Advice on everything, from what to look for when buying a house or home unit to the traps in buying a car; from avoiding problems with appliances to holiday disasters; the pitfalls in insurance policies to the credit … it’s all in a new book that’s designed to save you thousands of dollars and many headaches.
Consumer expert Helen Wellings has drawn on her years of experience with the NSW Department of Consumer Affairs to write a book of advice covering almost every aspect of buying.
BUYING A HOUSE
- Don’t be penny wise and pound foolish. Many consumers will carefully compare prices in supermarkets over a matter of cents, yet do not apply the same principle when house-buying. Do compare prices and “shop around” for your finance.
- Get your own solicitor. Don’t accept the vendor’s solicitor, because you need legal advice that is in your interest.
- Don’t fall for the “Don’t pay rent; for as little as $1500 deposit and $200 per week you can own your own home” claim by some finance companies. Customers who get caught with these deals, which can be financially devastating, have probably already been rejected as a bad risk by reputable home financiers because they really cannot afford to enter into home buying.
- Pay your deposit to the vendor’s agent, your solicitor or an independent stakeholder. If you pay it to the vendor, you could lose your deposit money if he goes into debt or disappears.
- Steer away from deferred transfer plans which mean that you will have no claim to the house until three years after the date of signing the contract. This arrangement often involves a deposit raised by a personal loan from a finance company whereby for three years you pay installments covering the interest only. The vendor usually promises to arrange a loan from a building society at the end of three years – but it may not come through because of a change in the money market or your financial position. You will be left without any money to complete the deal but, because you have committed yourself to a contract, you will lose your deposit and all the installments you have paid.
BUYING A HOME UNIT
- Look at the location of the unit. Determine how much sunlight you will receive and whether there are disadvantages in the floor level of the unit. If on the top floor, would the unit be too hot in summer, or is it directly below the flight path of aircraft?
- Look at the unit both during the week and weekend. Try to ascertain the types and ages of people in the block whether there are children or shift workers who might disturb your lifestyle.
- Have your solicitor check the financial accounts, insurance cover and any other records concerning the management structure. Is the body corporate and its council managing the units properly, with regular annual meetings, proper minutes of all meetings, and publication of the agenda and minutes on the notice board?
- Check whether the insurance cover on the building and other policies such as public liability, workers’ compensation and voluntary workers’ compensation, are adequate. Inspect the common property – foyer carpets and fitting, paintwork and garden areas – as well as the unit.
- Determine whether there are any restrictions on the use of common property facilities and see if any agreements have been made giving exclusive use of the common property to certain proprietors in the units.
- Find out through your solicitor about the sinking fund, which is the money accumulated from regular levies or maintenance contributions paid by proprietors to cover repairs and replacement to the building. Check that there are no plans to impose a heavy to cover major repairs for which the sinking fund is inadequate.
- Have an expert in building construction inspect the building, preferably on a rainy day as the most common problem with home unit construction is water penetration.
BUYING A CAR
- Don’t lose your head at the car yard. Consumers often become irrational and forget what exactly they were looking for and how much they can afford to spend. Most car buyers, especially young men, fall in love with a car and forget everything except the vision of themselves behind the wheel of it.
- Before you pay a holding deposit or “option to purchase” on a car, make sure you are entitled to a refund if you change your mind. Be careful the refund conditions apply to more situations than just a satisfactory mechanical inspection of the car.
- Insist on a test drive over different types of road surfaces, hilly, bumpy, curved and straight. Get a qualified mechanic or your motorists’ association to give a full written report on the car. Remember that even new cars may be faulty.
- Watch for “ghost advertising”. A car that was advertised to lure buyers may not even exist in the car yard or have faults that were not noticeable in the advertising picture. The dealer may be using an obviously bad car to steer you to a “better deal”.
- Don’t be fooled by “demo” cars. In most cases, it is the sales rep’s car, registered in his or the dealer’s name, and does not carry a new car warranty. Be wary about used cars offered for prices below the minimum statutory warranty price. If defects occur in these cars after purchase you may find it difficult to obtain redress from the dealer.
- Fully understand the order form, which is the basis of the contract of purchase. The dealer can increase the price of the car, delay the delivery or force a change in your financial arrangements with your written consent unless you are mindful of every clause.
- Don’t be fooled by exaggerated advertising claims. Be wary of cars that appear too low in price, and of claims like “genuine one owner”, or “as new throughout”.
- Watch for intimidation tactics. Always know what you are signing and ensure that blank spaces in a contract are filled in or ruled out. Don’t be rushed or made to feel foolish if you express doubts about the deal. One sales ploy is to keep you so busy with sales staff that you cannot think straight, and overwhelming the customer with attention so that he becomes too embarrassed not to buy.
- Important points to check are the general appearance of the car. If it is dented or rusty, it’s likely the mechanical parts have also been neglected. Other signs to look for:
- Unevenly worn tires could be caused by faulty brakes, suspension or steering.
- If the steering wheel is too free or it knocks, parts could be worn.
- Does the engine start easily without too much revving, and idle evenly without too much choke? Check the exhaust for excessive smoke when rewed. Look for oil or petrol leaks.
- A heavy knock in the engine may mean worn bearings.
- Gears that disengage when the car is in motion indicate excessive wear.
- A whine or howl in the gearbox or differential means heavy repair bills.
- Loud thumps from the suspension when driving over rough roads usually mean worn suspension parts.
- How old is the car? Has the kilometer clock been wound back?
- Ensure that you have a clear title to the car you buy. The person you buy it from must actually own the car, and not owe money to a financier. If that’s the case, it could be repossessed.
- Be very careful when you buy a car at auction, as these sales are exempt from most statutory warranty requirements. You also will not have much opportunity to inspect the car, and generally cannot test-drive it.
- Be wary of very generous trade-in offers – you could be paying more. If you are given a trade-in price higher than the dealer can sell your old car for, he may substantially increase the price of your new purchase.
- Second-hand appliances: watch out for quick cosmetic makeovers such as a new coat of paint, or handles, which may distract from faults. Electrical appliances are not like good wine – they don’t improve with age.
- Inquire where a product can be serviced before you buy it. The repair department may be interstate or inconveniently far from home. Ask who is responsible for repairs: the manufacturer, the seller or the dealer?
- Check whether your household contents insurance policy covers food spoilage if your fridge or freezer breaks down. It is your right, however, if the break-down occurs due to an inherent manufacturing fault, to insist on compensation from the manufacturer.
- Study the guarantee closely, checking its duration and what parts of the appliance it covers. Some manufacturers are still using carefully-worded guarantees, rather than concentrating on turning out a fault-free product. The guarantee often gives the customer a false sense of security.
- Be aware of consumer abuse that can lead to problems with your appliances. For instance, constant video games use of television can leave a shadowy image of the game on the picture tube, marring normal viewing. This can result from players forgetting to switch off the set because the screen is blank.
- Always check the license or registration of a builder before you seriously consider using him for any work. Check the relevant authority in your State or territory regulating building work and builders to determine what protection you are given against unsatisfactory renovations, extensions and construction before you pay any money or sign contracts.
- Know your contract types: the contract agreement, outlining the terms and conditions, the drawing, which shows the complete design features and floor plan, and the specifications, which give a detailed description of the work to be performed.
- Set a completion date for the building. Do not pay until you are satisfied that all work has been completed. Cover yourself with a defects liability clause in your building contract against faults developing in the house within a specified period after its completion as a result of poor materials or faulty workmanship.
- Be sure to look at small details in construction work that could be costly to repair later. Check drainage pipes, floor and ceiling levels and alignments, etc.
- Beware of untrained “renovators” who solicit their work from door-to-door. The problems caused by their handiwork could be disastrous, and there is little redress.
- Houses usually take months to complete and building materials and wages will probably change during this period. However, a “no rise and fall” clause in your building contract will fix prices, making no doubt about the final cost – a more acceptable basis to you and your lending authority.
- Supervising building work is important. Be there as much as possible to see that progress is satisfactory, to check, with the help of your architect or adviser, on the quality of materials used and to be consulted with queries.
- Make sure that your property is insured from the very first day of construction and that the builder has a current workers’ compensation and liability policy.
- If buying an older house, take care that it is structurally sound and that renovations required to make it suitable to you would not be more expensive than buying a newer house.
- Make sure you know what you are getting and what you will have to pay extra for when buying a display home. The “basic” cost may be far below the real cost if several of the home’s features are “extras”.
- When you buy goods on credit, you buy two things – the goods and the credit. Just as the goods can be expensive, moderately priced or cheap, so too can credit. Make the effort to find the cheapest and least potentially dangerous.
- Be wary of the credit offered by the seller of the goods. Do not rush into a commitment.
- Don’t just look at the monthly payments, but at the total cost of the goods on credit.
- If you are having trouble meeting repayments, talk to your finance provider. Don’t ignore the reminder letters telling you repayments are overdue. Explain your circumstances honestly because the financiers will probably appreciate your difficulties and try to come to a realistic arrangement.
- Be aware that contracts abound in everyday life: such things as drycleaning dockets, theatre tickets and your employment are contractual situations, with terms and conditions undertaken by each side.
- Know your rights and do not be reticent in seeking redress. Remember that no matter what signs, like “No Exchange, No Refund”, are displayed in a shop, you have every right to compensation or to have things rectified if goods are faulty.
- If there is something wrong with goods you have bought, return to the seller. Do not be fobbed off by being told to go to the manufacturer – your “contract” is with the seller.
- When buying second-hand goods, you are entitled to compensation for defects only where the claims by the seller have been false, such as if you buy a washing machine that you were told was “in working order”, when it is not.
- When buying services, such as furniture removal, household repairs and renovations, the company has three obligations to you under the Trade Practices Act: to use due care and skill; to make sure that any materials supplied for the job are fit for their purpose; and to make sure that the services give the desired result which you made known to the company before you bought. If a company fails to meet these obligations, you have the right to claim compensation.
- Do you have to pay for goods you damage in a store? If you were careless or rough in handling the goods, the shopkeeper would have every right to demand compensation from you. The same applies if you were warned by a notice such as “Do not handle glassware”. On the other hand, if you were able to establish that the store layout caused you to damage the goods, you may not be liable to pay compensation.
BUYING AT HOME
- Remember that in door-to-door sales, consumers are being offered something they may not really need – and the sales representative’s job relies on talking you into buying it.
- Never accept “gifts” in approaches made over the telephone, agreeing to accept them at home. Once the sales representative has his entree card to your home, you’ll find it difficult to prevent a sales pitch and pressure.
- Beware of pest control operators who call at your door with samples of termite damage to your house – the sample may have been collected from a derelict building. Beware of home renovators, such as roof repairers, who “just happen to spot” some problems around your home.
- Always ask for the name of the company they claim to represent. Ask “What are you selling?” and “How much does it cost?” Ask for their business card – you will then have some means of identification for later. Read the entire contract and don’t rely on the salesman’s interpretation of it. Never sign it then and there. Ask yourself: “Do I really need this?”
- Watch for sales pitches such as: “I’m a student collecting points in a competition for an overseas trip.” “I need your help in conducting a survey.” “I’m from the XYZ company and we take great pleasure in telling you that you are one of the lucky families selected to receive a lovely advertising gift.”
- Never pay cash until the goods are delivered and you inspect them; don’t sign papers you don’t understand; don’t give any personal details about yourself or your family; don’t give the names of neighbors or other people.
- An insurance policy is boring and difficult to read, but there’s more to being insured than paying a premium. For example, note that some insurance companies will refuse to pay on a burglary claim if deadlocks are not fitted to the doors. And, if living in a de facto relationship, are all the contents of the home covered in your policy?
- Car insurance: the insurance companies expect everything to be disclosed when taking out a policy. Your claims could be refused if you:
- fail to mention previous insurance claims
- omit mention of minor offenses and convictions (as well as major ones, of course)
- forget to mention any damage caused to your car in an accident or any fine you have had
- have your car insured in your father’s name because he has a better driving record or larger no-claim bonus.
- Remember that the best car insurance policy may not be the cheapest. There are two sorts of comprehensive motor insurance, the agreed value policy and the current market value policy. Make sure you know that you’re covered properly.
- Make sure that your home and contents are realistically insured. Increase the insurable amount each year, just to keep up with inflation. Have annual valuations.
- Do you know the difference between burglary and theft in insurance terms? Burglary involves forcible entry, and theft does not. Police and insurance companies consider flatmates unreliable and some firms will not insure them. Other firms will give cover where all occupants itemize their belongings separately.
- If you are renting household goods, check to see that you are covered for loss, burglary, theft or damage to the full replacement value under your household contents policy. Some rental companies want the full replacement value even when the goods are not brand new or current models.
- Life insurance – there are five basic types you can buy:
- A whole life policy: usually provides for an agreed lump sum and bonuses to be paid to the policyholder or his estate on death. This policy may be altered to an endowment policy later on.
- Endowment policy: provides for an agreed lump sum and bonuses to be paid to the insured upon reaching a certain age or on death before that age.
- Term policy: provides for payment of an agreed sum in the event of the insured’s death during a specified period of time. This policy is commonly used to provide for the repayment of a loan granted by a bank or finance company in the event of the insured’s death during the loan period. This policy expires after the specified period, so term insurance does not have a savings element, just life insurance cover.
- Unbundled insurance: similar to an endowment policy, but the premium is separated into an investment premium and life cover premium.
- Disability policy: against sickness and accident, providing for a substitute regular income in the event of inability to work. This policy can be renewed the following year on the same terms and conditions, beneficial to a self-employed person who has had bad health.