real estate fees

1 July Property Legislation Update

Well we are a few weeks into the new financial year and, as is usual, property owners and investors should be aware of various changes to property rules from the ATO.

Australia wide, the greatest and possibly the one with the biggest impact on investors, new home buyers and developers is the requirement for purchasers of new residential premises or potential residential land to withhold an amount of the contract price and pay this directly to the ATO at settlement.

Essentially, this means for affected property transactions, purchasers will need to:

split the amount of GST from the total purchase price,
pay the GST component directly to the ATO by a disbursement at settlement, and
pay the GST exclusive purchase price to the property developer (vendor).

The new rule imposes requirements onto the vendor/developer as well. Developers need to give written notification to the purchasers when they need to withhold.

The actual liability for the GST remains with the property developer, however there are no changes to how property developers lodge their business activity statements.

Should you be contemplating purchasing new residential property or potential residential land there are a number of forms that need to be completed by the purchaser or their representative (a conveyancer or solicitor) after contract signing and prior to settlement. Speak to your agent or conveyancer to ensure you comply with the new requirements or visit https://bit.ly/2tLbVri for more information from the ATO.

1 July 2018 also marks the date from which first home buyers can access super contributions for the purpose of buying their first home. Since 1 July 2017 eligible Australians have been able to make voluntary super contributions of up to $15,000 a year, to a maximum of $30,000 over more than one year, to their superannuation account to help purchase their first home. Since 1 July 2018, eligible Australians are able to apply to their super funds to release these contributions (and earnings) for the purposes of purchasing a first home.

Finally, another change on 1 July 2018: Australians aged 65 years + can make a non-concessional (after-tax) contribution into their super account of up to $300,000 from the sale proceeds of their family home (main residence) if they have owned the property for at least 10 years. Couples will be able to contribute up to $300,000 each, giving a total contribution of up to $600,000.

Again, please visit the ATO website https://bit.ly/2udPt9Jor discuss with your financial advisor for detailed information related to your particular circumstances.

Justine Thomson

Selling Yourself

If you are considering selling your home in 2017 there are many paths you can take:

Sell it yourself
Engage a traditional real estate agent on commission with a full agent service
Engage a real estate agent at a fixed price with a full agent service

Selling an $800,000 home could cost as little as $2,610 if you sell yourself or up to $17,675 if you utilise a traditional commission agent.

If you are considering selling on your own, think carefully about the following:

Appraise the property correctly by using publicly available information about local sale prices and consider an independent valuation to assist
Ensure you present the home well for photography
Prepare relevant marketing material
Ensure all relevant documentation is available to a potential purchaser to enable an informed decision to be made, example: council rates, water rates, copy of title etc
Be prepared to arrange inspections by appointments and opens at various hours of the day
Be prepared to meet potential purchasers and take on board any negative feedback
Follow up with those people interested in your home and be prepared to take the emotion out of the sale negotiation
Engage a Solicitor or Conveyancer to prepare the Contract and Form 1

People often underestimate the work involved in selling a home and the level of professionalism required to negotiate the best conditions and price. Selling a property is an emotional and intense experience. It can be easy for a seller who decides to sell it on their own to run into trouble with incorrect information provided to a prospective purchaser or the inability to remove the emotion from the sale. A real estate agents market knowledge and negotiating skills can be particularly useful when it comes to listing a property for sale. Following is an indicative table of costs under each model.

Cost to sell an $800,000 Home by Private Treaty	Sell On Your Own	Sell with SA Listings	Sell with a Traditional Agent @ 2%
Base Price	$1,295.00	$7,888.00	$16,000.00
Professional Photography	Inc	Inc	$200.00
Sign Board	Inc	Inc	$150.00
Listing on realestate.com	Inc	Inc	$500.00
Brochures	Inc	Inc	$110.00
Open For Inspection	Manage Yourself	Inc	Inc
Form 1	$330.00	Inc	$330.00
Government Searches	$385.00	Inc	$385.00
Contract Preparation	$600.00	Inc	Inc
Total	$2,610.00	$7,888.00	$17,675.00

In 2017 there is choice and the flexibility to now sell your home with a full agent service at a lower cost to a traditional commission agent. So why create a headache for yourself and embark on selling alone when you can engage the service of a real estate professional at a transparent fixed fee. Whilst you think you will save thousands by selling yourself, it could in fact cost you thousands in the final negotiated price!

Justine Thomson

Mum and Dad Home Loans

Christmas is fast approaching and we all appreciate the little gifts we receive from loved ones but is helping your adult child buy their first home a help or a hindrance?

It is not difficult to understand why adult children are turning to their parents for a step up on the property ladder. In a Parliamentary report titled, “Out of reach? The Australian housing affordability challenge” (8^th May 2015), there are some shocking statistics. Up until 2001 annual income grew in line with housing prices, since 2001 the growth in property values has dramatically outstripped growth in household incomes. NATSEM [National Centre for Social and Economic Modelling] data shows that house prices increased by 147 per cent compared to income growth of just 57 per cent between 2001 and 2011. In dollar terms, the median price of a house more than doubled from $169,000 to $417,500 while after tax income increased from just $36,000 to $57,000. Whereas in 2001 an average home price in Australia was 4.7 times the average income, by 2011 this had increased to 7.3 times.

This graph below (source: Master Builders Association), highlights the housing affordability issue in Australia.

The Housing Affordability Ratio is measured by dividing the median house price by the median income of the house purchaser. A ratio of 5 or less, below the green line, is considered affordable, a ratio of 7 or more, above the purple line is severely unaffordable. This horrific statistic can provide some insight as to why parents are assisting adult children fund their first home. Question is, should we be?

This can be a very difficult question to answer. Prior to gifting money to your adult child, funding their deposit or going guarantor on a loan, make sure you consider the following:

Will you have enough money to fund your own retirement if you assist your children?
If you go guarantor on the loan and your adult child’s circumstances change and they can no longer fund the mortgage repayments. Will you be able to meet these repayments? If not, there could be serious consequences for your own financial stability.
Should your adult child be in a relationship and live with their partner and things turn sour resulting in a relationship break up, watch the can of worms open up! If you paid the deposit or funded the home, the law may see it as a gift and the ex-partner walks away with half or more! Alternatively, if you are guarantor on the loan: What are the financial implications with the split?
Have you taught your adult child how to manage their finances on their own? If you are generous and assist them with their first home purchase they may not appreciate the value of a dollar. The best lesson in life when it comes to financial savings is delayed gratification. What you need to give up now to get something in the future can be a great value to instil in your child. If it is out of reach, then maybe it should never have been!
If the bank will not loan the funds to your adult child, the risk must be high. If you guarantor the loan you take on this risk.
Is your adult child willing to make sacrifices to invest in property? When I talk of sacrifices, I refer to their willingness to purchase in an affordable area that may be many kilometres from the city and to also manage their spending carefully.

This is not an exhaustive list but it does provide food for thought. If you do decide to assist your adult child it would be a good idea to ensure agreements are in writing and clearly understood. Life can often change course when we least expect it.

I have an adult child, still studying at University and living at home and understand the difficulty in wanting to provide for their financial future. Maybe times are changing and the reality of home ownership in Australia is now only a dream. Long term leases could pave the way for our kids into the future, so maybe you should be the one investing in another property!

Justine Thomson

Pinpoint the Perfect Agent

Deciding to sell your property can be one of the biggest decisions you make in your life. Along with your savings for retirement, the property you own would be one of the highest valued assets in your portfolio. The decision to sell and who to appoint to sell your property should be done with utmost care.

How do you know who is the right agent for you?

From experience, I would suggest interviewing a minimum of three Agents before appointing one right for you. If you are an employer looking for the right employee to fill a job role, you do your due diligence first before deciding on the right candidate. You don’t want someone who turns up late, cannot do the task at hand or is disrespectful. The same decision making process should be applied when reviewing Agents.

To sell or not to sell? A good Agent will consider whether now is the right time for you to sell your property taking into account market conditions, reason for selling and your needs. Securing the listing should not be their number one focus. The number one focus should be what is best for you.

The biggest brand or most popular Agent by size may not necessarily be the right Agent for you. Flashy cars, the largest billboards or designer suits does not make for a good Agent. A popular Agent can be working with many clients and may be spread too thinly. Professionalism, knowledge of real estate and the ability to negotiate are critical skills of an Agent. My partner and I many years ago had a number one Agent come to appraise one of our properties and all the person did was talk about themselves. No questions were asked about us and our needs. Once the Agent left the property, my partner made the comment, “Elvis has now left the building!” We looked at each other, laughed and agreed this was not the person we wanted to represent our property and us.

Referrals are important. A good Agent will have a list of positive client testimonials and with prior approval from their past clients, be willing to provide you with their contact details. It is always a good idea to call one of their past clients to get an understanding on how they perceived the service they received.

Licensed and professional memberships of the relevant State Government body and real estate organisations in their State. In SA, a Real Estate Agent must be licensed by the Office of Consumer and Business Affairs and carry their license on them at all times. A good Agent in SA would also be a member of the Real Estate Institute of SA or the Society of Auctioneers and Appraisers. Membership of professional organisations means they are interested in their own professional development. Be wary, if an Agent cannot show you their license, consider them to be Frank Abagnale, the guy who before his 19^th birthday successfully performed cons worth millions of dollars by posing as a pilot, doctor then prosecutor. We recommend no license, no appointment!

Knowledge is often underestimated and can be difficult to determine from an interview. However, if you ask the right questions, their knowledge should be evident. Questions like:

What do you consider to be the market appraisal for this property?

What areas of improvement to the property will assist us in maximising price?

What is the current market like for property in our area?

What would be the best way to market this property?

How do you qualify a buyer?

What qualifications do you have?

A good Agent should not need to be prompted by you, they will impart their knowledge throughout the initial meeting. Use your intuition and watch their body language. A lot can be garnered by body language. Beware of dominant body language, this is when a person makes the rules by interrupting you, using inappropriate language and standing over you. We are not looking for a round with Muhammad Ali, we are looking for someone who can build rapport and knows their profession.

Fees are also an important consideration. At SA Listings we are of the belief a good Agent does not need to be incentivised to obtain the best price for your property, for this reason we charge a fixed fee, no matter the value of the property. The role of a good Agent is to negotiate the very best price and conditions for you. When comparing fees ensure you have information not only on commission but also marketing costs, Government searches and Form 1 preparation. To compare apples with apples you need the entire fee structure. For more on fees, please refer to SA Listings earlier blog: “Real Estate Fees – Friend or Foe?”

We hope this article has been informative and assists in ensuring your property journey is a successful one.

Justine Thomson