11 Common First Home Buyer Mistakes
Buying your first home
Can be an exciting time. While you may be eager to look to the future in your new home, you should be aware of a few places where first home buyers can stumble:
Not Taking Advantage of First Home Buyer Benefits.
The Difference Between Buying Private Treaty vs Auction.
Confusing a Loan Pre-Approval with a Formal Loan Approval.
Paying More Than You Can Afford.
Underestimating the Costs of Purchasing a Property.
Don’t Let Your Emotions Get the Better of You
Not Considering All Aspects of the Property.
Understanding the Role of The Selling Agent.
Not Considering a Professional Buyer’s Agent
Signing a Contract Before Obtaining Legal Advice.
Not Obtaining Property Inspections.
If this property is your first purchase, you may have a few options open to you. While the lump sum payments of first home buyers’ grants of old may not be around, but there is still help available. For example, the NSW government provides concessions and exemptions on transfer duty for first home buyers and if the house is new or being built you may be eligible for a $10,000 grant.
The most obvious difference between private treaty and auction is that private treaty has an asking price (which can usually be negotiated), whereas auctions are open to bidding on the day. As well as this there are contractual differences, for example there isn’t a cooling off period for auction sales. The sense of competition can also take hold of buyers on auction day, causing them to overextend themselves. If purchasing at auction is a potential option for you then talk to a solicitor to get a better understanding of what this involves.
Seeking pre-approval from a lender can be a helpful step towards your big purchase. It does not, however, mean the lender has agreed to the loan. Pre-approval is only an estimate by the lender of what the upper limit of what amount they may lend you. This can help you narrow your search for properties. Once applying for the final loan amount, lenders will have requirements of you and the property, so it’s important to also know what they are to avoid disappointment.
To get to the point where you’re looking to buy you will have had to budget. You wouldn’t have been able to raise a deposit if you didn’t. Keep thinking the same way. What is your budget? Is it the same as your rent plus what you’ve been saving for the deposit, or can you afford more? Once you’ve got that number, stick to it. This is also where pre-approval can help. If you go over that budget, you not only risk this property but potentially any future properties also.
This is an easy one to do. Unlike when you buy a car and you look at the drive away cost, purchasing a property can have some additional costs that you may not have been expecting. On top of the sale price you will have to pay transfer duty, which is a percentage of the property value. Mortgages will also have application fees and depending on your deposit, may require mortgage insurance. These are just a few examples. Be sure to check with your lender so you’re not caught out.
When you’re looking at a property, it’s very easy to get caught up in the idea of your new home. Walking through a place you can easily imagine where you put your furniture and how you and your family would spend your time there. But while deciding where you will live is very much an emotional experience, you have to let logic take charge. A great idea is to have a checklist, not just of what you want but what you need and can afford. This will help you cut through the emotion and make sure the property you love is also the best one to buy.
Once you buy a property it’s yours to do with as you wish right? Unfortunately, that’s not the case. Different areas have restrictions on what you can build and even where on your land you can build. Many renovations require council approval (which comes at a cost). It’s not just your home you have to consider. What is the neighborhood like? If you have children, what schools are nearby? Does it have the cafes or restaurants in the area you’re looking for? What public transport is nearby? Even things that might seem insignificant, like the number of bins available might have an impact. Research is key.
Is it in your nature to trust people? That might not be the best instinct in this case. Real estate agents are friendly people. They will get to know you and figure out what you want in a home. This can be very helpful and if they find the perfect house for you, then it’s win-win. But they are trying to sell. The best interest of the seller are also their best interests, not yours. This isn’t to say they are unethical, but ultimately, they are trying to get you to buy. Always keep this in mind.
While the seller usually has an agent, as a buyer you can appoint an agent too. This has a few advantages. Firstly, it can save you time. By giving the agent a budget and requirements of the property, they can look at the market and present you a shortlist. This can even rule out the trap of overspending as you won’t see homes outside your budget. Buyer’s agents can also provide you with all the information for the area and negotiate with the selling agent, taking even more of the stress out of the process.
Once you have found the perfect home you want to get the contract signed quickly so you can move into your new home as soon as possible. It’s always a good move to have a solicitor look at the contract. While the law does it’s best to safeguard the interests of buyer and seller, there may be some conditions that could be overlooked by someone inexperienced with contracts. A solicitor will inform you of all conditions and advise the best course of action.
Appearances can be deceiving. A good-looking home may be hiding some issues. Not everybody is honest, and they may try and cover up problems. To be sure you haven’t missed anything it is imperative to get a building inspection. A professional can inspect the house and will find things that you may not even have thought of. A building inspection can be a condition of your contract, so get your solicitor to include it and be sure you aren’t buying into a headache.
When you’re looking to buy your first property, knowledge is power. Seek help from your solicitor, lender, and agents. Keep emotion out of the process and stay informed. This will help you with a smooth transaction and let you get settled sooner. If you’re looking at buying your first property and need help, contact us at CM Lawyers.