9 Buyer Traps And How To Avoid Them
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Buyer Traps and
How To Avoid Them
9 Buyer Traps And How To Avoid Them
Our promise to you Since 1988 we have strived to provide the very best real estate service in Sydney to the many property buyers, sellers, investors and tenants who call on us for help and advice each week. This booklet and the advice it contains is part of that promise. We hope you enjoy the content and profit from the experience. Remember, our offices are open 7 days a week to help you with any real estate matter so be sure to call us if you think we can help. You'll find contact details for your nearest Prudential Real Estate office on the back page of this booklet.
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9 Buyer Traps And How To Avoid Them
Do you remember buying your first home ?
For most of us our first home buying experience is often an anxious and daunting time. It can be the first time we deal with a solicitor ; the first time we apply for a mortgage ; the first time we deal with a real estate agent as a buyer ; the first time we make an offer to buy something involving so much money. No wonder the process of buying or selling a property is rated the 3rd most stressful event of our lives (behind the death of a family member and the diagnosis of a life-threatening illness). And because most of us buy or sell a property less than 4 times in our entire life the process doesn't get any easier each time we embark on a property transaction. The mere fact that many years elapse between transactions ensures that, if nothing else, the law involving the sale or purchase of property has changed and therefore the process has probably changed in some way (only adding to the stress). Like anything in life the more often we do something the quicker we become proficient. The problem with buying or selling a property is that, for most of us, we simply don't get enough practise to become proficient.
Such lack of “practise” often causes buyers to make fundamental errors. These errors often result in a substantial loss for the average buyer including . . . Ÿ Paying too much for the home they want Ÿ Losing their dream home to another buyer Ÿ Buying the wrong home for their needs Ÿ Getting stuck with a property that needs lots of repairs A systematic approach to the home buying process can help you steer clear of these common traps, allowing you not only to cut costs, but also to secure the home that best suits you. Here's the 9 most common mistakes made by the average property buyer and how to avoid them.
9 Buyer Traps And How To Avoid Them
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Failing To Obtain Mortgage Pre-approval
Banking has changed a great deal over the past 20 years. These days few people make an appointment with the Bank Manager in order to apply for a home loan.
Naturally, once you've found the right p ro p e r t y t h e a d va n t a g e o f h av i n g arranged a pre-approved mortgage becomes obvious.
Today Mortgage Brokers arrange home loans for many property buyers. Most brokers deal with up to three dozen banks and lending institutions including the “big 4”. Their representatives will come to your home, listen to your requirements and then match your circumstances to the best loan product from their range of banks. Best of all their service is FREE – they are paid a small fee for arranging all the paperwork by the bank you place your home loan with.
You will be able to bid confidently on the property knowing that your bank will support you (subject to your maximum amount and sometimes subject to a property valuation). Any offers you make to b u y a p ro p e r t y w i l l h ave m o re substance to them when the owner knows you have a pre-approved mortgage. You will quickly leapfrog other interested buyers who have not arranged their finance. And you can confidently commit to a purchase knowing your finances are all in place.
With in-home services such as those offered by Mortgage Brokers it has become very easy for any homebuyer to arrange a pre-approved mortgage. A pre-approved mortgage is one where your bank has agreed to extend to you a mortgage up to a maximum amount (determined by the bank and based on your financial circumstances) before you have located the right property to purchase.
(If you would like to speak with our recommended mortgage broker you are welcome to call Craig Corbett of Choice Home Loans on 0418 204 120 – Craig will come to you 7 days a week at a time that suits you. Craig can arrange your mortgage from your choice of dozens of Australian banks and lending institutions)
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9 Buyer Traps And How To Avoid Them
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Failing To Take Hidden Costs Into Account
Buying a property involves a number of costs, some are obvious costs such as the purchase price of the property and others are hidden costs and only appear at the last minute. It is essential that buyers understand these costs and allow for these “extras” in their budgeting. Here's a quick list of some hidden costs . . . Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ
Bank Fees Building Inspection fees Council Rates / Water Rates Mortgage Application Fees Mortgage Insurance Mortgagees search fees / settlement fees / bank cheque fees The cost of a professional pest inspection Solicitors / conveyancers “extra” c o s t s s u c h a s p h o t o c o py i n g , stamps, phone calls etc
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Removalist costs / truck or ute hire Stamp Duty on the mortgage Strata search fees Survey costs GST on everything Building insurance / contents insurance for the new property Rubbish removal / cleaning costs Buying new furniture for the new house (and YES, there will be new furniture)
And there are probably others. Whatever you do be sure to allow for these “extras” when you first budget to buy a property.
9 Buyer Traps And How To Avoid Them
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Buying The Wrong Property
What are you looking for in a home? A simple enough question, but the answer can be quite complex. More than one buyer has been swept up in the emotion and excitement of the buying process only to find themselves the owner of a home that is either too big or too small. Or a home that's further from work than they expected, or a home that has more repairs than they expected. Either way it makes sense to take the time to work out your needs well before you begin the search for a property. Write a list for yourself and then use this list as a yardstick to measure each property you visit. If you do you'll find the whole process will be much easier and you'll be genuinely happy with the home you eventually buy
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9 Buyer Traps And How To Avoid Them
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Failing To Inspect Sufficient Properties Before Making A Decision
Most of us use the same strategy when we go shopping. We compare one product with another until we determine which product will fulfil our needs – we call this comparison shopping. When we begin the search for a home we use the same process. This requires that we look at several properties before we make our choice. The mistake that many people make is that they buy the first home they inspect without comparing several homes.
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Buying the first home you see invariably results in a poor choice. Take the time to inspect several homes before settling on one you like. Even if you see a number of properties you may end up going back to the first home you saw – that's OK, so long as you see several homes as a comparison. On average most buyers see 5 to 12 homes before making a decision on the purchase of a property.
Bidding Blind
What price should you offer when you bid on a home? Is the seller's asking price too high, or does it represent a great deal? If you fail to research the market in order to understand what comparable homes are selling for, making your offer would be like bidding blind. Without this knowledge of market value, you could easily bid too much, or fail to make a competitive offer at all on a property that represents excellent value. Take the time to read the local paper in the
area where you intend to buy. Check out the property pages to see what other homes are selling for. Visit popular websites like realestate.com.au and domain.com.au. Read the property m a g a z i n e s t o g a i n s i m i l a r m a r ke t awareness and visit a number of local real estate agents to inspect their display window. All this information adds to your market information so that when you make an offer to buy a property you can feel confident that your offer is based on fact.
9 Buyer Traps And How To Avoid Them
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Failing To Commit The Owner To The Sale
So, you've found the home of your dreams. You've submitted an offer to the owners and they have accepted – you're over the moon. However, care must still be taken. Once you have come to an agreement with the owner on the sale price and the terms of the sale it is imperative that you secure the property immediately. After all, the last thing you want is for the owner to change their mind about selling to you. In NSW you can do this by agreeing to a co n d i t i o n a l exc h a n g e o f co n t ra c t s immediately. The agent can usually arrange everything within a very short time. A conditional exchange of contracts allows a buyer 5 business days during which they can change their mind about purchasing. On the other hand this process locks the owners in – they cannot change their mind about selling to you nor can they change their mind about the price or the terms of the sale.
(Exchanging contracts is a legally binding transaction that may involve a buyer losing 0.25% of the agreed purchase price should they decide not to proceed with a purchase. How much is 0.25% of an agreed purchase price ? On a purchase of $300,000 the possible loss in a penalty payment of 0.25% is $750.00)
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9 Buyer Traps And How To Avoid Them
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Failing To Obtain A Good Building / Pest Report
If you were considering the purchase of a motor vehicle and your knowledge of motor vehicles was limited you would p ro b a b l y u n d e r t a ke a m e c h a n i c a l inspection of a car before you committed to a purchase. After all, the cost of such an inspection is very small compared to the cost of the car. It makes good sense to insure your i n te re st s by h av i n g a p ro fe ss i o n a l inspection before you buy.
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In the same way it makes good sense to have a professional building inspector and a professional pest inspector check out a property before you buy. The cost is generally very small compared with the cost of buying the wrong home. Your solicitor or conveyancer will be able to arrange these inspections for you. Whatever you do be certain to have both these inspections - even for new homes.
Failing To Check On The Availability Of Keys
Moving day can be very exiting – and very tiring. The one thing that creates the biggest headache on moving day is the key (or keys) to the new home. The agent will generally only have what is referred to as “access keys” – enough keys to get through the front door. Unless the agent has specifically gone out of their way to chase up the owners for all their keys there may be a problem on moving day. It pays to enquire from your agent at least a week before settlement about the location of all the keys for the property you are buying. In this way the agent will be on notice to have all keys available for you on the day of settlement.
9 Buyer Traps And How To Avoid Them
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Failing To Carry Out A Final Inspection
Whatever you do be sure to have a final inspection of the property you are buying. A final inspection usually takes place on the day prior to settlement. The object is to ensure that the property is in the same condition as when exchange of contracts took place. If the property is damaged or in a substantially different state to what it was when you purchased the property you should alert your solicitor or
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conveyancer immediately. Although it is a rare occurrence for a property to be damaged in the weeks between exchange of contracts and settlement it is very important that each buyer inspect the property prior to final settlement. Remember, once settlement takes place there is no recourse on the old owner.
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Recipients of this report are reminded that, although due care has been taken in the preparation of the within contained material, prospective property buyers, sellers and investors are always best served by making their own independent inquiries before entering into any real estate transaction. This report has been prepared for the sole and exclusive use of Prudential Real Estate clients and customers. The whole of the contents and design are protected by copyright. COPYRIGHT Š Michael O'Sullivan 2001-2015
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