module five - the buying and selling process 2016 v2

Module Five: The Buying and Selling Process

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MODULE FIVE:

The Buying and Selling Process


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Table of Contents MODULE FIVE:The Buying and Selling Process Introduction ........................................................................................................................... 3 Aim ....................................................................................................................................... 3 Program aim ......................................................................................................................... 3 Module aim ........................................................................................................................... 3 Pre-requisite knowledge and skills ........................................................................................ 3 Getting the most out of this Learner Guide ............................................................................ 4 At this level of learning, your expectations are: ..................................................................... 4 To be deemed competent in this qualification: ...................................................................... 5 The learning approach .......................................................................................................... 5 Assessment .......................................................................................................................... 5 Content outline ...................................................................................................................... 6 Module objectives ................................................................................................................. 6 Module 5 Learning Objectives ............................................................................................... 6 Contributing authors .............................................................................................................. 7 Other Contributors ................................................................................................................ 7 Suggested study schedule .................................................................................................... 9 TOPIC ONE: Valuations ...................................................................................................... 10 TOPIC TWO: Buying the property ....................................................................................... 21 TOPIC THREE: The roles of associated professionals ........................................................ 36 TOPIC FOUR: Overview of the settlement process ............................................................. 53 Conclusion .......................................................................................................................... 81


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Introduction Welcome to Module 5: The Buying and Selling Process. This is the fifth module in the QPIA Course. Buying property requires a series of steps to be completed in a specific order (which also is explained state by state). It is imperative as a property investment advisor, you have a sound knowledge of all aspects of this process to advise and assist your clients.. We also explain due diligence, settlement, caveats, deposits, deposit bonds and cooling off periods.. Negotiation skills are also covered here in this module.

Aim Program aim The Property Investment Professionals of Australia (PIPA) has developed the PIPA Accreditation Program, a professional industry award, to address the need for professionals in the property investment industry and related industries to be appropriately qualified to give advice in property investment. PIPA is committed to the development of industry standards in property investment advice. It has developed the Accreditation Program as the first step in quality education for all those involved in giving property investment advice to retail property investors. The Accreditation Program has been aligned with the Financial Services Reform (FSR) provisions of the Corporations Act and with ASIC Policy Statement 146 training requirements for regulated financial services.

Module aim The aim of Module 5: The Buying and Selling process is to cover the purchasing process in depth. This module will look at how properties are valued and why this understanding is important for your clients. It will also cover negotiation skills, making offers and the purchase process from offer and acceptance through to settlement.

Pre-requisite knowledge and skills

There are no pre-requisites for this education program. It is expected that participants will come from a range of backgrounds including accounting, financial planning, banking, mortgage broking, real estate agencies and property development.


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Getting the most out of this Learner Guide It is important to let others close to you know that you are completing this program and that you will need time and space to work through the course materials. This will assist in balancing your workload and seeking the necessary support or assistance to help you in your learning. It will also assist in minimizing interruptions. Ensure that your surrounding environment is suitable for learning. Consider such factors as sufficient lighting, room temperature, adequate seating arrangements, desk setup and comfort level. If small environmental factors are not right, it will be harder to focus. It is important to take the time to thoroughly read all information and instructions carefully and complete the questions and activities as they arise. Use this Learner Guide as your manual. Make it your own by making as many notes as you wish, in addition to the questions and activities included. You will find a combination of Self Reflection questions and Activities included in this Learner Guide

At this level of learning, your expectations are:

To demonstrate a competent level of theoretical knowledge

To apply the range of skills outlined within this course to your role

To apply solutions to common problems

To take responsibility for your own learning and the application of your knowledge.

Your learning pathway


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To be deemed competent in this qualification: Complete and submit all required assessment tasks Be assessed as competent for the requirements of each unit of competency.

The assessment methods used in this qualification, may include any or all of the following:

Written questions/answers Verbal Assessment and/or Telephone Role Play Short answer or project based assessment Trainer/Assessor Observation

Your assessments will give full instructions on how to complete them. If you have any questions, you may contact PIPA head office to clarify instructions. Best of luck!

The learning approach This program is delivered by distance education, using a blended learning approach involving a combination of printed material and electronic materials. You will be sent study material in a printed book (the study guide). The handbook and some of the assessment will be available electronically and online. You will be required to access the Internet from time to time as directed in the study guide. You may also be directed to do some research of properties in your local area. You will not be required to do library research. When you receive the study guide, you will be able to work through it at your own pace. You are likely to move faster through areas with which you are already familiar, and slower through areas that are new to you. The recommended study schedule will give you an idea of how to pace your learning. Even where you think you know the subject, you are advised to skim through just to make sure that you know what is in this course. The treatment of subject content in this program will not necessarily be the same as in other courses designed for different purposes. Throughout the study guide you will find activities that are designed to assist your understanding. While your responses to these activities will not be assessed, you are encouraged to try them in order gain maximum benefit from undertaking the course.

Assessment Assessment for this module will consist of an online multiple-choice exam and an assignment. The successful completion of this module is achieved by receiving a pass grade in both the online multiple-choice exam and assignment.


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Content outline Topic 1 – Valuations Topic 2 – Buying the Property Topic 3 – The Roles of Associated Professionals Topic 4 – Overview of the Settlement Process

Module objectives Module 5 Learning Objectives By the end of this module you will be able to:

Explain the buying and selling process in depth state by state List different valuation methodology used such as government, summation, bank valuations

and appraisals and when they are used Describe the process of making offers on property Brainstorm appropriate negotiation tactics that you clients should use List the steps necessary to ensure settlement of a property occurs Describe the tasks required of the purchaser, the vendor and all associated professionals Explain the different types of property title applicable in Australia Describe the term due diligence and explain appropriate due diligence steps Explain the meaning of the terms caveat, covenant and easement List features of contracts state by state List the necessary steps for settlement


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Contributing authors Margaret Lomas, QPIA®, Dip Fin Adv, Cert. Investment Property Advice, Senior Associate of FINSIA, Member of MFAA. Margaret is a property investment author and founding director of Destiny Financial Solutions (DFS), a company, which provides specific property investment advice to consumers. She is a past Telstra NSW Businesswoman of the Year and is the host of SkyNews Business Channel's Your Money Your Call and Property Success with Margaret Lomas. Benjamin Kingsley, QPIA®, Cert IV Financial Services - Mortgage Broking, Member of MFAA. Ass Dip Business - Tourism & Travel. Ben is an active property investment analyst and media commentor. He is the Founding Director of Empower Wealth, a wealth advisory firm specialising in residential property investment. He has over 17 years research and personal property investment experience and has personally amassed a multi-million dollar residential portfolio. Ben also has over 7 years experience in mortgage investment finance. For the last 6 years he has been a presenter of regular property investing and finance education workshops Ben brings a long history of property investing knowledge and corporate business acumen that will provide a greater voice and awareness for PIPA. Damian Collins, Founder and Director of Momentum Wealth, a full-service property investment consultancy group based in Perth, Western Australia. Aside from acquiring a multi-million dollar property portfolio, Damian has earned a Bachelor of Business at RMIT University in Melbourne, a Graduate Diploma in Property at Curtin University in Western Australia and has also completed the stringent requirements for membership of the Institute of Chartered Accountants in Australia and the Financial Services Institute of Australasia and is currently a member of both institutions. In 2007 Damian was a recipient of the prestigious 40 under 40 awards for business entrepreneurs. Damian is a highly sought-after presenter and speaker; and is a regular media commentator.

Other Contributors Timothy Biles, BA, Dip.TRP, FPIA Timothy Biles is a geographer and town planner, and a Fellow of the Royal Australian Planning Institute. He has worked for planning authorities at the local and regional level, lectured in town planning at Royal Melbourne Institute of Technology and has been in private practice since 1980. Melinda Chapman Melinda Chapman is the Director of a Registered Training Organisation and the co-writer of the Diploma of Property Investment competencies. She is a training and development consultant with Trainingways Pty Ltd. Bill Dimovski, DBA MBA BBus CPA The property development companies for which Bill is a director have developed hundreds of commercial and residential properties in the past 20 years. Prior to this, Bill worked for two of the ‘top four’ accounting firms in their accounting, taxation and management advisory services sections.


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Scott Keck, Managing Director, Charter Keck Cramer Scott has more than 35 years’ property valuation and advisory experience. He is frequently engaged as a senior advisor and strategist in complex commercial and statutory issues related to the national and state property markets and for advice in relation to large portfolio valuations for major private, public and statutory corporations. Owen Lennie, MUP, BA, DipFinMgt, GradDipAppFin&Inv, FCPA, FAPI, FPIA, FAICD, ASIA Owen has been involved in property asset management and investment evaluation for more than 20 years. He was a director of McIntosh Knight Frank Limited, which floated the Grand Hotel Group. With Gary Weaven, he launched the Industry Superannuation Property Trust. Phil Osborne BA, ANZIIF (Aff), Dip FP, CFP® Phil has been involved in the financial services industry for 16 years, the past five years as a financial planner and business development consultant. He has been a consultant to the Financial Planning Association of Australia as part of their education taskforce, as well as conducting face-to-face training sessions Natasha Palich, B.Arch.Hons, Grad.Dip.Soc.Sc, RAIA Natasha has a background in sustainable design, having worked for both the Royal Australian Institute of Architects and the City of Port Phillip as a sustainable design advisor. Thanks also to Brad Matthews, Group Managing Director of ResCom Group of businesses, which offer mortgage management, finance broking, real estate, insurance and conveyancing services. Brad has a Business Degree from Monash University (major in Banking & Finance), is a Life Member and Fellow of the FINSIA (Financial Services Institute of Australasia), is a QPIA®, Licensed Real Estate Agent, a Fellow of both the Australian Institute of Company Directors and Leadership Victoria-Williamson Community Leadership Program (year 2000) and a past awardee of the Rotary Youth Leadership Scholarship Rohan Birmingham, Grad Cert bus, Lic Builder, Lic Real Estate Agent. Rohan is Managing Director his own property investing advisory company “Affordable Property Investments”. Rohan is highly skilled in his field and has a great ability to transfer that knowledge in simple and concise language. Rohan is a successful property investor in his own right and has become financially free. Rohan is often asked to speak at investment nights on the subject of Property Investing due to his skill of keeping it simple. Malcolm Allan (Rick) O’Shea. QPIA®, Director of Queensland Property Sales Pty Ltd, a specialised Real Estate agency which focuses on providing a high level of personalised service to military personnel and their friends and families. Rick has been board member and committee member for many associations, and is a qualified JP in Queensland and holds a QPIA®.


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Suggested study schedule The following is a suggested timeframe only. As this is a self-paced learning program, you can take as much or as little time as you need. How much time you are able to spend on the program will depend on your work and other commitments. The following schedule is suggested for a person who is fitting in study around work. If you are not working and can study full-time, you will probably find that you can progress more quickly. We recommend that you do not attempt the assessment until you have completed studying all ten topics in Module 5.

Week 1 Read through the Overview. Read Topic 1 and do the activities. Week 2 Read Topic 2 and do the activities. Week 3 Read Topic 3 and do the activities. Week 4 Read Topic 4 and do the activities.

Please refer to the participant handbook for information regarding assessment.

Module Five: The Buying and Selling Process Topic One: Valuations

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TOPIC ONE:

Valuations


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Table of Contents TOPIC ONE: Valuations Introduction ............................................................................................................................. 12 Learning objectives .................................................................................................................. 12 Topic 1 – Valuations ................................................................................................................. 12 Valuations ................................................................................................................................ 13 Obtaining a valuation ............................................................................................................... 13 Summary .................................................................................................................................. 19 References ............................................................................................................................... 19 Suggested answers for activities .............................................................................................. 20


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Introduction In this topic you will learn how property is valued by both governments and private valuers This is an important part of your learning and information that will enable you to assist your clients to gain a broader understanding of the process they are going through.

Learning objectives Topic 1 – Valuations By the end of this topic you will be able to:

List different valuation methodology used such as government, summation, bank valuations and appraisals and when they are used.

Answer questions, complete activities and other self-paced learning tools to enhance your understanding of this topic

Module Five: The Buying and Selling Process Topic Two: Buying the property

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TOPIC TWO:

Buying the property


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Table of Contents TOPIC TWO: Buying the property Buying the property ............................................................................................................. 23 Making the offer .................................................................................................................. 24 Negotiating a price .............................................................................................................. 24 Transfer of the property ....................................................................................................... 27 The process towards settlement ......................................................................................... 27 Checking plans, measurements and other factors ............................................................... 30 Building approvals ............................................................................................................... 30 Heritage listing .................................................................................................................... 31 Other possible issues .......................................................................................................... 31 Summary ............................................................................................................................ 33 References ......................................................................................................................... 33 Suggested answers for activities ......................................................................................... 34


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Introduction Each state has a different process of buying and selling. It is likely that you will be assisting your clients to acquire property across a range of states and as such you should be aware of the similarities and differences. In addition to that the process of making an offer, and signing a contract is also different and both you and your client can get into difficulty if this is not clearly understood. This topic takes an in depth look into the buying process.

Learning objectives Topic 2 – Buying the Property By the end of this topic you will be able to:

Explain the buying and selling process in depth state by state Describe the process of making offers on property Brainstorm appropriate negotiation tactics that your clients should use List the necessary steps towards settlement of property including:

o Choosing a solicitor or conveyancer o Obtaining the contract o Paying the deposit o Cooling off period and special conditions o Checking plans, measurements and other factors o Settlement

Answer questions, complete activities and other self-paced learning tools to enhance your understanding of this topic

Module Five: The Buying and Selling Process Topic Three: The roles of associated professionals

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TOPIC THREE:

The roles of associated professionals


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Table of Contents TOPIC THREE: The roles of associated professionals The roles of associated professions .................................................................................... 38 Real estate agents .............................................................................................................. 42 The financial institutions ...................................................................................................... 43 Summary ............................................................................................................................ 49 References ......................................................................................................................... 49 Suggested answers for activities ......................................................................................... 51


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Introduction While you may be the property investment advisor, your client will have a team of professionals assisting them at every turn. This may include lawyers, conveyancers, bankers, brokers and real estate agents. In this module we take a broad look at the people who may be involved in the property transaction.

Learning objectives Topic 3 – The Roles of Associated Professionals By the end of this topic you will be able to:

Describe the tasks required of the purchaser, the vendor and all associated professionals Answer questions, complete activities and other self-paced learning tools to enhance your

understanding of this topic

Module Five: The Buying and Selling Process Topic Four: Overview of the settlement process

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TOPIC FOUR:

Overview of the settlement process


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Table of Contents TOPIC FOUR: Overview of the settlement process Overview of the settlement process .................................................................................... 56 What are you buying? ......................................................................................................... 59 Strata Title .......................................................................................................................... 60 Pre-purchase due diligence................................................................................................. 60 Easements .......................................................................................................................... 61 Caveats............................................................................................................................... 62 Covenants ........................................................................................................................... 63 Removing a covenant ......................................................................................................... 64 Purchasing a property with an Owners’ Corporation ........................................................... 67 The contract ........................................................................................................................ 68 Signing a contract ............................................................................................................... 69 Settlement ........................................................................................................................... 72 Settlement conveyancing procedure ................................................................................... 73 Post settlement ................................................................................................................... 73 Consequences of failure to settle ........................................................................................ 73 Mis-description of measurements on the Certificate of Title ................................................ 74 Insurance ............................................................................................................................ 74 Common questions and answers ........................................................................................ 76 Summary ............................................................................................................................ 78 References ......................................................................................................................... 78 Suggested answers for activities ......................................................................................... 79 Conclusion .......................................................................................................................... 81


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Introduction Settling a property can be a stressful and time-consuming task. In some states it happens more smoothly than others, but in all states certain steps are required. By being aware of exactly how a property settles you can prepare your client for the process and for any eventuality. This topic examines how property transfers from one owner to another and the steps which are needed to make it happen.

Learning objectives Topic 4 – Overview of the Settlement Process By the end of this topic you will be able to:

Explain the different types of property title applicable in Australia Describe the term due diligence and explain appropriate due diligence steps Explain the meaning of the terms caveat, covenant and easement List features of contracts state by state List the necessary steps for settlement Answer questions, complete activities and other self-paced learning tools to enhance your

understanding of this topic

module five - the buying and selling process 2016 v2

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