Welcome to Part 7 of our series, offering tips to help first home buyers find the right property. In this edition, we aim to equip you with strategic insights and essential knowledge to enhance your property search and purchasing decisions. You will discover the critical questions to ask real estate agents and unravel the often perplexing jargon used in property transactions. We also delve into the specifics of different property types, particularly apartments, and the advantages of exploring off-market properties. These insights are designed to guide you, whether you’re considering a vibrant city apartment or a serene suburban home, ensuring you make informed choices that align with your preferences and budget.
Tip 24: Questions to ask the real estate agent
When inspecting properties you are looking to gather as much information as possible as you seek to decide how interested you are in a property and whether you are realistically might be able to buy it.
As you assess this, the real estate agent managing the sale can be a useful resource. Now it needs to be pointed out that the agent is there to act for the seller so you need to be careful what you share with the agent and how much you rely on what they tell you. BUT nevertheless asking the right sorts of questions can yield useful information.
Here are some questions that may yield useful insights to assist as you look to buy your first home:
| Question | Why ask? |
| How long has the property been on the market? | Insight to the demand/interest in the property |
| Why is the owner selling? | To understand the need or desire of the seller and their urgency (eg. they have bought a new home or a divorce) |
| Is there anything I should know about the property? | A good open question that might produce information that you would not otherwise glean. |
| How long has the owner held the property? | If a short period of time it suggest a potential issue motivating a sale so you want to know what that issue is. Change in personal circumstances? Or an issue with the property? |
| If sale by auction, what price range are you expecting? | If you visit more than once then keep asking this question and see if the price range quoted in moving |
| If selling by private sale, how did the seller come to the asking price? | Looking for data to support the asking price (or show that there is none). |
| How many parties have asked for the contract or conducted building inspections? | To gauge the level of interest in the property as getting a contract reviewed or conducting a building inspection costs money |
| Have any renovations been carried out recently? | You want to make sure any works have the necessary council approvals |
| If buying an apartment, what are the rates & body corp fees? | Helpful for budgeting and body corp fees can vary widely depending on the amenities in the building |
| What fittings are included with the sale? | Some items that you might think will stay might go and vice-versa – again this impacts your budgetting |
| Are the sellers genuinely open to pre-auction offers (where sale by auction) | Impacts your strategy if you are interested in the property |
Finally if you have any interest in the property always tell the agent that you wish to be notified of any offers made so that you are in the mix to buy if interest in the property hots up and is being brought to a conclusion pre-auction.
Tip 25: Understanding property jargonÂ
There is lots of jargon used by agents and it is helpful to understand the terms they use. Here are a few of the more important terms to know as you are looking at properties:
Body Corporate/Owners Corporation – The body responsible for managing the common areas of a property (eg stairwells, foyers, lifts for apartment buildings)
Company title – Is a type of property title where you hold ownership of real estate by way of company shares. Under Company Title, land and buildings are owned by a private company. The company’s shareholding structure is organised so that ownership of a certain parcel of shares entitles the shareholder to exclusive possession of a part of the building. Company Titles existed before Strata Title was introduced in the 1960’s so you should be aware of this when looking at older style apartments.
Cooling off period – A short statutory period after the contract is made, during which the purchaser may cancel the contract unconditionally. In Victoria the cooling period is 3 business days. A cooling period does not apply in the case of an auction OR offers made within 3 business days of an auction.
Date of settlement –Â The date on which a contract of sale is finalised and final payment is made (and ownership is transferred to the purchaser).
Easement – A right to use the land of another (not involving the taking of any part of the natural produce of that land, or any part of its soil) or a right to prevent the owner of that land from using that land in a particular manner. Most commonly used where Government authorities have the right to run, for example, electrical mains or drainage through private property. Some form of compensation may be payable.
Fixtures –Â Those parts of a property affixed to structures or land, usually in such a manner that they cannot be independently moved without damage to themselves or the property housing supporting or pertinent to them. Fixtures are usually included in a sale and commonly include items such as carpets and awnings.
Offer – The consideration (price) offered to purchase a property. An offer also needs to spell out all terms of the offer such as the Settlement Date, Deposit Amount and any conditions on the purchase (subject to finance/building inspection/review of contract etc)Â
Reserve Price – The lowest acceptable price that the owner will sell at. In the case of an auction not usually set until auction day. It is not uncommon to find that this figure is above the Quoted Range
On the Market – A term used in the context of an auction. When a property is declared “On the market” bidding has reached a level where the seller will sell the property to the person offering the highest price. Until that time the bidding has been at a level below what the seller would accept.
Quote Range – The price range for the property estimated by the selling agent and set out in the Statement of Information.
Settlement – The finalisation of the purchase when the purchaser makes the final payment to the vendor and takes legal ownership/possession of the property
Settlement Date – The date on which Settlement takes place
Statement of Information – Where a property is not offered for sale at a set price, the selling agent must provide a Statement of Information. This document must list 3 comparable properties sold and nominate a quoted price range for the property being sold taking into account the prices paid for these properties. The price range quoted can not be more than 10% apart.
Strata Title – A scheme of property ownership where each proprietor owns parts of a building (their apartment or unit) and has joint rights with other proprietors over the land and other common areas (which are managed by the Body Corporate).
Stratum Title – Under stratum title, the property is subdivided into lots. Each unit owner is the registered proprietor of their lot and also holds shares in a service company that owns and manages the common property. Stratum Title is a hybrid of Strata and Company Title.
Subject to Lease – The property being sold is currently leased out and the lease will still be ongoing at settlement (in other words you are not getting vacant possession)
Vacant possession – In real estate this refers to a right to possession of land or built-up property in respect of which there is no current occupant.
Zoning – A local planning tool to control the present and future development of land including residential, business and industrial uses.
Tip 26: Not all apartments are equal
If you are looking at apartments here are a few things to be aware of as you look at properties. With this knowledge, you can ask the right questions and gather the relevant information. You can also check if your proposed lender can accept the proposed property as security (this is a question for your mortgage broker).
Property type – Strata Title v Stratum Title v Company Title
Apartments and units fall under one of 3 different title systems, Strata, Stratum and Company Title. See the previous tip for an explanation of each type but the key thing to know is that while Strata
Understand that Strata Title properties are easier to finance than Stratum or Company Title properties (especially the latter). It is why, all things being equal between 3 such properties that Strata properties are valued higher
Property sizeÂ
Did you know that the size of an apartment impacts how readily you can get finance for it?
Apartments under 30 sqm – There is possibly only 1 lender that will consider lending against a property that is under 30sqm.Â
Apartments 30-39.99 sqm – Only 1-2 lenders will lend on apartments in this size range.
Apartments 40-49.99 sqm – A handful of lenders will accept apartments this size.
50 sqm+: Size is rarely an issue.
The above measurements are based on internal liveable areas so measurements do not take into balconies, car park spaces or storage lockers.
It is harder to finance smaller apartments as the demand for these properties is smaller. So the banks perceive greater risk associated with properties with less general appeal. For example, a spacious 2 br apartment might suit a single person, young couple, downsizer or investor whereas a small 1 bedroom apartment has narrower appeal.
Inner City or High Density Apartments
A number of lenders also have issues with apartments in high density apartment buildings or certain inner suburbs (eg Southbank or Docklands in Melbourne). There are lenders that will accept such securities but discuss this with your broker or lender if you are considering buying such a property.
Tip 27: Off market propertiesÂ
Off market properties are properties that are not publicly listed and advertised for sale. There are a number of reasons why someone might want to sell a property off market, including;
- To save money – selling off market avoids paying marketing costs of online listings, photography, listing boards, and property staging. A seller might not want to pay for these items or they might not have the funds to pay for them due to financial pressures.Â
- To save time – A seller may be looking for a quick sale due to financial distress or because they need the funds quickly to pay for a property they have already bought. Selling off market can achieve this as time is not lost readying the property for sale and running a sales campaign
- Privacy – the seller does not want people going through their home en-masse and might not want people around them knowing that they are selling for various legitimate reasons
- Test the market – This is sometimes done to test the properties true value and may lead to a on market listing unless a satisfactory offer arises
If you are able to buy off market you will often pay a little less than if it was offered via a public sale campaign. If you can identify what is driving the off market sale, and in the absence of a lot of competition, you might pick up the property for even a better price.
The number of properties available to buy off market will change constantly but recently one buyers advocate estimated that up to 30% of properties that she bought for clients were “off market”.
So there are potentially a lot of properties you are missing out on seeing if you are not finding out about off market properties for sale.
To gain access to these properties, either engage a buyers advocate who ought to be able to find these opportunities from their networks, OR, be open to talking to the selling agents as you inspect properties and let them know that you would be interested to hear about off market listing and give the agent just enough details to be able to match you with suitable properties they know about or come across.
Finally, if you are looking at buying an apartment/unit, be aware that often the owners of the other apartments/units in the block watch the auction and if the sale price is attractive to them, they might approach the under bidder to see if they might be interested in their property. So consider hanging around after an auction concludes for 10-15 mins and see what happens.
We hope you enjoyed our tips to help first home buyers find the right property. For more useful tips for first-time buyers, check out part one of our 30 tips For First Home Buyers here, part two here, part three here, part four here, part five here, part six here, and our First Home Buyer page in the knowledge centre here.
