What you need to consider before buying property
1. Consider what you can realistically afford
This is the most important step and it’s one you must take before you even start looking for a home. This step is often where we see client hesitation due to unrealistic property expectations.
For an initial idea use a budget planner to figure out how much you spend each week, fortnight or month. This will help determine your borrowing capacity (i.e. how much money the bank will loan to you).
Further it is important to keep in mind that you will need a deposit saved. This figure differs for each different scenario (i.e. eligibility criteria and lender/gov grants). Have a chat with us to find out more.
Keep in mind you’ll need to have funds to cover other costs associated with a purchase including stamp duty and Lenders Mortgage Insurance, when finalising your budget.
2. Factor in silent or forgotten costs
As mentioned, it’s the extra costs that will sneak up on you and create some budgetary mayhem.
These costs include
Council rates – if the current owner has paid the council rates for the year depending on when you take over the property you’ll have to pay them a portion
Stamp Duty – this is a big one as it can cost many tens of thousands of dollars so it’s best to use a stamp duty calculator to understand how much you’ll need to pay
Lenders Mortgage Insurance – if you’re borrowing more than 80% of the value of the property you’ll likely pay additional fees called Lenders Mortgage Insurance (LMI). There may be situations where LMI is waved.
Additional Insurance – most people know you should have home and contents insurance when you move into a house, but many banks will ask you to insure the home before settlement. Get a quote to understand how much it will cost.
Loan Fees – it’s worth comparing bank comparison rates rather than simply the variable or fixed rate as this will take into consideration the fees associated with a loan. Sometimes a really great rate actually has lots of hidden fees. As a part of our recommendations we can provide a fee breakdown for you.
Conveyancing – Fees for conveyancing can vary from provider to provider, so keep in mind there will be a basic fee for their service plus the additional costs when they need to do more work like add a clause to the contract or negotiate with the seller’s conveyancer.
Building and pest inspections – Please keep funds aside to ensure you don’t get caught out.
3. Research, research, research
You can’t be too prepared when purchasing a property.
You should consider what’s important to you but also be aware of things that help improve property value for when it’s time to sell. Things like:
Future building plans – Visit the local council website
Access to amenities
When you’ve found a house or houses you’re genuinely interested in, use property profile reports (just call us and ask) to get an idea of what similar houses have sold for, the sales and rental history of the house and even an estimate of what the house is worth today.
4. Negotiate with confidence
While you can negotiate with a firm price ceiling in mind, always remember it’s also perfectly ok to walk away if the deal isn’t right. There’ll be other properties that meet your requirements.
A few things to consider when negotiating;
Supply and demand – If you’ve noticed that there is little interest in the property either by limited people at the open houses, lots of similar houses on the market or the agent is really pushing for an offer, you could be in a position of power, meaning you could be one of few or the only interested party. This gives you room to offer below the asking price.
The market, not the asking price – The asking price has ultimately been given by the seller with guidance from the agent. If you have noticed similar sized and located houses in the market are selling for less than the asking price don’t use it as the starting point or even the gauge. Keep in mind a house is only worth as much as someone will pay for it. This means the seller will either have to settle for a lower price or take the house off the market.
Price isn’t the only negotiating tool – You can also negotiate settlement terms, for example, if it suits you to get into the house quickly because you’ve already sold your house. Tell them you are willing to settle earlier if they want that.
Keep in mind that while the real estate agent is working for the seller trying to get the best price, they also need to make a sale to get paid, so if they feel you have no more room to increase your offer they will push the seller to sell.