Essential pre-purchasing costs to account for

Buying a property requires more than a deposit.

Pre-purchase costs can add up to 10 per cent to the price of an average family home.

Some of these, such as conveyancing, stamp duty and mortgage costs, are only incurred once.

However, inspections and valuations may need to be carried out on more than one property.

Here’s a guide to keeping these costs in check.

Essential fees to build into your budget

• Property stamp duty — a tax on the value of the property paid at the time of purchase to the state or territory government varies from state to state
• Mortgage stamp duty — sliding scale on mortgage amount varies from state to state
• Mortgage insurance — usually paid if a mortgage exceeds 80 per cent of the property value
• Application fees — paid to the lender to meet legal, valuation and administration costs of loan establishment
• Inspections — including pest inspection, council building certificate, building inspection and land surveys
• Contract examination — this incurs solicitor’s fees for inspecting the property contract
• Conveyancing — the legal process of enabling the transfer of property ownership
• Insurance — building and contents
• Relocation — such as moving costs and utility deposits
• Repair — the cost of essential property repairs.

Of course, if you’re in the market, pre-purchasing costs don’t stop there.

Other areas to consider include:

Structure

Most buildings over 10 years old will have several defects, which may be minor, such as a leaking downpipe, or major, such as subsidence caused by severely leaking downpipes over a number of years.

Unless you know what to look for, a pre-purchase building inspection is, therefore, a must.

But thoroughly checking five or six properties can get expensive.

It, therefore, pays to become familiar with the usual signs of problems, such as rising or falling damp (dark patches around the cornices, bubbling paint on walls, distinctive smell), poor underfloor ventilation (bouncing floor) and leaking roofs (dark patch on ceiling, indications of plaster repair). Expect to pay between $200 and $500 per inspection depending on property type.

Modifications

Illegal modifications can cause real headaches, and many lenders require a council building certificate as evidence that the property complies with requirements.

Bathrooms and toilets are the biggest problems — a toilet too close to the kitchen and DIY plumbing being frequent indications of unauthorised modifications. Familiarity with local planning codes can make spotting these modifications fairly straightforward.

A council building inspection and land survey will cost about $600 per property.

Pests

Termites can attack a new brick-veneer the same way they will attack an old terrace.

Cockroaches, too, are indiscriminate and can cost thousands of dollars to get rid of if they are entrenched.

Again, become familiar with the more obvious signs (check the roof cavity, especially for termites; check cupboards and under furniture for excessive cockroach frass) and call a pest inspector only if it seems acceptable.

Pest inspections will cost about $250 per inspection.

Valuation

Before lenders agree to lend money against a property they require a satisfactory valuation.

For those buying at auctions, and bidding on several properties, this can be an expensive exercise.

Costs vary according to the lender but expect to pay about half to one per cent of the value of the property.

Become sufficiently familiar with market prices by utilising

Tapping into a real estate agent’s expertise for an informed assessment of a property’s value can often alleviate the need to approach a lender and incur unnecessary costs.