As part of the conveyancing process, your solicitor will undertake several searches of the property that you are buying to ensure the property is free from defects and all costs are accounted for prior to settlement. One of the searches they will undertake is a council rates and water search.
The reason a rates and water search is done is to ensure that these cots are divided proportionally between the buyer and the seller in accordance with the settlement date. For instance on the Gold Coast rates are billed in six month increments and water charges are billed in three month increments. If you are buying a house in the middle of one of these periods, you don’t want to be paying the full period, and vice versa if you are selling a house.
The cost of a council rates and water search will vary depending upon which council area the property is located in and whether rates and water are managed by the council, or water is outsourced to another company. For instance, Gold Coast City Council manages both rates and water, while in Brisbane the council manages rates, but water is billed by Queensland Urban Utilities.
Prior to settlement your conveyancing solicitor will generate a settlement statement that shows the exact amount of money that is due to the seller of the property at settlement, with the deposit accounted for, any mortgage release fees deducted and rates, water and body corporate charges, if applicable, proportioned between the buyer and seller.
It’s important that as a buyer of a property you are aware that the price you agree to pay for the property will not be the final price, as there are associated costs. For example when it comes to water and rates if you are buying the property early on in the billing period for either water or rates and the seller has already paid the bill, you will be responsible for paying the proportion you will be responsible for to the seller and this cost will be added onto the purchase price in the settlement statement. This could mean anywhere between a few hundred dollars to over a thousand in extra costs that you will be required to pay.
Another cost that many people are unaware of when buying a property is that of transfer duty, which is a tax imposed by the State Government on all property transactions. The amount of transfer duty that you must pay depends on the purchase price of the property and whether you are eligible for any concessions, such as the first homebuyer concession. Your conveyancing solicitor will be able to explain more about your transfer duty liability to you.
If like most people you will also taking out a mortgage to fund your purchase there are mortgage registration fees and various bank charges. All property purchases must also pay a transfer registration fee, that you will either have to pay upfront if you are not taking out a mortgage, or your bank will charge you for this as part of your mortgage. The cost of this again is dependant on the price of the property.
The settlement statement generated by your conveyancing solicitor will provide a full breakdown of all these costs and the final amount you will be required to pay for the property at settlement, so it’s a good idea to have a basic understanding of these costs.