The Dos and Don'ts of Buying Your First Home
Buying your first home can be daunting, overwhelming, and confusing—to say the least. But, if you’re properly prepared, you've done your research, and you have a strategy, getting your foot onto the property ladder can be an enjoyable and exciting process—it is a life achievement, after all!
Nicole Jacobs, director of Jacobs Buyers Advocates has revealed the key dos and don’ts when buying your first home, so that you channel more of the enjoyment and less of the confusion. “Following some of the important rules of purchasing can mean you are in the best possible situation to make an educated and confident decision,” explains Jacobs. “You make your money when you buy, so you need to buy well.” Read on to find out what you should and shouldn’t do when trying to unlock the door on your first property.
Do go and see your finance broker or bank to find out exactly how much you can borrow. Knowing your budget up front means you will be able to focus on the right properties from day one. Make sure you know the amount you can spend—and make sure you factor in stamp duty and other associated costs, like the conveyancer and solicitor.
Whether you’re purchasing your first home or your 10th home, you should always follow the same rules. You are spending the largest sum of money in one transaction than you will have probably ever spent in your life, so you should invest in a building inspection. The only time you can dismiss one of these is if you are knocking the house down! Knowing in advance what needs to be fixed in a property gives you another piece in the puzzle to your information gathering and helps you assess whether to move forward on the property. If you know it needs a new roof or to be re-stumped, and the costs associated with this, then you are well informed. You can factor this into your price or walk away. You wouldn’t buy a car without an inspection, so why would you buy a property without one?
Making a list of everything you ‘must have’ along with the features you ‘would like to have’ will again allow you to prioritise and focus on the properties you shortlist to view. If you must have a courtyard or balcony, then only shortlist those with these features. Be careful when making this list to be realistic for your budget and really question why it is a ‘must have’ and not a ‘would like to have’. List suburbs, (often three is a maximum to avoid confusion), proximity to transport, shops, cafes, parks or beaches, off-street parking, and orientation to light as important questions to ask yourself.
When you buy a property you need to know the seller (vendor) has declared to the best of their knowledge everything there is to know about a property. Having a trained legal professional look over this information, along with the Contract of Sale, means you can move forward (again) with confidence. If you do not get these documents looked at and something goes wrong, you may not be able to rescind the contract. Walking away from a deposit of 10% because you have realised you don’t want to buy this property or the vendor doesn’t have enough money to settle on the property from the sale price can mean one thing—a big headache and possible financial stress for you. Find a solicitor or conveyancer that is happy to look over several contracts without charging as long as you use them when you do finally purchase. The good ones will happily do this for you.
Seeing potential competition building and worrying that you may miss out on a property at auction can sometimes lead buyers to make an offer prior to the auction. If you are thinking about doing this, make sure you know the agent's rules of engagement. If the agent has been instructed by the vendor not to accept offers prior to the auction, then you need to know this. Don’t reveal your top offer to the agent before knowing this. If offers are being accepted, make the offer on the Contract of Sale and present this along with a cheque for the deposit (usually 10%). Making a solid offer with the deposit is a lot more engaging for the vendor, and a lot more helpful for the agent, than a verbal offer or an offer on email.
How often have you been to an auction where there are couples shaking their heads and speaking to each other, quietly discussing whether they will continue bidding or not? We’ve all seen them and their position in the auction race is weakened every time. Auction day is strategy day. You need to go the auction armed with all of your information; knowledge of the market (pricing), how the agent auctions (style, whether they will break for a half-time chat or just keep going), potential competition, and levels they have bid to before.
The biggest question, of course, though, is what are you going to bid to? You need to know this before the auction. Yes, you can have a contingency plan (an additional $5,000 or $50,000), but stick to it. Know your limit. Knowing your limit allows you to bid with confidence. The aim is to look like you have a limitless budget and that you are there to buy. Often it is not the person with the most money that buys the property, it is the one with the best strategy. If it is a street auction, stand out the front so you can see everyone. Open the bidding (this gets the nerves out of the way and announces you are there to buy it). If the property is to be passed in, then let it be passed in to you. You will then have at least 15 minutes to negotiate and hear the vendor's reserve before anyone else.
If the auction is in a hotel room, bid loudly and confidently. Come back with your next bid quickly—you may want to wait until later in the auction to enter. This is sometimes used to make everyone think you have just started with your budget. This can put people off especially if they were down to $1,000 bids and you start with a $10,000 bid. You could just buy it on one bid!
Note: If it is all too overwhelming and you don’t have the time or knowledge of the market, think about using a buyer’s advocate. The selling agent has someone to represent the seller, so why shouldn’t you have someone representing you and only you.
The internet is such a great tool to search for properties. Once you have your core features list, set up an email alert system with the real estate portals so that whenever anything that matches your criteria is listed you know about it. Call the agent before stepping out the door with any questions that may not be answered in the advertising. How many in the block? If you only want to be in a small block and this apartment is one of 110, then you can safely take it off your list. Does it have a courtyard or balcony? If it doesn’t, take it off the viewing list. Is it big enough to allow you to get finance? Some financial institutions will not lend on dwellings that are under 50sqm. Check with your financial institution so you know.
Being well informed and doing your homework will give you confidence to make an educated decision. Get out to the open for inspections, speak with agents and view as many properties as possible. Attend auctions in the areas you are looking at so you can familiarise yourself with the process. Take note of the under bidders. They may be bidding against you one day and knowing where they are bidding to gives you information that is critical if you do come up against them. Go to the council and check on neighbouring developments that may affect the property in the future. Keep an eye on sale prices each weekend and call agents if it is not reported. The more you know the more confidence you will gain.
Nicole Jacobs, Director, Jacobs Buyers Advocates