So you’ve taken that all important decision to buy your perfect home. Now what?
Venturing into the real estate market is very exciting; it can be the realisation of a dream. But navigating the purchasing process can also be a minefield… Unless you’re well prepared.
Lots of questions will be running through your mind as you start the search.
- Will I find my “ideal home”?
- How many weekends will I spend house hunting?
- What is the property market doing?
- How much should I pay?
- What if I have to go to an auction?
- Can I trust what the agent is telling me?
You can opt for the shortcut route, but in the long run this is likely to cost you more time and money. On the other hand, if you’ve got your heart set on finding the “right” property – you are going to have to invest some time in getting it right.
We’ve put together this “how to guide to house hunting” to help you on your way.
Searching for the ideal house may seem like hard work, but taking a few moments to strategise your plan of attack will make the whole process a lot easier.
1. Deciding your wants and needs
There are two things to work out upfront:
- Which suburb best suits your needs?
- What type of house or apartment are you looking for?
Before trawling through hundreds of properties online, step back and develop a one-page checklist of things you really want and need. Setting your goals and deciding what you want from the outset will save you lots of time during your house hunt.
Think about what life stage you’re at. Can you purchase your next home and “future proof” for the next five or 10 years? By “future proofing”, we mean what is likely to change in your life in the foreseeable future that is likely to affect your home buying decision?
- Are you planning a family?
- Changing jobs or cities?
- Starting a home business?
- Downsizing?
- Wanting more lifestyle or lower maintenance?
Deciding which suburb best suits you can also be a challenge when buying a house. Take a drive around the areas you like. Eat in the neighbourhood cafes and restaurants, go to the shops and talk to the locals. Find out what attracts people to the suburb.
Ask yourself whether you prefer the trendy inner city vibe with everything within easy walking distance or do you enjoy the tranquillity of the leafy suburbs?
Perhaps you’d like to be close to the beach, harbour or waterways. Or is being on the train line or close to your children’s schools a priority?
Your budget will also help you determine which suburbs will best suit you.
We call this first step creating the “property brief” – it becomes the guiding compass to assessing and shortlisting suitable properties.
2. Money, money, money
No, we’re not talking about the ABBA hit, you need to have your finances in order when you’re buying a new home. There is no point shopping for property without money in your pocket.
Speak to your finance broker or bank and get a finance pre-approval confirmed. Don’t just focus on getting the best interest rate, look at the features of the loan – its flexibility and the total borrowing amount.
The mortgage market is highly competitive and finance brokers can assist you in selecting the best option. It doesn’t cost anything to get finance pre-approval, and it’ll put you in a good position to act swiftly when you find your dream home.
Most pre-approvals are valid for at least three months. Knowing your borrowing capacity helps you narrow your property search to houses within your price range.
Another tip is to make sure you have your 10% deposit available in “clear funds”, in other words that the money is readily available. If your money is tied up in shares or term deposits, it’ll hamper your potential to buy a home in the short term.
3. Put in the research
You’d put in the effort if you were looking for a new car, or any other major purchase. Buying a new home is probably one of the most important decisions you’ll make, and an online property search is always a great starting point.
You can set up property alerts for new listings on the two main property web portals domain.com.au and realestate.com.au. Using your search criteria from Step 1, you can begin to shortlist possible house to buy.
But remember, nothing beats seeing a house” in the flesh”, so to speak. The physical inspection gives you the opportunity to really appreciate what a home has to offer. You’ll soon discover that appearances can be deceiving, and a wide-angle lens is a very useful tool for selling agents to make small rooms look larger online!
When buying a house set aside time to research and inspect potential properties every weekend. By looking at between 50 to 100 homes for sale, you’ll develop a real feel for the market. Tracking recent auction events and private treaty results is also useful.
By forming a relationship with local agents you can also be alerted to new listings before they appear on the market. As you inspect each property, jot down some notes of what you like and dislike – this is essential as it’s easy to forget what you saw four weeks ago.
Arrange an inspection of homes you’re interested in at different times of the day. Listen for potential noise sources l – traffic, neighbours or the proximity of transport hubs such as stations and airports – note down your observations.
4. Draw up a shortlist
Once you’ve looked at a reasonable number of properties you might need to refine your preferences. Are you being realistic in your expectations?
A three-bedroom apartment is unlikely to magically appear for under $500k, and you’re probably going to have to settle for a two-bedroom unit? Or maybe a lock-up garage will have to be compromised for a car space? You might therefore want to also consider widening your suburb search.
Now it’s time to be decisive and dismiss those properties that don’t stack up. Review your notes and come up with a list of three or less properties that could work for you. Consider the following features and evaluate:
- Asking price
- Proximity to shops, schools and transport links
- Age and condition
- Street appeal
- Aspect and light
- Floor plan – does it have a good layout?
- Construction type (i.e. brick or clad)
- Renovation potential
- Kitchen and bathroom styles
- Room sizes
- Living spaces
- Block size
- Maintenance
- Potential capital growth from this suburb.
This step will help you crystallise your wants and needs for buying a house, and come up with a realistic shortlist.
5. What’s it worth?
Now’s the time to appraise the value of your preferred home.
Look at the results of recent home sales and auctions in the suburb. Make sure you compare like properties. Ask local agents for recent sale results. There is a time lag from when properties are sold and when they appear on the public register.
- A bank valuer considers these items when calculating a property value:
- Land size, building size (or internal apartment size)
- Beds/bath/garage
- Age of the property/condition
- Views
- Proximity to amenities
- Functionality
- Ability to add value
- Land value
- State of the local market
- Whether the property is comparatively inferior, superior or similar
When it comes to buying a house, property market is constantly changing. Supply and demand determine what people are ultimately willing to pay. There are also greater factors at play including consumer sentiment, seasonal factors, interest rate movements and economic growth.
6. The legals
You should select a solicitor early in your search process and notify them of your intention to purchase a new home.
Your solicitor is an invaluable ally in the process as they’ll review the contract of sale and check for any adverse contract conditions or problems relating to the title of the property.
They may also negotiate with the vendor’s solicitor to agree on terms such as the settlement period, default rates of interest, deposit amount, inclusions or other items.
Tip: You may have to move fast when exchanging contracts, so make sure your solicitor is available at short notice.
7. Negotiating the deal
You’ve found your dream home after months of searching, but the agent says there are two other buyers “very interested” and they are also making offers. What should you do? Is it real or a ploy to bid you up?
Negotiation is an art – it’s where deals are won and lost. Try to keep emotion out of the equation.
Understanding the vendors’ motivation for selling is a useful starting point. Even more important is knowing the true value of the property in the current market.
You need to have a clear strategy for securing a desirable property ahead of other buyers.
The first impressions you make on an agent do count. He or she will be assessing whether you are a genuine buyer or just window shopping.
Offers need to be made in writing and the value and timing of offers is critical. Too low and you won’t be taken seriously. Too slow and you may miss out. Too high and you’ve overpaid!
You can attempt to work out the value yourself or you could engage a buyer’s agent to both appraise and negotiate the property for you. Getting independent advice and removing the emotion has proven very successful.
8. Exchanging contracts
Once your solicitor has reviewed and approved the contract, you can sign it. You’ll then pay a small deposit of 0.25% of the purchase price, covering a five-day cooling off period. The seller also signs a copy of the contract and the solicitors then “exchange” contracts to verify the sale. The remainder of the 10% deposit is due on the 5th day after signing.
If it is an auction property, you will have to pay 10% deposit on the day of the auction if you’re successful, and there is no cooling-off period.
9. Is it all it’s cracked up to be?
Pest and building inspections are usually completed during the five-day cooling-off period and highlight all the imperfections of the property. This may discourage you from going ahead with buying your house.
Most houses will have some problems and it is important to identify whether they’re simply cosmetic issues or whether they require major work at great expense. While it’s worthwhile to watch out for cracks, don’t be discouraged by minor faults. Every house would have some minor settlement cracking and a few “drummy” tiles.
The key items to look out for are evidence of active termite damage and of serious structural movement which could cause problems later.
Engage a professional building and pest inspector to assess the property you want to buy. It may cost between $500 and $700 to get a quality inspection report. This report can be done either during the cooling-off period or prior to exchange.
10. Reaching the settlement
The final settlement normally takes place six weeks after exchange. Your solicitor will attend the settlement and arrange payment to allow transfer of title into your name.
You need to make sure you have any funds or equity available for the final settlement.
The bank will provide cheques (up to the agreed limit) for the balance owing (less the deposit paid). Various adjustments need to be made for stamp duty, solicitor’s fees, council and water rates, mortgage duty etc.
You should also arrange a “pre-settlement” inspection, to ensure that the vendor has left the agreed inclusions in the property.
Download our Moving Checklist and Free Report on How to Select Your Buyers’ Agent to remind yourself of any finicky loose ends.
How can I get further help?
To get a professional buyers’ advocate on your side sourcing and negotiating the best opportunities, please call 1300 655 615 (or + 61 2 9975 3311), send us your property brief, or email us to arrange a meeting to discuss your property needs.
Rich Harvey is founder and Managing Director of www.propertybuyer.com.au, Australia’s most awarded Buyers Advocates. Propertybuyer helps property investors and home buyers search, appraise and negotiate the right property at the right price, every time. Rich Harvey is an economist, property investor and Managing Director of propertybuyer, Australia’s most awarded Buyers Agents. Rich was awarded the 2009 national “Buyers Agent of the Year”, the “Award for Excellence” 2004-2013 by the REINSW and the 2007 National Telstra Business Award. Find your next property faster, visit www.propertybuyer.com.au or call 1300 655 615.
How can I get further help?
To get a professional buyers’ advocate on your side sourcing and negotiating the best opportunities, please call 1300 655 615 (or + 61 2 9975 3311), send us your property brief, or email us to arrange a meeting to discuss your property needs.
General Advice Disclaimer
This report is intended to provide general information only and has been prepared by propertybuyer without taking into account any particular person’s objectives, financial situation or needs. Investors and home buyers should, before acting on this information, consider the appropriateness of this information having regard to their personal objectives, financial situation or needs. We recommend investors obtain legal or financial advice specific to their situation before making any financial investment or purchasing decision.
Rich Corporation Pty Ltd, trading as propertybuyer (ABN 61675089912, licence # 1265983) and its authorised representatives and consultants do not accept any liability for any errors or omissions of information supplied in this report.
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