So you're going to take the plunge into real estate ownership. Congratulations! You've just made a smart decision in securing your financial future. Let me help you with my top 10 tips for buying your first home.
1. Decide what you can afford
Take a look at your salary, debt levels, cost of living and the repayments you'd face on your ideal property. Be honest with yourself about lifestyle costs so you don't over-stretch yourself. Remember, you have the First Home Owners' Grant of $7000 available to you; and if you buy in NSW before 1 January 2012, you can still enjoy the full stamp duty exemption of $17,990 on a property worth $500,000.
2. Get your finance pre-approved
Do this before you start looking. Don't risk missing out on a great property because you haven't got your finance organised. Shop around too as the banks are offering some very competitive rates right now!
3. How to buy where you want for less
Take a look at the neighbouring suburb. It might be a five-minute walk away but often so much cheaper. If you can't afford your favourite area, consider what you like about it and seek the same in another region. Say you love the café culture and CBD proximity of Sydney's Eastern Suburbs. You'll find the same attributes in the more affordable Inner West.
4. Top features to look for
Major items to look for include a quiet suburban location away from major roads and traffic noise, lots of natural light, close proximity to shops and transport, a good floor plan, good internal size (apartments)/land size (houses) and ideally, off-street parking. Your first property purchase will not be your last, so be willing to compromise on the smaller things but not the headline items above.
5. Properties to avoid
Company title apartments often have by-laws restricting owners' rights to rent their apartments. This might not matter right now, but if you ever want to rent it out or sell it later, company title could be problematic. Stick with strata apartments – there's plenty around. Also avoid new apartments in inferior locations. They're often keenly priced because the developer bought the site cheaply.
6. Recognising potential
It's really off-putting to walk into a dirty, untidy property. But stop yourself and try to see past the mess. How would it look with new paint and carpet and a professional clean? A poorly presented property in a good location is a gift for budget-conscious buyers as you'll face less competition.
7. Buying at auction
You can make an offer prior but you risk paying more than you need to. Pre-sales usually occur when there is lacking interest or when one buyer is offering a lot more. Plan your walk-away price and attend some auctions to experience the atmosphere and observe a few bidding strategies. Organise contract amendments beforehand in writing. If you really don't want to bid yourself, you can authorise someone else to act on your behalf.
8. Bidding at auction
If you're going to start the bidding, start low. Project confidence and make the other bidders think you have no limit. Make your bids fast and assertive. Agonising over your next bid is a sign of weakness. Call out your offer in full (that is, say "$350,000" instead of the increments, such as "$5000"). If it's going to pass in, make sure you're the highest bidder as you'll usually be given first right to negotiate afterwards. Stick to your walk-away price. Short-term disappointment beats long-term remorse! \
9. Buying via private treaty
Don't offer the most you can first-up, as vendors will always assume you can do better. Put the offer in writing and mention your pre-approved finance. To make it more seductive, sign a contract and attach a deposit cheque. If it's rejected, look for ways to help the vendor. Offer a shorter settlement or early release of the deposit if they accept the price. After one or two rejected offers, try offering an odd number such as $337,500 instead of $340,000, as it implies you're stretched to your financial limit.
10. Get a pest and building report
I strongly recommend this but there are also ways to identify major defects yourself. These include checking the powerboard in the electricity box to see how old it is; checking for sagging floors; and looking for water stains on the ceilings or dark stains around the skirting boards, which could indicate leaks or rising damp. Also, turn on a tap to check the water pressure.
Finally, if you're a NSW first homebuyer trying to buy before 1 January so you can save that $17,990 in stamp duty, keep that number very firmly in mind. Don't go $25,000 over budget in order to save $17,990!
Good luck!