For many of us, buying that first home can present a great deal more anxiety than those picture-perfect SOLD smiles give away.
It can be the first time we deal with a solicitor; the first time we apply for a mortgage; the first time we deal with a real estate agent as a buyer; or, the first time we make an offer to buy something involving more money than we’ve ever given thought to.
And unlike seasoned investors, we aren’t well-rehearsed in the process and often run into errors, such as paying too much for the home we want, losing it to another buyer or worst of all, getting stuck with a property that doesn’t meet our needs.
But with a systematic approach, the home buying process can help you steer clear of these common traps and help secure the best deal. Below we’ve laid out the 9 most common mistakes made by the average property buyer and how to avoid them.
Trap #1: Not obtaining a mortgage pre-approval
A pre-approved mortgage is one where your bank has agreed to provide a mortgage up to a maximum amount. This is determined by your bank and based on your financial circumstances – something you will definitely want before finding the right property to purchase. Naturally, people with mortgage pre-approval will be at an advantage in their search, as they can leapfrog buyers without pre-approval and make an offer that the owner can be confident in.
Trap #2: Not accounting for hidden costs
It is essential for buyers to understand and allow for extra costs in their budget. These can include:
- Bank or mortgage application fees, mortgage insurance fees
- Strata search fees, settlement costs
- Building inspection fees
- Council rates/water rates
- Cost of professional pest inspection
- Solicitors/conveyancers costs
- Removalist, rubbish removal or cleaning costs
- Stamp duty fees
- Survey costs and GST
- Building or contents insurance
- Cost of furnishing
Trap #3: Buying the wrong property
What are you looking for in a new home? It’s important to identify what you’re not prepared to compromise on, whether that’s location, floorplan, size etc. Write a list so that you have a benchmark in your search, and won’t settle on something that proves the wrong fit down the track.
Trap #4: Skipping the market before deciding
A good search begins with comparing several properties before deciding – yet this can be something that many skip out on. Taking the time to inspect a number of homes (on average, 5-12) will help you identify your preferences and make an informed decision.
Trap #5: Bidding blind
If you fail to research the market in order to understand what comparable homes are selling for, making your offer would be bidding blind. Without knowing market value, you could easily bid too much or fall short of a competitive offer, and miss out on a home that represents excellent value. Scouting online data, reading property magazines and visiting your local agent to view listings will give you confidence in your knowledge.
Trap #6: Failing to commit the owner to the sale
Once you’ve come to an agreement with the owner on the sale price, it’s imperative that you secure the property immediately; the last thing you want is for them to change their mind. In NSW you can do this by agreeing to a conditional exchange of contracts immediately, which an agent can help you arrange. This is a legally binding transaction allowing 5 business days for the buyer to change their mind, and which locks the owner in.
Trap #7: Not obtaining a good building/pest report
With the cost of having a ‘check’ very small compared to that of unidentified issues down the track, it makes good sense to have a professional building and pest inspection before you buy. Your solicitor or conveyancer will be able to arrange for these, even for new homes.
Trap #8: Not checking on the availability of keys
Moving day can be very exciting, and very tiring! So it pays to check with your agent at least a week before settlement about the location of all keys for the property you’re purchasing. By doing this, the agent will be on notice to have all keys ready for the big day.
Trap #9: Skipping the final inspection
Whatever you do, be sure to have a final inspection of the property you are buying! This will usually take place on the day prior to settlement, and will be your opportunity to check that the property is in the same condition as when exchange of contracts took place. If it isn’t, alert your solicitor or conveyancer, as there is no recourse on the old owner once settlement takes place.
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