Looking To Buy A Property?
When it comes to selling a property, there is a protocol of stages and steps to follow, and a whole host of ways you can prepare your home to get the best possible result.
So what about when you are a buyer? When you are ready to purchase your first house, a new home or an investment property? What steps should you follow? What should you factor in and what should you take into account?
Here are our top eight tips for ensuring you buy the right property at the right price.
1. Find the right location:
As the saying goes, it’s all about location, location, location. However it’s not all about the best value or best investment, it's important to factor in the right location for you. There may be hot selling suburbs that simply don’t offer what you’re looking for, and conversely some areas that are a bit further out can be provide a lifestyle that isn’t on offer in the more popular suburbs. Think about what your and your family’s needs are, not just for today but in ten year’s time. The years do fly by, so factor in the changing circumstances of your lifestyle that you want to enjoy for the foreseeable future:
access to major roads
electrical pylons and any industrial waste?
nearby creeks or dams (if you have small children these can be a safety hazard)
is it the best house in the worst street, of the worst house in the best street?
access to public transport?
close to shopping or entertainment hubs, cafes, restaurants and amenities
the right schools?
what is the cultural landscape and what are the community groups?
is there any council expansion, are there major building works nearby or any pending developments?
are there plenty of local leisure activities?
2. Get good legal advice:
Ensure you have a trusted conveyancer or solicitor who will alert you to serious problems with the property in question that could affect the value of the property or delay the settlement. They also need to review the Contract of Sale and mortgage agreement to ensure they are legally binding documents.
Are there any illegal building additions or renovations which could be removed by council or are costly to update?
Are there complications with the existing title deeds and legal ownership of the property?
Any potential issues with strata management clauses and fees?
Are there any state authority rights to the property pertaining to zoning and/or future developments to the area that could seriously affect the property’s value?
What is a Conveyancer?
A licensed conveyancer is a property professional who conducts the conveyancing process on your behalf, including the organising of building inspections and valuations, examining contracts of sale, mortgages and strata reports, conducting title searches and overseeing the exchange of title, attending settlement and making you aware of outstanding arrears, land tax obligations, illegal building work and planned developments that may affect the property. So choose wisely!
What is a Solicitor?
A solicitor performs the same functions as a conveyancer, as well as advising on legal matters outside of your property transaction. Both a conveyancer and a solicitor should be covered by professional indemnity insurance.
3. Building Inspections:
If you are seriously interested in a property for sale, it is always wise to arrange a professional building inspection to check for any structural issues, plumbing or wiring defects, pest infestations, rising damp and asbestos. A licensed builder should carry out these inspections and provide you with a detailed report (enabling you to negotiate the sale price if you are prepared to undertake the work post-purchase). A licensed surveyor or architect can also complete pre-purchase building inspections but you may require a specialist pest or engineering assessment. However this process can be expensive, especially if you have to do it for more than one property if the sale doesn’t eventuate. So before you get to this stage, undertake your own property inspection.
There are key ways to spot potential issues:
Look for (or smell for) damp and mould. You can quite often smell mustiness in a room if there are damp issues, and fresh patches of paint could be hiding a damp or mould problem so check skirting boards and ceilings.
Look for structural issues like sagging ceilings, cracks in ceilings or walls and uneven doors or window frames.
Test all the taps and see how long it takes for the hot water to come through, and check out the hot water heater.
Think about the energy efficiency of the house – which way is it facing, will it get too much sun or not enough, and how costly will energy bills be?
4. Understand your potential mortgage:
Before deciding which lender to take our your hard-earned mortgage with, try talking to a variety of financial institutions to review their interest rates and potential product add on fees (redraw facilities, offset accounts, income insurance) to determine how much you can realistically borrow and your ability to manage mortgage repayments without fear of a rise in interest rates (they actually used to be as high as 18%!).
Obtaining loan pre-approval will keep you ahead of the buying pack in a fiercely competitive market. The more financially ready you are to make a property purchase the more likely you are to make a successful offer or bid with confidence. By seeking financial advice from the outset you will have a strong understanding of your financial position. This will inform how much you can spend on a property and how best to structure your mortgage, and help you manage ongoing costs.
Remember that homes also come with upkeep costs that can be substantial at times. This can be especially tricky if you’ve been renting and you are purchasing your first home. Structural issues and utility expenses can really add up, and the yearly council rates can be difficult to manage as well, so make sure you understand what these might add up to on a yearly basis and factor them in to your budgeting.
What is a Financial Advisor?
A financial advisor will review your current financial status and help you plan your purchase strategy. Financial advisors can also manage the mortgage brokering process.
What is a Mortgage Broker?
A mortgage broker will analyse the numerous mortgage products on the market and negotiate the terms of the loan on your behalf. Their services are often free as they receive a commission from your chosen lender, however make sure they are transparent about their fees.
5. Get an accurate valuation:
Your mortgage lender will do a property valuation to determine the funds they are prepared to lend (which is a maximum of 90% but usually more like 70% of the property value). It’s important to remember that financier valuations are notoriously low to ensure they can always redeem their funds should the property go into default. Sales have been known to fall through due to inaccurate property valuations and this can be particularly difficult if you don’t have a ‘subject to finance' clause in the sale contract. Always use an accredited valuer if sourcing your own valuation.
6. Consider a buyer agent:
Buying real estate can be a game of poker and chess. If you’re not comfortable making sale offers, bidding at auction or negotiating settlement terms, it could be a good idea to engage a buyer agent (a real estate agent you can trust). Along with finding property, buyer agents are experts at evaluating properties for sale and negotiating purchase terms.
When it comes to finding your dream property, choosing a real estate agent / buyer agent who has a good understanding of your needs and with whom you feel a rapport will mean that you’ll have someone who can do the legwork for you and who may even be able to access properties before they come onto the market.
Buyer agents not only help home buyers who are time-poor and unable to look for properties themselves, but they can also manage the purchase for buyers who are uncomfortable with the negotiation, auction and settlement processes.
7. Negotiating the sale price:
Don't let yourself feel pressured by expert sales people. They may get you to rush you into viewing a property and then urge you to make an offer before someone else does. If you feel rushed at all, then back away. Time is on your side.
8. Finding the right property is just one piece of the puzzle, you then need to navigate the interest of other potentials buyers, and what method of sale the Vendor has chosen to use.
Most Australians buy their properties by private treaty. The Vendor sets an asking price and potential buyers are free to negotiate, either directly with the Vendor or through an Agent the Vendor has appointed to handle the sale. When buying by private treaty, once you (or your Agent) make an offer and the Vendor (or their Agent) accepts it, signs the sale contract and receives the deposit, you have ‘exchanged’ contracts and the cooling-off period begins.
Purchases at auction have no cooling-off period. Because of this, contracts and inspection reports will be prepared by the Vendor and made available to potential buyers before the auction. You may be able to organise your own building inspections prior to the auction. Once your winning bid has been accepted at an auction, and the gavel has fallen, you don’t need to worry about someone else outbidding you. The property is yours. So ensure you are not over-committing yourself in the heat of the moment as your bid is binding and there’s no cooling-off period. Set your maximum bid and stick to it even if it means walking away from a sale that would bust your budget. Remain calm. Here's where a Buyer's Agent can come in very handy.
Cooling off period:
Once the cooling-off period is over or you have bought at auction, you then enter the ‘settlement’ phase. This is usually when building inspections and due diligence takes place and finance is finalised (so ensure the Contract of Sale includes any inspection or subject to finance clauses, as well as a suitable settlement period).
On settlement day, you (or your chosen representative) and the Vendor (or the Vendor's Agent) will meet and finalise the sale – which includes paying the Vendor the remainder of the property's purchase price. In return, you’ll receive the keys and title deeds and it will finally be all yours.
“I have a great deal of empathy with buyers," says Sam Danckert. "I bought my first house at the age of 22 and there weren’t many Agents who were committed to understanding what I was looking for, and through that experience I was able to resolve the type of Agent I wanted to be,” says Sam. “I was determined that I would put in the effort required, and that I would listen to my client’s needs and understand their real estate goals. It’s so important to understand what a buyer is looking for in a home, not just the specifications of a property but understanding what sort of lifestyle they are looking to achieve. A house is four walls and a roof but a home is an emotional space that connects with people so it’s important as an Agent to understand the difference between the two.”