Purchasing your first property is an exciting time in your life, even though it can be fraught with a number of realistic concerns about the buying process. After all, you don’t want to invest your money in a property that turns out to be more trouble than it’s worth in a few years’ time. So what can you do to ensure that the property you purchase fulfils all your requirements in both the short and long time?
At Switch Real Estate, we want you to feel comfortable with the buying process. However, as a novice purchaser you can be tripped up very easily, simply because you are inexperienced and don’t know what questions to ask. So to help you navigate your way through the process of purchasing your first home, we have put together this list of six essential tips for first-time home buyers.
1. Sellers don’t always agree to your conditions
When you submit an offer to purchase a property there are a number of condition that you can stipulate. Obvious examples are that the property passes a building and pest inspection and that you obtain finance (if needed). Some buyers also stipulate other conditions that are not always met with such a favourable outcome. One good example is repairs and another is cleaning. You are well within your rights to make the sale conditional on specific repairs being performed and if the seller agrees, but doesn’t undertake these repairs, the sale can legally be halted. However, if you stipulate that the home is professionally cleaned prior to settlement, this can’t be enforced legally, even if the sellers agree and then renege at settlement.
2. You need to pay your legal fees before settlement can be finalised
In addition to your deposit, you need to pay your lawyer’s bill, as they usually perform all the title searches and conveyancing duties. These legal fees must be paid before settlement can take place, otherwise your property will not settle (although they can be paid on settlement day). This means that the final settlement of the property will be halted, delaying the transfer of ownership of the property from the seller to you, until you pay these legal fees.
3. Always check for infrastructure changes in the suburb
Often your lawyer will search for any proposed plans to the infrastructure in your new home’s location, but they are not infallible. A new school or upgraded parklands might increase your new home’s value, but rezoning to allow commercial buildings might have the opposite effect. So always ask your lawyer to make these searches, but it also pays to do your own research before you make an offer, as afterwards it may be too late. You can ask at your local council chambers, as well as discussing this matter with the local MP at your new location.
4. Read all legal documents before signing
Reading legal documents isn’t for the faint hearted, but they can save you a lot of grief in the future. This is particularly relevant if you are building your first home, but also applies to any home you purchase, whether a new build or not. One of our Switch Real Estate agents has a good example where reading these documents paid off handsomely. Hidden in a 60-page off-the-plan sales contract was the fact that the new estate was being built on top of an old ammunitions dump and there could still be live ammunition underground. The developer hadn’t revealed this information, it was only found by the potential buyer because he actually read the entire document before signing (he didn’t sign!). Relying on your lawyer to identify these issues is admirable, but it also pays to do your own due diligence.
5. Prepare to pay a deposit when you make an offer
In Australia, you can’t make a verbal offer on a property and wait to see if the seller agrees, then sign the necessary documents and pay a deposit. You have to submit a written offer, which is a legal document, and pay a deposit at the same time. This deposit is usually $1000 for every $100,000 of the purchase price, but at Switch Real Estate, we have a certain amount of discretion in negotiating the amount of the deposit, which will be subtracted from the final price at settlement. It will however, be returned to you, if the seller doesn’t accept your offer, but you may loose this deposit if you renege on the purchase, after the seller has accepted your written offer.
6. Manage your credit cards judiciously
If you are applying for a mortgage, it’s wise to pay off your credit cards first and not apply for any more cards, until you have purchased your new home. For many first time buyers, the lure of credit is seductive, simply because you want to add your own touches to your new home. However, too much money on credit is considered a liability and banks are well-known for refusing to approve mortgages to buyers in these circumstances. So clear your cards and don’t apply for any more until the deal is done.