Buying a home is an important decision and purchasing your first home, even more so. Here are the 10 steps to avoid when it comes to purchasing your first property.
1. Not securing pre-approval
One of the first things you should do once you decide you’re going to buy your first home is to get pre-qualified for a loan. This way you will know in advance how much you can afford and what the lender will loan to you. You will also be ready to act once you spot your dream home.
Make sure the pre-approval from your lender is put in writing, giving you the confidence and means to make an offer on a home or bid at auction.
2. Not doing your research
Failing to understand the market and exactly what properties are worth could be your downfall in securing a property at the right price. There are lots of places where you can research property prices. Look at auction results in newspapers or on the Internet, speak to local real estate agents regarding recent sales purchase a professional sales report for the suburbs you are interested in. Such reports give a detailed analysis of sales on a street-by-street basis.
3. Not being familiar with the sales process
Before you start your search, be aware of the practicalities of buying a home. For example, read up on how auctions work, the best way to go about making an offer, what to look for when buying property, and real estate agent tricks and traps. Speak to friends and family about their experiences.
4. Not looking at all aspects of the property
When searching for your dream first home, it’s not just about inspecting the rooms and outdoors areas, you need to take many other issues into consideration.
Consider the following:
- Possibility of aircraft noise
- Local traffic levels
- Parking availability
- Nearby industrial activity
- Developments planned for the nearby area (talk to the local council authority about this)
- What the rest of the street looks like
Tip: Visit the property and surrounding area at different times of the day and observe what’s happening. The last thing you want is one of these factors affecting your quality of life once you move in.
5. Choosing the wrong area
The suburb you move into will become a big part of your life so it’s important you make the right decision when it comes to choosing a suburb.
When compiling your list of suitable areas, consider the following:
- Are there adequate transport facilities?
- Will you have to commute far to work?
- Do you like the surrounding area and the facilities it offers? Are there adequate amenities nearby for your needs?
- If you plan on starting a family, are there enough related services nearby, such as parks, childcare centres, hospital etc?
6. Failing to get a property inspection or strata report
We’ve all heard horror stories about those who’ve purchased a new home only to find it riddled with termites. While you might think this will never happen to you, just remember that buying a property will be one of the most expensive financial commitments you’ll ever make. And it could prove an even more costly one if you don’t get an independent pest and building inspection done prior to purchase.
Property inspections: pest and building
Pre-purchase property inspections that are undertaken before you exchange contracts or bid at auction will give a written account of the state of the property, highlighting any problems such as significant building defects or issues such as rising damp or movement in the walls (cracking), and the cost to fix them. A basic report will cost around $500 and you will need the vendor’s permission to have the property inspected.
A building inspection report is different to a pest inspection report. While a building inspection report should identify any visual damage that may have been caused by termites, it usually won’t include the existence of termites or other timber destroying pests. It is advisable to get a separate pest inspection report done before you buy a property.
When purchasing strata property, it’s highly recommended that you conduct a strata search that will look at all the records of the strata scheme. Such a search may uncover factors that could affect you if you become the owner.
You can opt to search the records yourself (you’ll need to make a time and date with the strata managing agent and will often have to pay a small fee) or there are companies that specialise in this service and will provide you with a report covering all you need to know. Your solicitor can often arrange this service for you, and will then go through the report to discuss any important matters such as current or proposed litigation, disputes between owners or any other financial matters that could affect a new owner.
7. Not acting quickly enough
Once you see your ideal home, you may have to move quickly. Whether it’s the first house/apartment or the 100th one you see, if it feels right and it’s within your budget (and you’ve looked at all the aspects above), don’t leave it too late before making an offer. Someone might just beat you to it.
In the same vein, don’t be talked into buying any property you’re not sure about.
8. Not being alert to gazumping
Just because you’ve made an offer and it’s been verbally accepted, and the real estate agent tells you “It’s in the bag”, don’t be fooled into believing the property is yours. Until you and the owner sign a legally binding contract nothing is set in stone and another buyer could make an offer and outbid you. Ask the real estate agent to let you know if another party puts in a higher offer so you can make a counter bid if you wish.
9. Letting your emotions get in the way
While the search to find your home will be an emotional one, it’s best not to let your emotions get in the way when it comes to transacting a purchase. This especially rings true when it comes to auctions, as under the circumstances, it’s easy to get carried away. If you feel too emotionally attached and feel you will go over your budget, consider having someone else do the bidding for you.
10. Going beyond your means and budget
As a first home buyer (and this rule applies to anyone buying property), you should never go above your budget and financial means. If you do, it may affect you and your family’s short-term and longer-term financial situation. It’s always better to play it a bit safer and think about events that could happen in the future, for example job loss or interest rate rises.