Buying Tips

shutterstock_111711725Buying Tips

1. Start with your finance.

It is often said, to make an offer from a position of power.  Therefore, a simple tip is to obtain a finance pre-approval before you make an offer.  This means the financial institution basically asses
you and your borrowing capacity excluding any property you may be considering buying.

Be aware that submitting too many finance applications may effect your credit rating so make sure you are ready to buy before hand.

Brokers are a good idea as they can offer you a wide variety of lending options for free and totally non-biased.  It pays to have a good network of professionals working with your best interest at hand. Ask one of our Team how we can assist you in this regard.

2. Set your budget.

Next, you need to determine how much you can afford to borrow.  You may already know this if you have applied for a pre-approval.  You may be able to borrow more than you thought, however be aware, that is to the financial institutions benefit.  Only borrow what you are comfortable with and stick to your plan.

Once the bank has looked at your income, debt and credit to determine what they will lend you, make sure you negotiate the best possible rates, product and package that’s right for you.  Again, a broker may be able to offer you a non-biased solution.

3. Line up cash.

You’ll need to come up with cash or have equity to borrow against for your deposit and associated costs (Establishments Fees, Settlement Fees, Stamp Duty and so on).  Lenders like to see 20% of the home’s price as a deposit. If you can put down more than that, the lender may be willing to approve a larger loan.

Having a significant deposit saved, or equity in another property will assist you improve your borrowing capacity without having to pay LMI (Lenders Mortgage Insurance).  This is a safety net protecting the bank in case you fail to make payments.

If you have equity in another property that you can draw against, you may wish to create a draw down facility with one bank to provide the deposit to another bank which will be funding the property.  This way you can avoid cross collateralizing of properties with one bank.

As briefly mentioned above, once you’ve considered the deposit, make sure you’ve got enough to cover fees and associated settlement costs. These may include the valuation fee, lending/bank fees, legal fees, title search and stamp duty (excluding first homes buyer). These costs can easily add up to thousands of dollars.

4. Search for a home.

Your first step here is to figure out where you would like to live, what suburb suits your lifestyle.  Are you looking for the café-strip, night life apartment environment close to the city, or a new, young suburb to raise your family.  Look for signs of economic vitality: a mixture of young families and older couples, low unemployment, good incomes and close proximate to infrastructure such as transport and shopping centres.

Pay special attention to suburbs with good schools, even if you don’t have school-age children. When it comes time to sell, you’ll find that a being in the catchment area of sought after schools is a major advantage in helping your home retain or gain value.

Try also to get an idea about the real estate market in the area. For example, if homes are selling close to or even above the asking price, that shows the area is desirable. If you have the flexibility, consider doing your house hunting in the selling off-season — meaning, generally, the colder months of the year. You’ll have less competition and sellers may be more willing to negotiate.

Be wary of choosing search criteria that are too restrictive. For example, select a price range 10% above and 10% below your true range. Add a 2 – 5km radius to your preferred location.  You may find the “Ripple Effect” may offer excellent opportunities just outside your preferred suburb but offer exciting growth prospects as a result of high growth from its surrounding suburbs that might be slightly out of reach.

5. Make an offer.

Once you find the home of your dreams, move quickly to make an offer. If you’re working with a buyer’s agent, then get advice from him or her on an initial offer. If you’re working with a seller’s agent, devise the strategy yourself.

The sellers agent must write up and present all offers (Unless otherwise instructed by the seller).

Try to line up data on at least three houses that have sold recently in the area.  If you really want the property, don’t low ball. The seller may give up in disgust. Remember, that your leverage depends on the pace of the market. In a slow market, you’ve got muscle; in a hot market, you may have none at all.

There’s no foolproof system for negotiating a fair price.

Be realistic with your conditions.  Remember, although when you make an offer, you have the opportunity to present any conditions you may wish, such as termite/pest inspection or building inspection, however too many conditions may detract from your offer.

Everything on the offer is negotiable.  You may find you have some flexibility with settlement or finance terms in return for a lower price.  Generally speaking, sellers are eager to sell and move on therefore very often a cash unconditional offer with a speedy settlement may encourage a seller to accept an otherwise lower offer than usual had it had onerous conditions.

6. The Offer is Accepted. 

This is where you will engage a settlement agent or solicitor to facilitate the transaction between all parties.  At Asset Edge Residential, “Sellers Settle Free”.  Through our corporate partnership with Archon Settlements (Part of Archon Legal), we have negotiated exceptional rates and will pay your settlement costs to the value of $550.  In addition to this offer, as Archon Settlements are owned by the legal firm Archon Legal, they will offer clients of Asset edge Residential a 10% discount off any legal fees should you require their services.

The settlement agent will see to it that all the conditions on the offer are met at the due dates, such as:

1. Initial deposit
2. Your finance approval
3. Pest/termite or building inspections
4. Final inspection prior to settlement

NOTE: The initial deposit is generally a good will gesture usually between 1% to 10% of the purchase

price.  It is generally held in the sellers agent Trust Account however can sometimes be held in the settlement agent or solicitors Trust Account.  The seller will receive this money along with the balance of funds at settlement.  If the deal falls through, you will get the money back only if you or the home failed any of the conditions.  Be aware, if all conditions have been met and you choose not to proceed, you will forfeit the initial deposit paid and could be sued for the balance of deposit up to 10% (If not already paid) and also any losses the seller may suffer if the property is resold at a lower price than initially sold to you.

7. Apply For Finance.

Now call your mortgage broker or lender and move quickly to agree on terms, if you have not already done so. This is when you decide whether to go with the fixed rate or variable rate home loan and the best package.  Most related bank fees will be covered at settlement.

We have found, using brokers offer you the widest range of options.  Let them do the running around for you and present you the best tailored solutions based on your personal circumstances. Ask your Asset Edge Residential Team member how we can help.

 8. Get an inspection.

In addition to the valuation that the mortgage lender will complete of your home, you may want to commission an independent building inspector (This will have been written on your offer).  Depending on the size of the home, inspections can start from around $400 and take two or more hours.  The associated costs for any requested inspections are bourne by you.

You can be present during the inspection, however it is not common practise.  The building inspector will provide you or through the sellers agent a very detailed report outlining its overall condition, construction materials, wiring, and general structural integrity.  If the inspector turns up major problems, like a roof that needs to be replaced, then ask your settlement agent or solicitor to discuss it with the seller. You will either want the seller to fix the problem before you move in, or deduct the cost of the repair from the final price. If the seller won’t agree to either remedy you may decide to walk away from the deal, which you can do without penalty if you have that contingency written into the contract. be aware that the report is really looking for major structure defects, not general wear and tear.  Even reports conducted on new homes will find some sort of faults but these do not deem it to be structurally unsound.

9. Unconditional.

In the simplest of terms, this means all the conditions of the offer have now been met. Therefore the initial deposit paid, any inspection conducted to your satisfaction and your fiancé has been approved. The property is now deemed to be unconditional and sold.

10. Settlement. 

About five days before the actual settlement date, you will receive notification from the settlement agent or your selling agent to conduct a final inspection for the property.

You must conduct a final inspection in order for settlement to take place.  If you can not or do not wish to attend a final inspection, you can sign a waiver letter doing so which deems this condition waived and settlement can then proceed.  Following the final inspection and everything being in order, the settlement agent or solicitor is notified in writing and you will then proceed to settlement.  Should there be any minor items to tend to, the settlement agent or solicitor can retain funds at settlement for you to rectify your self, otherwise you may issue instructions that the items be tended to prior to settlement.

If settlement can not take place on the due date, both parties have three days grace before penalty interest can be charged to the part delaying settlement.  The penalty rates can be in excess of 16% so it is advisable to avoid being the cause of delaying settlement if possible.

If the all clear is given, a final Settlement Statement from your settlement agent or solicitor will be issued outlining all the funds required for settlement to take place.  Review it carefully and ask your settlement agent or solicitor to explain any items that you are unsure of.

The actual settlement process is often somewhat anticlimactic and very systemised.  Basically you settlement agent or solicitor hand over cheques required to close off the transaction.

The best part about the settlement process is when you receive the phone call from the real estate agent or settlement agent/solicitor saying “Congratulations, You Own A Home”.

All that’s left now is to pick up the keys and move in.