The 5 most common mistakes when buying a home
The journey to finding your dream home can be an exciting one. It’s easy to get swept off your feet by the perfect home, and if the “shoe fits” shouldn’t you just stop your endless searching and become the owner of your castle in the sky?
Suffice to say, not everyone’s search for a home has a fairy-tale ending. But if you do want to find a great home that suits you and that is within a budget you can afford, then don’t make the same 5 mistakes that many buyers make…
- Not doing enough research
Don’t sit around waiting for the perfect home to fall in your lap for a steal! The chances of that happening are miniscule and in the process you will miss lots of good properties.
You need to put in the legwork and do your research. This will put you well ahead of others in securing your new home. Keeping up to date with market news, talking to an array of agents from different companies, friends and family are all a great place to start.
The next step would be to watch out for property trends in suburbs you’re looking to buy in. This will give you a better estimate about price ranges in the area. Attending auctions and seeing how many bidders are at each one is imperative to knowing the realistic competition you’re up against.
Home buyers are also notorious for undervaluing properties. The result being, that people are looking at properties beyond their price range and being outbid at auction.
In a rising market if it takes 6-18 months to find a home, the type of property you first sought could end up well out of your price range by the time you finally buy.
And if you don’t feel confident knowing how much you should pay for a property, then getting some professional advice could be a great benefit to you. A good Buyer’s Advocate can more accurately assess the value of properties and ascertain their long-term potential.
- Failing to organise finance in advance
A pre-approval loan is a bank indicating that they are prepared to lend the amount requested, in the scenario presented to them, subject to the applicant finding a suitable property and valuation of that property. It is not a rock-solid guarantee that the bank will lend you money, but it is a strong indication.
Organising a pre-approval loan before you purchase has a number of benefits. It will give you the knowledge about how much banks are willing to lend you and in turn will provide you with a sense of comfort in knowing how much you should be spending on purchasing a property.
When bidding at auction that confidence could be the difference between losing out on your dream purchase and being the one to sign the contract. It also gives you the option to make an offer on a property and take it off the market prior to it going to auction.
“There’s no cost to you for organising a pre-approval and you receive a greater sense of comfort. So why wouldn’t you?” – Tim Gaspar, Director at Hatch Financial Services.
- Dazzled by décor. Failing to focus on fundamentals
It’s becoming more and more common for real estate agents to employ property stylists when selling homes to expertly “dress up” the interior of properties. Don’t be drawn in by the exquisite furniture, modern art and stylish décor around the home as this won’t be there after settlement!
Assess the unchangeable features of the property. The number and size of rooms, the floorplan/layout, the quality of the building itself and the aspect of the home including sun exposure and lighting.
Make a checklist of your ‘non-negotiables’ and ‘desirables’. If the property doesn’t tick all the ‘must haves’ …then look elsewhere! You can buy nice furniture and art later, it’s expensive to move walls and your block of land is never going to get bigger. Don’t fall in to the ‘uber trendy’’ trap!
“You ought to be emotional about the property you are purchasing. You were born with senses for a reason. Use them. Just don’t get emotional about the price,” emphasises Ying Chan, buyer’s advocate at WBP property. Know what you should be paying for a property so you don’t overpay and “make sure you choose a property that has the right fundamentals that will always appeal to future purchasers or a tenant such as suburb, street, and proximity to shops, parks, school and transport.”
- Not being purchase ready
Getting a pre-purchase building inspection is an ideal way for an objective opinion on the condition of a property. Building inspections, assess the overall structural aspects of a property, quality of the buildings and if there are any damages (both minor and serious) and can also include pest inspections.
Buying a home is expensive. The cost of inspection ranges between $200 up to $1000 depending on the size of the property. It could be both unfortunate and financially crippling to find out after you purchase the home of your dreams that you would need to carry out expensive repairs on damages and issues you did not know about. Relative to the purchase price and overall costs, it’s a rather small expense which can provide a lot of peace of mind!
The other crucial mistake home buyers make, is not having the contract of sale checked by a solicitor or conveyancer. Having the contract and vendor’s statement checked by a legal professional is “crucial for ensuring the terms and conditions are read and understood” says Martin Galea, Director of Principle Conveyancing.
If you haven’t checked the contract before you sign it…then it’s too late. “Once signed it becomes exceptionally difficult to legally avoid the contract.” Title & zoning issues and more could severely impact the purchaser’s future plans for living and/or development.
- Having a short-term focus
Buying property should be a 5-10 year decision, not 1-3 years as buying and selling property is expensive. Stamp duty, government fees, legal costs will come to around 3-6% of the purchase price and on selling, agent fees will cost you between 1.5-3% of the sale price not to mention costs to move! So you will need the property to have increased by 5-10% just to break even.
Following on from your checklist, know what you want out of your property in the future not just right now. Is this a property you can live in for the next 5-10 years or more? Will your family grow in the near future or will the kids be moving out? Do you want the ability to entertain but also have quiet spaces to retire?
“You don’t want to be buying a place that you’ll need to sell in the next 2-3 years as the property’s value is unlikely to appreciate to cover costs to sell in the current market,” says Tim Gaspar.
Understanding the costs involved in purchasing and selling property is integral in assisting you plan for the future as you will come to understand that there are many expenses involved. Be sure to remember the cost of stamp duty (approx. 5%), agent fees should you sell (approx.2%), interest on loan repayments, transfer (of land) fees, moving costs, home insurance etc.
To ensure there are no major plot-twists, filled with witches, fire-breathing dragons and big bad wolves along the way, then this list can assist you along the way to attaining your fairy-tale ending (at least in the world of property). Trying to find your dream home can be a really enjoyable and positive experience if you’re well prepared and have the support and advice you need. We wish you all the best in your home-hunting adventures!