What you must know before purchasing a residential property in Victoria

We often get questions from clients about what they need to pay attention to when buying a house in Melbourne and the relevant procedures involved in the process. In this article, we will introduce the process of a residential property purchase and the things buyers must be aware of, through an example of our client.


Our clients, Tom and Mary (pseudonyms), are a married couple and have recently obtained an Australian permanent resident visa. Each of them has a stable job. After having a discussion with Mary, Tom decided to buy a house in Melbourne for them to live in.

Are there sufficient funds?

Is a mortgage needed?

We would advise Tom and Mary to contact a home loan bank or a banker first to find out the amount of loan they can borrow. Normally, the bank will provide a pre-approval document, which states the estimated amount that the bank will offer to lend. This amount plus their own savings should give them an idea of the price range of properties they can afford to buy. After the price range is calculated, Tom and Mary can then search for properties online. If they plan to purchase a property in cash and their cash is overseas, they will need to figure out how long it will take for them to transfer money to Australia. This gives you an idea of how much time you would need for settlement to take place.

Make sure your lawyer reviews the contract and vendor statement (section 32 document) before signing


Once Tom and Mary have found the desired property that suits their needs, we would advise them to inspect the property. Meanwhile, they should request a copy of the contract and vendor statement (also called section 32 document) from the agent, then give it to a lawyer to review the terms and property rights of the owner.
Why is a lawyer required to review the documents?
Every contract of sale differs – especially on the special terms. Most commonly, contracts of sale are drafted by the lawyer of the vendor. This often makes the terms of the contract more favourable to the vendor. We, as lawyers, will assess whether the terms of the contract are relatively fair to both the purchaser and seller.

Examples of special terms that are unfair to the purchaser

Theoretically speaking, the property continues to belong to the vendor until the settlement date, upon which Tom and Mary will become the newly registered proprietors. Accordingly, the vendor should bear the responsibility for paying corresponding fees and responding to any government notices in relation to the property before settlement, and Tom and Mary will carry on the responsibility after settlement.

However, a special term in the contract may state otherwise – e.g. that the purchaser will bear the corresponding costs associated with any notices. A lawyer is capable of reviewing the important information of the property, including whether there has been any dispute over the owner’s property rights, any arrears of utility fees or council fees, or any restrictions to the re-construction of the property.


Any modifications to the terms of the contract must be made before you sign the contract. Any verbal agreement between you and the vendor, or the agent, is unlikely to be binding if it is not stated in the contract. If you sign the contract without having your lawyer review the contract and the vendor statements, it would almost be impossible to ask the vendor to amend the contract again. It would also be difficult for you to withdraw from the contract if any issues arise afterwards.

Private Sale or Auction?


There are two main forms of buying a residential property in Victoria, which are through an auction or private bidding. The main differences between the two are as follows:

Private Sale

The purchaser can claim that the contract of sale will be subject to a number of conditions, such as the conditions of a loan or a FIRB approval. This is called a conditional offer.



For properties sold through a public auction, the contract of sale is unconditional, meaning that the purchaser would have no valid excuses to withdraw from the contract after signing it.
If Tom and Mary intend to purchase a property that is on a private sale, they can make an offer with a request that the contract is subject to a loan, completion of building inspection reports and pest reports, etc. Within the specified period, if the bank rejects your loan application or if reports indicate that the property has significant structural defects, they are entitled to withdraw from the contract by notifying the vendor in writing.

Preparation for settlement


After the contract has been signed, the next step is to prepare for the loan and settlement. Tom’s loan broker must obtain unconditional loan approval from the bank within the time specified in the contract. If he cannot take out the loan within the stipulated time frame, he must notify his lawyer and contact the vendor’s lawyer to request an extension. If the vendor refuses to extend the time, and Tom’s lending bank cannot guarantee that his loan will be approved, then Tom would inform the vendor’s lawyer or agent immediately in writing to withdraw from the contract within the specified time period. If Tom successfully obtained the unconditional loan approval from the bank, the lawyer would prepare the following work for Tom and Mary:

 1. Complete identity verification and require them to sign a Power of Attorney;

 2. Complete the stamp duty assessment (including any possible exemptions);

 3. Provide the estimated amount of balance payment for settlement; and

 4. Contact the lending bank to prepare for settlement.

The Balance Payment for Settlement


It is important to calculate how much Tom and Mary are left to pay at settlement. The balance payment is comprised of the following parts:


  • The remaining of the property price (for example, if you have paid a 10% deposit, the remaining is 90% of the price)


  • Any cost adjustments including council rates, property management fees, etc.


  • Stamp duty (since all current property settlements are processed electronically, stamp duty must be paid at settlement)


  • Land registration fees (to be paid at settlement)


  • Fees for using the PEXA system to process settlement


  • Legal costs and incidental costs
The sum of the above amounts, less the amount of the loan, is the amount of the final payment that Tom and Mary need to make for settlement. The final payment may be transferred to the bank account designated by the lending bank or to the trust account of our law firm.

Final inspection


Before the settlement date, Tom and Mary are to have a final inspection before the settlement. The purchase of the inspection is to see whether the conditions of the property are consistent with when the contract was first entered. Make sure the final inspection is not too early. Generally, a final inspection takes place 2-3 days before settlement.

True case

One of our clients conducted the final inspection two weeks before the settlement. Unfortunately, the property was damaged in following the two weeks. After the settlement, it was difficult to claim compensation from the seller for the damage.

Australia’s online property exchange network – PEXA


Tom and Mary’s purchase went smoothly. On the settlement day, all the conveyancing transactions were managed and processed through an online settlement and lodgment platform called PEXA. The balance payment would be paid to the vendor through PEXA, and the property rights would be registered in the name of Tom and Mary. Because there is a mortgage on the property, the bank will hold the title on the property until they have completely repaid the loan. At this stage, the couple’s purchase is officially completed.

What overseas buyers must know before making a property purchase in Australia


Foreign investors need FIRB approval to purchase a residential property in Australia (please note that we are only talking about residential properties here, rather than commercial properties or industrial properties, etc.).

Depending on the type of FIRB approval and the purchase price limit, foreign investors can purchase various properties in Australia. However, these purchases must comply with the relevant conditions and requirements specified on the FIRB approval.

Foreign investors who intend to borrow a loan to purchase a property will be subject to more conditions and restrictions. Therefore, we suggest that you contact a loan broker for inquiries.
Foreign investors need to have additional stamp duty when purchasing a property in Australia. The total amount payable is comprised of two aspects – first is the standard stamp duty payable by Australian buyers; and second is called the “foreign citizen stamp duty surcharge”, which is 8% of the value of the residential property.
Properties owned by foreign investors are subject to FIRB conditions. For example, a temporary resident (TR) in Australia may purchase a pre-owned property through FIRB for self-occupancy only, and they cannot lease out the property. Additionally, after the purchaser has left Australia, they must sell the property as soon as possible.
Foreign investors are required to declare the status of their property to the ATO (FIRB) annually. If a newly built property owned by a foreigner investor has not been occupied for more than 183 days (6 months) according to FIRB requirements, the investor shall pay an Annual Vacancy Fee.
From 2020, if the value of an investment property acquired by a foreign investor exceeds the specified threshold (currently $250,000, or $25,000 for investment funds), the investor must pay a land tax absentee owner surcharge of 2%. According to our past experience, land tax is commonly overlooked by foreign investors. To find out whether your property in Victoria is subject to land tax, you can simply tell from looking at your property’s first council rates bill of each financial year, whether the local government’s valuation of your property has exceeded the specified threshold of $250,000. It is also important to remind you that if you own more than one investment property in Victoria and the combined value of these properties exceeds the threshold value, you will also be liable for land tax. Alternatively, you may contact your property management agent and ask them to order a land tax certificate for you to see if any land tax has been generated.


Above is the process of buying a property in Melbourne and the key matters needing attention. We hope this article is helpful to those of you who intend to buy a house in Victoria. If you encounter any issues in the transaction, you are welcome to contact us.


This article is only a general guide and does not apply to readers’ individual cases. Based on the information provided, readers should not make any legal decisions without seeking professional legal advice from an Australian Legal Practitioner. Fumens Lawyers hereby declares that readers who refer to this article do not constitute a lawyer-client relationship with our firm, therefore, Fumens Lawyers will not be liable for any losses caused as a result of relying on the information contained within this article.


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