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Buying my first home Part TWO

Missed Part One? Click here

So you’re ready to get serious.

Talk to the agent of the property you are interested in and tell them you want to make an offer, subject to your due diligence. Your due diligence is anything at all that YOU need to satisfy you that the property is sound and that you have found ‘the one’.  It can include a pest and building report, confirmation of your loan approval, whether there are sufficient funds in the strata sinking fund, if the swimming pool is approved, if the climate suits your orchid collection – anything at all that would be material to your purchase.

Feel free to start a little lower with your offer.

Don’t be ridiculously insulting, and allow the process to move your price upwards if necessary. I mean, yes, the agent works for the vendor but they also don’t get paid unless the deal comes together. Talk to the agent about a reasonable price to offer.  A good agent will help both sides get what they want.

There are typically three prices…

“OMG I am thrilled I got it for that”,  ‘That’s fair and reasonable price’ and  ‘I am not paying another cent’ price. Hopefully you end up in the middle of those ranges. Fair and reasonable. Remember you will have closing costs – stamp duty and conveyancing fees to consider, moving and relocating costs and possibly some redecoration back up cash. The seller doesn’t care about any of ‘your’ costs so don’t feel these are items to help you negotiate. You should have all those costs in your allocated budget.

Don’t obsess about overpaying.

Everyone wants a steal but its unrealistic. Markets go up- and markets go down. You will have done your homework at this point and know where relative value sits. Don’t dig your toes in over $5,000… The vendor AND the buyer have got to walk away satisfied or the process doesn’t work. $5,000 extra on the mortgage will be pennies a day, but it might pay off the marketing package for the vendor which could allow them to move ahead. Its none of your business how much “they” are making on the transaction! If they are making a massive profit or making sixpence, that’s their business. (You wouldn’t pay extra if they were making a loss, would you!) Hopefully you get an amazing house for an amazing price – but don’t hang your hopes on that scenario.

Back to due diligence.

Do make sure you organise a pest and building report to make sure the property is structurally sound, or a strata report to make sure there is enough funds in the kitty and that there are no scary issues with the building. This is usually done in the cooling-off period once the offer has been accepted. Again, be reasonable. If you are buying a 28 year old house, have some expectation that it won’t be a brand new property. You want it to be ‘as expected’ for a property of that vintage. Talk to the inspector too. Sometimes their written reports cover their butts so extensively that it looks terrifying. Verbally they may be more human.

Happy with the reports?

Once you are satisfied, and with consultation with your solicitor, you then pay the balance of the deposit (typically 10% but sometimes you can negotiate to 5% of the sale price). This generally occurs after the cooling-off period has expired, and you are ready to proceed. This is when the sale becomes an ‘unconditional sale’ and the settlement process begins. Remember, whatever deposit you pay at this point, you will still owe 10% if you default between now and settlement. The deposit is held in trust by the real estate company and handed to the seller once settlement has occurred. In New South Wales, typical settlement is 42 days, but anything can be negotiated between the buyer and the seller – BEFORE you sign contracts. If you want more time after contracts have been signed, the vendor might say yes – but they might say no too, and you have no leverage.

Key points to remember:

  • Sort your finances out and save save save!
  • Know what your borrowing capacity is before you start looking, shop around, but also find a good broker that will do the work for you
  • Do your research on the area, agent, current market, everything!
  • Utilise the agents in the area, they (should!) know the area like the back of their hand
  • Remember to take into account extra costs eg stamp duty, conveyancing fees, etc
  • Don’t skip on your due diligence, this may bite you in the behind!
  • Organise a pre-settlement inspection with your agent

Buying a house is daunting – but its the best feeling once you receive the keys to your first home.  Good luck!

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