FAILING TO PREPARE!
1 – Listening to friends or family that have not bought property before. You need to seek advice from people who have actual on the ground experience in the area you want to buy. Independent & local Buyer Agents or Buyer Advocates, can be an excellent starting point. Especially if they have built a portfolio of properties and have results that prove they are experts. When interviewing a professional, ask for experience.
2 – Not identifying your Borrowing Capacity. A strategic Mortgage Broker will be able to help you understand your borrowing capacity. You need to understand what the repayments are and what the next 2-3 years look like for you from a lifestyle and financial point of view. Once you know this, then you should start researching the type of asset class and location that is the best fit for you.
3 – Not completing enough research – Research is a KEY ELEMENT of being successful when buying your first home. The key is to know what to research and where to source your information. I would suggest at minimum inspecting 10 properties before you make an offer. This strategy allows you time to have a more clear understanding of the market value and the pros and cons of the properties in your price point.
4 – Buying jointly with a family member or friend. Seems like a great idea at first to get into the market. However, the biggest issue here is how the banks assess the total debt. For EG – Say you buy a house worth $800,000. You both contribute $50,000 – ($100,000 deposit total) and borrow $350,000 each to make up the difference. After two years you have paid down $30,000 in principal and interest. The house is now worth $900,000, and you only have a $670,000 shared mortgage total. You decide you would like to buy another property by yourself or with your new life partner. The bank will calculate the TOTAL debt $670,000 against your name, not just the debt you owe $335,000). This mistake will potentially hold you back from borrowing again, at a minimum, it will greatly reduce your borrowing capacity on the second property! This scenario can work well if you understand the ins and outs of finance. If buying a property jointly with family or friends. We advise on having an agreement drawn up between the two parties and having it signed witnessed by a lawyer.
MISTAKES FIRST HOME BUYERS MAKE WHEN INSPECTING PROPERTIES!
5 – They get blindsided by how beautiful the furniture looks and how it makes the area feel (It’s called Professional Staging) Look beyond the furniture because come settlement day, the property will be vacant and will feel completely different.
6 – They don’t arrange a building inspection! Why would you spend such a large amount of money on buying a property and discount the $650 it costs to have a professional builder on your side. As a professional buyer, there are areas of the house that I cannot see. The main two are the subfloor (under the house) and the roof cavity. This is where issues can arise, a detailed report with photos can uncover if you’re potentially buying a property with issues. You can see an EG of a building report on the home page of our website.
7 – First Home Buyers often don’t consider the fundamentals of what makes a property a good asset class. Land size, location, orientation are the fundamentals that you cannot change. The floor plan is also essential and in certain circumstances, can be adjusted. Suppose you’re considering buying an inner-city apartment. Make sure that you don’t compromise the following items. The internal size – The natural Light and the Outdoor space. At a minimum, a balcony/terrace, or the best outcome is a courtyard – WHY? Because they are not making any more land and we all know that the properties value appreciates over time due to the location of the land, while the building depreciates. Here is an apartment we bought for our most recent First Homebuyer. https://www.realestate.com.au/sold/property-apartment-vic-elsternwick-133865466
MISTAKES FIRST HOME BUYERS MAKE WHEN THEY VALUE PROPERTY
8- Lack of Due Diligence – First Home Buyers, often underestimate the people that you need in your corner. A professional conveyancer & an independent building and pest inspector, can all go a long way to ensuring that you don’t buy a LEMON. First Home Buyers often listen to the sales agents. We all have two ears and one mouth, so listening is essential. However, it’s who you listen to when buying your first property that counts. Unless you know and trust the sales agent personally, you must be careful what information you take on board. Majority of agents will help you, but just remember they get (paid by the seller) the buyer needs to make their judgement on what they are buying.
Buying quality property in Melbourne is very rarely easy. The competition is often HIGH & very much real! If you are purchasing a property that no one else is interested in, there is typically a reason. If you know the cause and are comfortable with the compromise, then go ahead. But if no one else wants the property, and you don’t understand WHY. Then cool your jets and figure it out. Take some time to assess your negotiating power. Chances are you have the upper hand in negotiations when no one else wants the property!
BEGIN WITH THE END IN MIND
9 – Often First Home Buyers might be considering having a family in the future. Suppose this (FUTURE) is sooner rather than later. Then be wise and buy a property that you can grow into as a family. Second, the best scenario is to buy a property that you can extend and increase the size when needed. I’ve seen many first home buyers live in a home for 2-4 years only to realise it’s too small and they need to sell an upgrade to a larger home. Here are how the COSTS all add up. If you make this MISTAKE & outgrow your first home quickly.
$13,000 – $15,000 in commission (2%) at $650,000 to a Sales Agent
$4,000 -$6,000 on Marketing the home to the Sales Agent
$3,000 – $5,000 on Staging the home – To maximise your price
$5,000 – Paying a removalist – To move you from A to B.
$2,200 – Conveyancer that manages all the legal documents.
$3,000 – Bank & Transfer Fees
$43,000 – Stamp Duty on say a larger home at $800,000 – This is the killer, people often don’t sell and buy due to this massive amount of TAX. In total that’s potentially a $70,000 MISTAKE OUCH! Ask yourself, How long did it take you to save $70,000 in the first place!
10 – What I’m about to say will make no sense at all. That’s unless you understand how finance, OFFSET accounts and tax deductions for investment properties are structured. Suppose you are planning on turning your first home into an investment property. Don’t pay down the debt! It’s counter-intuitive, but yes that’s right paying down the debt if you are going to turn the property into an investment, is not a smart move. A strategic mortgage broker will be able to explain to you exactly why! I can tell it, but I’m not a licensed mortgage broker. But I do have a fantastic network of strategic mortgage brokers that help our clients.
MISTAKES FIRST HOME BUYERS MAKE WHEN NEGOTIATING
11 – They don’t clearly understand the offer process the agent will use to maximise the price for the seller. Yes, the Sales agents work for the seller, they DON”T work for YOU. Any First Home Buyer who does not know or understand this needs HELP! You can’t negotiate the best price possible unless you clearly understand the offer process.
Here are a few different methods of sale and JARGON that you need to know how to navigate.
Expressions of Interest – Private Sale – Private treaty – Auction – Boardroom Auction – Sale by Set date – Tender – Price on Application – Contact Agent – Highest and best offer – Multiple Offer Scenario – As if buying your first home wasn’t already a complicated process. All of the above methods are crafted to maximise the SALE price for the seller.
First Home Buyers are typically not ready to bid at AUCTION – They often show poor body language and don’t clearly announce their bids. Read more TIPS here on how to Negotiate in this link below. https://www.industryinsider.com.au/services/real-estate-negotiation/
Usually, your first home is just a stepping stone into the market. More than likely, it is not a forever home. Focus on the fundamentals and remember if you are the only one interested you have the negotiating POWER! Be clear on what you can compromise on based on your budget. Seek trusted advice. If you decide to go it alone, good luck but remember to do your due diligence!
There is a saying that resonated with me when I started in the property industry ten years ago. “Don’t wait to buy Real Estate, buy Real Estate and wait.”
Independent Buyer Agent
at Industry Insider Property Advocates.
+61 402 346 810