Home » Property Law » Buying House from Parents Australia
Buying House from Parents Australia
Buying a house from parents in Australia involves several steps and considerations, just like any other property transaction. At ALA Law we assist families to buy and transfer properties between them to ensure the process occurs smoothly, legally and with the minimum amount of additional costs.
Here are our 10 top tips when considering purchasing a house from your parents in Australia:
1. Valuation and Negotiation:
Begin by determining the fair market value of the property. Initially this can be negotiated through the use of market appraisals, but in NSW you will be required to obtain a stamp duty valuation to determine the market rate for stamp duty in any case. This will also assist with determining a fair market price for the purchase.
It is important to establish a fair purchase price through negotiation to ensure that both parties agree on the terms.
2. Legal Considerations
Consult a solicitor or conveyancer to handle the legal aspects of the transaction. As it is likely that the property will not be placed on the open market to allow this sale, so the process can either be affected by way of ‘Contract for Sale’ or by way of ‘Transfer’.
The team at ALA Law will discuss the most appropriate option and help you detail out the conditions, and any special arrangements that need to be made to affect the agreement that you have mutually reached.
3. Finance Options
You will also need to secure finance or reach an agreement with your parents regarding how the purchase will be funded.
If you’re taking out a mortgage to purchase the property, you’ll need to work with a lender to secure the necessary funds. This is done by applying directly to the lender or through a broker for the necessary finance.
If your parents are providing seller financing (i.e. agreeing for you to pay the property off over time) then this will need to be formalised by way of a Loan Agreement with caveat or mortgage. At ALA Law we prepare these documents on a regular basis to secure the agreement.
Check out this article regarding borrowing money from your parents to finance a purchase.
4. Property Transfer – The ‘Conveyance’
The property transfer process involves changing the ownership of the property from your parents to you. This is done in-house by our property lawyers and our team of Conveyancing Paralegals.
Your Property Lawyer at ALA Law will handle the necessary paperwork and ensure that the property title is transferred correctly to your name, and your parents interests (if required) are secured.
5. Stamp Duty
In Australia, stamp/transfer duty is a tax payable on all transfers and purchasers (some exemptions apply). The amount of stamp duty varies depending on the state or territory where the property is located and the purchase price. You’ll need to factor in stamp duty costs when budgeting for the purchase.
In NSW, you can calculate the stamp duty payable here: (https://www.apps09.revenue.nsw.gov.au/erevenue/calculators/landsalesimple.php)
6. First Home Buyer
As a first homebuyer, you may be eligible for certain benefits, grants, or concessions.
These can vary by state and territory and could include grants for purchasing a property or exemptions from stamp duty.
In NSW, the schemes that are available regularly change, so keeping up to date with current and future proposed schemes can be essential when entering into the home market.
Up to date information can be found at Revenue NSW.
When you obtain the advice of our qualified Property lawyers, you will be advised as to any options that are available to assist you with the purchase.
7. Legal and Tax Implications
As part of buying a home from your parents, you must consult a Lawyer. You should also consider consulting an Accountant or Financial Advisor to determine if there is a more suitable way to structure the transaction. Depending on how the transaction is structured, there may be capital gains tax, transfer duty, or other tax considerations.
8. Family Arrangement
If the sale is occurring as part of a family arrangement or to help you financially, make sure that everyone involved is aware of the legal and financial implications. It’s a good idea to have open communication and possibly involve other family members if necessary.
It is also important to consider the effect this may have on all parties in the future and attempt to negotiate an agreed outcome of the expected vicissitudes of life.
9. Due Diligence
Even though you are proposing to buy a house from your parents – you still need to undertake all the necessary searches and reports for the property.
Ordering a Building and Pest Inspection Report, or if strata, a Strata Inspection Report is a must. Understanding what is legal and illegally built on a property is also essential.
It is important to understand what you are purchasing and be aware of hidden costs associated with the property into the future to ensure you are capable of meeting these – and you are buying what you think you are!
10. Settlement
This is the final stage of the process which occurs (in NSW) on PEXA. The property will be transferred from your parents’ name to yours, and any finance will then be registered against and secured over the property.
Remember that the specifics of buying a house from your parents can vary based on individual circumstances, the state or territory you’re in, and local regulations. The above advice and information are focussed on New South Wales, Australia. Working with the professionals at ALA Law will ensure that all legal and financial aspects are properly addressed.
Give us a call to discuss your matter further
Please contact us to have arrange a confidential appointment with one of our friendly solicitor
