So, the time has come to purchase your first home. That is terrific. It can be a daunting experience, however, if you do the correct due diligence prior, it can be a great journey.
Here is some helpful information from ReDIY that will assist you in this major purchase.
First things first.
How much can you borrow? You can go to your bank and they will be able to give you the answer to this question. It is good practise to also have a chat to a Mortgage Broker. There are many. They are free and they will come to your home. Most of these represent many banks, building societies and lending institutions. They can give you choice, even if it is to just compare with your own bank. When making the decision, consider all of the fees involved as well as the interest rate. Discuss Mortgage Insurance, Stamp Duty and other associated costs that need to be factored in. You will now have “Pre Approval” up to a certain amount. This approval lasts for 3 months. At this point, you do not have full approval. Once you have found your new home, the bank will conduct a valuation of the property prior to giving full finance approval.
Now that you know your budget, you can start doing some research. Prior to inspecting homes, you will have determined the area you wish to purchase in and the “must haves” in your shopping list.
Again, before inspecting homes, visit realestate.com and look at recently sold properties in your chosen location. Check out the features and match to your shopping list.
Asking prices, on properties currently for sale can differ greatly to their final Sale Price.
The gap between the listed price and the sale price is known as the negotiation rate and that is heavily influenced by market conditions. In a seller’s market, you will typically see a lower negotiation rate, whereas in a buyer’s market, it is likely to be much higher. In a normal market, the negotiation rate is somewhere between six and ten percent.
Rediy can supply you with a Free property report on the chosen post code, in which you wish to purchase. Just let our friendly staff know that you have read this, and a report will be emailed to you. This normally costs over $40.
There’s nothing like pounding the pavement first hand to give you a feeling of confidence about the neighbourhood and values in the area. The market is constantly changing, so sales statistics from six months ago may no longer reflect the current market values.
Since the introduction of the Internet real estate agents are no longer the gatekeepers of the information. Do your own due diligence and make sure you fully understand what’s happening with prices and what’s going on in the area that may influence future market variations.
The reasoning behind doing this research prior to inspecting properties is to keep emotion out of it. It is not the best outcome to inspect one property, fall in love with it, and have no idea of its true value in the current market.
You are now probably as well educated on the current market conditions as a great deal of Real Estate Agents. You are now ready to start inspecting properties.
The fun begins.
When comparing properties, you need to consider the location within the chosen suburb. Convenience to public transport, schools, shops etc. Being within a couple of streets of a school is great, but backing on to the school oval could be perceived as a negative to some. Likewise, a property situated on a main road is valued less than an exact same property in a quiet location.
Also consider the actual block of land and where the property is situated on the block. Does it suit? What is next door and behind? A block of units can have a negative effect on the property value. Is the property below street level? What is the aspect? Are there any views. Are there any easements over the land?
If you are looking at a unit or townhouse for example, is it better to be located on the perimeter, or is an interior location better? In a high-rise building - one side of the building could be more favoured than another because of the sun or views. Which level of the building is the unit on? The level can also make a difference. Which is more important to you, the lower cost or the better view? Remember, a unit with the best view in a building will appreciate faster than other units in the same complex.
All of these do not matter if you love the property and want to buy it. All we are saying is, these need to be factored in when determining the price you pay. Value is not always in the eye of the beholder. Every property sells. There’s a buyer for every property. The only thing that stops a property from selling is the price. The true value of property is determined by the buyer and the seller. It’s what a willing buyer is prepared to pay and a willing seller is prepared to accept.
With Real Estate, you make money when you buy, not when you sell. It is important to buy well.
You think you have found the right one.
So, it is ticking a lot of the boxes. That’s great, but there are a few more yet.
It is important when buying a property that you don’t get emotional about the purchase. That is not easy when it is your first property. Always have in the back of your mind that there will be another property. There always is.
How much is the property worth? Remove the emotion and consider this property to the research that you have done. Do you have to factor in any repairs, maintenance, or improvements when determining the amount you are prepared to pay? Have your maximum price in mind – the most you are prepared to pay and the true market value of the home.
What exactly does the property have that could take away from its value? What is the community like? What is the average selling price in the neighbourhood? How long has it been on the market compared to average selling times? These are great questions to ask an agent or property owner.
Let the negotiations begin.
Offer a price that is lower than what you normally would; enter negotiations with the optimistic attitude that the seller will come down. Relax. This could take a while. Be diplomatic. Negotiations may be a long and tedious process. It can be very easy to get irritated.
Negotiating requires you to be assertive and question what you are being told. If you disagree with someone regarding the price, value, or condition, speak your mind. Do it diplomatically and the best way to do that is to ask “Why do you say that?” or “How did the sellers establish that price?“ Ask questions and be a good listener.
While you don’t want to be hostile, you do want to be assertive and dominate negotiations. Have responses for any potential arguments that may be thrown your way. Whenever you agree to give something, be sure to get something in exchange. Don’t be fooled into thinking the agent is on your side.
Never reveal your urgency. Acting calm and under control, in addition to taking time to think rationally, will help you in the long run. In short, just think before you speak.
Sometimes the first person to speak loses. We were born with 2 eyes, 2 ears, and only 1 mouth. So listen and observe more than talking.
Price is not the only thing to be negotiated. Deposit, Inclusions, exclusions, and timing all need to be negotiated. The amount of the Deposit is seen as a display of being serious. What do you or don’t you want as part of the purchase? These are the inclusions and exclusions and should be noted on the contract. This could be a dishwasher, pool cleaning equipment, or freestanding items of furniture. Timing refers to the length of time you require for your conditions as well as agreeing on settlement date. A quick settlement may suit a seller and it may mean they will accept less to have this.
The negotiation process varies in the amount of time it can take.
When there is competition on a property, this usually means that it is a well-desired property. Just stick to your instincts, not your emotion. If you feel it is going significantly over the value you put on it, simply walk away.
Your Final Offer is accepted.
Just a few more hurdles to go.
Engage a Solicitor or Conveyancing Company. This is vital. You are dealing with legislation and a great deal of money. Leave it to the experts.
The contract will be passed on to your lending institution who will organise a valuation.
You may need to have a Building and Pest Inspection done. In some states, the seller is required to do this and have a report available for the buyer. In other states, it is up to the buyer to conduct their own. This is something you should arrange. Do not accept one referred by the Agent. Ask around your social circle for a recommendation. Make sure you are in attendance for the inspection. You can speak directly to the Inspector and ask his opinion on any areas of concern. If significant issues are revealed from the inspection, you can walk away or re-negotiate the sale price.
Congratulations, the contract proceeds to Settlement.
Your solicitor will hand over the Money. You will be given the keys to your new home.
Don’t underestimate the time it takes to buy your first home. We have tried here to assist with some information that will assist you. Do your research, take your time, negotiate with confidence, complete the due diligence and you are sure to buy the right home for you at the right price. The bad purchase stories are from the ones who do not do their homework first.