10 little secrets to buying a home

Searching for the right home can be frustrating especially if you have been spending your Saturday’s traipsing from one open home to the next.

The modern’ way of searching websites like Domain or Realestate.com.au can be equally as frustrating as you simply want a property to jump out of the pack and say “buy me”.

Have you considered a buyer’s agent – hang on, “why I am going to pay someone to do something I can do myself?

Buying a home can set off all sorts of emotions so below is a list of 10 little secrets that we should all keep in our back pockets when we are on the property hunt.

Secret # 10: Now is not the time to be spending up big

While looking for a property it’s not wise to be making any big purchase or moving your money around.

3-6 months prior to buying a new home, lenders like to approve loans when there is a degree of stability in your savings and in your bank account. In the finance industry, it is referred to genuine savings.

Dipping into your bank account on a regular basis can raise levels of concerns and questions from the lenders.

Be careful with your credits cards, using interest-free loans and making big purchases like a new car as they can all impact your ability to borrow money and therefore buy the new home.

 

Secret # 9: Get Pre – Approved For Your Home Loan

There’s a big difference between having a pre-qualified and pre-approved home loan.

Anybody can get pre-qualified for a loan. It is as simple as stating “I earn this much how much could I borrow and a lender with pre-qualify you subject to criteria, loan assessment and loan conditions.

For instance, I have heard of a 17-year-old being given a letter stating he was pre-qualified for a loan you the laws state you must be over 18 to borrow money.

Being pre-approved on the other hand means the lender has looked at all of your financial information, they’ve assessed your loan application, established how much you can afford, completed a credit check and they’ve let you know how much you can afford and how much they will lend you.

Having a home loan pre-approved will save you a lot of time and energy so you are not running around looking at houses you can’t afford.

Secret # 8: Avoid a Border Dispute

It’s essential to get a survey done on your property, so you know exactly what you’re buying.

Knowing the precise boundaries of the property may save you from a potential dispute with your neighbours. This is especially true when it comes to older properties where the fence line differs as they have been torn down and replaced over time.

If the property is an investment property, it is also worth noting that the land value will be based on the amount of land you have. So when it comes to the land tax bill, it is best to have an accurate map drawn up in the event you may wish to dispute it. 

Secret # 7: Don’t Try to Time the Market

Trying to buy at the right time can be challenging. Using the property clock to guide you in your purchase can be useful but it is very difficult to establish when it is the absolute best time to buy or sell.

Attempting to anticipate the exact movements in the housing market is near on impossible. For example, some markets will drop and then bounce along for 6-12 months before dropping again.

An approach I like to consider is the best time to buy is when I find the property and can afford it.

Real Estate is cyclical, property prices go up, and contrary to popular belief can go down at times.

The key is to buy a carefully selected property in the right area and in the long term you will more often reap the rewards as opposed to waiting for the perfect time to buy or seeking the next property hotspot.

Secret # 6: Bigger Isn’t Always Better

Sure the bigger and most beautiful houses stand out but it doesn’t mean the property is right for you.

There’s an adage in real estate that says don’t buy the biggest and best house in the street because  when it comes time to sell you may have  a limited audience of potential buyers because the property is too big.

Buying the biggest and best home may see you overcapitalise in the purchase price as you will be relying on other properties in the street to increase in value.

Sometimes it is best to buy the worst house in the street, spend a little bit of money on renovating the property to suit you or your family’s needs and you might find the property will appreciate in value more quickly than the biggest house you originally looked at.

Secret # 5: Avoid the Surprise of Extra Costs

The difference between renting and home ownership is the additional costs that go with home ownership.

Most people just focus on their mortgage repayments but it’s important to factor in possible expenses such as land tax if you are an investor over the land tax threshold, then strata fees, and special levies if the property is a unit and maintenance costs if the property is a typical house.

Just like cars, properties need regular repairs and maintenance so we’d recommend budgeting around 1% of the property’s value each year to cover such expenses. It is much better to be able to draw on reserve funds in your budget for the additional costs rather than risk losing your house.

Secret # 4: You’re Buying a House – Not Dating It

Buying a house based on emotions has the potential to break your heart and create financial difficulty.

There’s a big difference between your emotions and your instincts. Going with your instincts means that you recognize that you’re getting a great house for a good value. Going with your emotions is being obsessed with the paint color or the backyard.

It’s an investment, so stay calm and be wise.

Secret # 3: Give Your House a Physical 

Would you buy a car without checking under the hood? Of course, you wouldn’t.

Make sure you have a pest and building inspection done on the property.  It’ll cost about $200 – $500 but could end up saving you thousands.

The Building or Pest Company’s representative’s sole responsibility is to provide you with information so that you can make an informed decision to buy or not to buy.

If any issues are found in the property, you can use it as a bargaining tool for lowering the price of the home. It’s better to spend the money upfront than to find out later and you have to spend a fortune.

Secret # 2: The Secret Science of Bidding at Auction

If you find yourself having to attend an auction your bidding should reflect:

• What you can afford (because you don’t want to outbid yourself)
• What you believe the property is worth.

After you have decided to make your opening bid, be sure it is something that’s fair and reasonable and isn’t going to offend the seller.

A lot of people think they should keep their first bid as low as possible. The think about bidding is to play your own game as while you know your own limits you don’t know the limits of the other people bidding.

Secret # 1: Stalk the Neighbourhood

Before you buy or attend any auction it is highly recommended to get the lay of the land of the neighbourhood.

Many homebuyers have become completely distraught because they thought they found the perfect home, only to find out the neighbourhood wasn’t for them.

Drive by the house at all hours of the day to see what’s happening in the community and you could even do your regular work commute from nearby the house to make sure it is something you can deal with on a daily basis.

Even if you don’t have kids, research the schools because it affects the value of your home in a tremendous way. If you buy a house in a good school area versus bad school area even in the same suburb, the value can be affected as much as 20 percent.

Whilst the process of buying a home might be frustrating if you follow the 10 little secrets you just might end up buying a property that brings many years of enjoyment and reward.

Happy house hunting.

Rebecca Mitchell is the Founder of Awesome Lending Solutions