stamp duty is a tax imposed on written documents that record or affect certain types of financial or legal transactions.
Stamp duty is chargeable on documents or statements if they are either:
- Signed or executed in Queensland; or
- Signed or executed outside Queensland but relating to property situated in Queensland or to some act, matter or thing to be done in Queensland.
State Government charges the buyer stamp duty when they purchase a property - the percentage scale will vary according to the amount of the sale price and whether or not the buyer intends to live in the property or rent it out to tenants as an investment. Depending on the nature of the transaction, certain concessions and exemptions are available.
Your solicitor will obtain the appropriate rate. The buyer pays the solicitor the amount payable who then arranges payment to the Government authority.
The State Government introduced legislation in 2008 to ease the financial burden of stamp duty on first home buyers.
Under the legislation:
- From 1 September 2008, first home buyers pay no stamp duty on:
a home valued up to $500,000
- From 1 July 2009, first home buyers also pay no stamp duty on a vacant block of land up to $250,000.
For the current transfer duties schedule or for more detailed information, visit the website
for the State Government's Office of State Revenue website at www.osr.qld.gov.au.
Alternatively, you may first wish to refer to Buying Real Property in Queensland which addresses specific provisions under the Act.
For more information about stamp duty, go to the Office of State Revenue website or phone 07 3227 8733 or 1300 301 342.
- Land tax
The Office of State Revenue (OSR) collects land tax in Queensland and administers the Land Tax Act 1915. Land tax is levied by the Queensland Government on freehold land owned in Queensland as at midnight on 30 June each year.
For land tax purposes "land" includes vacant land, land that is built upon, building unit plans, group title plans, time shares and home unit companies.
Land tax is payable by the owner of any interest in freehold land in Queensland if the aggregate value of all land interests exceeds the relevant threshold.
There are various classes of taxpayers including residents (natural persons who ordinarily reside in Australia), absentees (natural persons who do not ordinarily reside in Australia), companies (includes clubs, associations etc.) and trustees (includes trustees of deceased persons' estates).
Depending on the use of the land, certain deductions may be available to reduce the taxable value of the unimproved land. Land tax is not payable on land used by the owner solely as their principal place of residence if a deduction has been claimed on the relevant form and allowed.
To see the the current land tax schedule or for more detailed information, visit the website for the State Government's Office of State Revenue.
- Legal costs and searches
The REIQ strongly encourages buyers to seek independent legal advice before signing a Contract for Sale.
Issues that need to be understood by the buyer are: the appropriateness of accepting or waiving the five-business day cooling off period, seeking assistance with understanding the State Government forms, the Selling Agent's Disclosure to the Buyer Statement (Form 27b) and the REIQ Contract of Sale. It is recommended that the buyer seek legal advice relating to these forms.
After a buyer has signed the appropriate forms and the Contract of Sale, they are advised to undertake certain searches. These include a Title search verifying the ownership of the property, a local government building report on the legality of existing structures on the property, and a local government search on the zoning of the property indicating any restrictions on the property and encumbrances on the property easements.
Solicitor's fees are negotiable. It is advisable to compare the fees being charged by a few different solicitors. Good referrals and past experience is valuable when choosing your legal representative.
It is possible for a buyer to undertake these activities on their own, however, the REIQ strongly recommends using qualified solicitors for conveyancing. Contact the Queensland Law Society for further details about how to contact a qualified solicitor: www.qls.com.au
- Building and pest inspection reports
Buyers can make their Contract of Sale conditional on the basis of a satisfactory building and pest inspection report from a licensed professional. See the Building Services Authority website www.bsa.qld.gov.au for more information.
The cost of these can vary but it is required under Queensland law that the inspector must be licensed by the Building Services Authority.
- Termination of a Contract under the five-business day cooling-off provision
If a buyer terminates a Contract of Sale at any time during the stipulated 5-business day period, they will have to pay the seller 0.25% of the property price on the Contract. There is no additional GST payable on this amount.
If the buyer has elected to waive the cooling off period provision they will not incur any cost and consequently cannot terminate a Contract.
