Buying your first property is incredibly exciting! Unfortunately that excitement is often stamped out by expensive rookie mistakes that can result in tears or sadness, not happiness! To ensure a much smoother purchase experience and to avoid a mental breakdown, follow these 3 mistake-busting steps!
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1. Not Understanding Your True Financial Costs And Capabilities
Finance goes hand-in-hand with buying a house, but too often first home buyers make the fatal mistake of borrowing right up to their borrowing limit. This is the number one killer! Think of it like when you are flying with a budget airline - the price of the flight seems great, but the true costs are when all the extras are added in like baggage, seat selection and so on. When it comes to houses, the additional costs include home insurance, moving costs, stamp duty, council rates, transfer fees, and moving costs, and these are way more expensive then that $20 baggage fee at the airport!
To avoid this fatal mistake, get to know your finance and mortgage options inside and out and shop around with a mortgage broker so you know you are getting the best rates. There are so many different home loan packages out there, but just remember that whilst it may be easier to get a loan nowadays, the risks are higher. If you go for a no-deposit home loan you will pay more in lenders mortgage insurance. Work out your financial capabilities before looking at properties so you have a set budget and can focus on properties that you actually can afford. There is nothing worse than searching for your dream home and learning you cannot own it.
Tip: Use a reputable mortgage broker, it’s completely free and instead of just searching for the best deal with your bank they will compare with up to 30 banks.
2. Not Researching The Market
On top of getting mortgage insurance advice, your parents telling you about how it worked 30 years ago and with all your Facebook real estate experts it can get super confusing when buying a property. Too many first home buyers fall into the trap of relying on just scrolling through realestate.com and domain.com, working out the average price of homes on what is currently listed and thinking that’s the only option. This process only gives you a vague figure on what home owners are currently “hoping” to sell their home for.
Instead go and do your own independent research by looking at auction results in the local paper or the Sunday Courier Mail. Bless the internet, because it is now full of historical information on sold house prices, and even iPhone’s have apps that can give a price assumption. The key is to use recent sold prices of similar homes to the one you admire, this will give you a more accurate representation of where the property sits in the current market. There are many factors to consider when pricing a home so keep things like main roads, block size, location, historic flood zones, transport options etc in mind. Like apples and oranges, there is no point comparing a newly built house with city views, a pool, six bedrooms etc to a house at the bottom of the hill that needs a complete renovation on the smallest block in the neighbourhood that also backs onto the highway.
Real estate and property professionals are another fantastic source but be wary as each person you encounter will have their own point of view and experience. In terms of your friendly real estate agent, they can be super helpful and there is a lot of well-intentioned agents out there. Know the difference, however, between an agent working for you and an agent working for the vendor.
An agent not working on the property you are inquiring on can be an enormously helpful friend to have as they will cut through the red tape and help you find exactly what you are looking for, and they may even have off market properties that suit you. However, the agent looking after the property you want to purchase might seem pretty helpful but you must keep in the back of your mind the fact that they are working for the seller of that particular property and must legally act in their best interest, not yours.
So long as you do your independent research we spoke about earlier you will be fine, become your own real estate pro and you will have the upper hand at the negotiating table. When you show you are serious by making informative and realistic counter offers on properties, agents and their vendors will be more likely to deal with you. This helps in an auction scenario as well and can save you thousands. Always remember knowledge is power!
Tip: For a small investment you can buy an online monthly subscription to either www.pdslive.com.au or www.corelogic.com.au and research like the professionals do. These sites allow you to compare properties and build reports on probable sale ranges.
3 – Making Emotional Decisions
Back to those tears that we spoke about earlier, buying homes is an emotional experience no matter if it’s your first or 5th home. The most common mistake is paying too much for your ‘dream home’ because your emotions are dictating your decisions. There is no need to beat yourself up for getting emotional. In fact, you should embrace it. Buying your very own home is such an unreal experience. If you have done the above you will be in a far better decision-making frame of mind. It is quite easy to get carried away and rush into making an offer on the first home inspection you go to. Remember to step back and don’t overlook the buying process. Do your due diligence, inspect the property multiple times and don’t overlook important areas that will impact your bottom line. Buying a home is not just a new family home but also an investment in your future. This process may mean spending a little more time searching for the property that best suits you, but if you keep a cool head you will have ensured that your future is as safe . . . as houses!
Tip: A general rule of thumb for investors and renovators is that if the return on investment isn’t feasible then you walk away, this is true for all home owners as well.
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Buying your first property or any property is one of the most rewarding and fulfilling experiences. If you need some guidance on your property journey, please don’t hesitate to contact me today for a free consultation.