You have done all your research and you have found a property that ticks all the boxes. What next? We have put these next steps together to help explain the process to buying your dream home.
Finance and Inspections
- Almost all of us are going to need a financial institution to help us buy our first home. So you need to get busy and get your finance approved. Ideally you should have been speaking your your Bank or Broker before you go to contract, so you really have a good understanding of how much you can borrow and the implications of what you are getting yourself into.It also helps to have your Lender ready for when you do want to act quickly. It will be stressful going through the purchase of your new home, so try and get as much of the finance approval process at least started. If you have your financial statements ready and an existing relationship with a Broker or Bank, you can get approval in a matter of days. If not it could take you a week or more.
- Before you make an unconditional offer, you need to have the property professionally inspected. This is a must. There is a long history of buyers caught out because they acted in haste. This include having the building looked over to make sure there are no structural issues, and other due diligence inquiries. This is simply to do. Simply make the contract subject to your various inspections and searches, with the right for you to rescind (cancel) the contract in the event you (the buyer) are not satisfied.
- Your solicitor will recommend you get a survey of the property. It costs, but is always a good idea to make sure your property doesn’t encroach onto your neighbours, or theirs onto yours.
How much should you offer?
- This requires research. You need to gain an understanding of what you think the property is worth. Of course there is no absolute correct value. The value of a home is really a subjective thing to a certain extent, but if you do your homework you should a have a pretty good idea of fair value. Check the address on the internet to see what it has previously sold for or get an expert opinion from an outside real estate agent. Look at what neighbouring properties have recently sold for. Most agents will give you a report that details this. Also you need to remember throughout the purchasing process that the real estate agent selling the house does not work for you, they work for the seller and their job is to get as much money as they can for the seller.
- Don’t lead with your highest offer. Also don’t low ball. As a first home buyer if you low ball agents won’t think you are serious. Try and make a considered offer which is close but below where you ultimately think you will be at. It is ok in most transactions to go back and forward a few times to settle on a price. Your agent will be expecting to do this.
- Keep your emotions in check. Buying a home is one of the most stressful acts we all do, so you need to keep calm and stick to your plan.
Types of Offers
Conditional Offers – This is the most common way to go to contract and it is the safest from a buyers perspective. When people say that the contract is conditional, what they mean is it is subject to a condition precedent – that is the condition must be fullfilled before the contract can be completed. If these conditions are not met you can legally back out of the sale, and get your deposit refunded. Some of the most common conditions include:
- Subject to valuation: The sale will only go ahead if the property valuation is accepted by your finance lender
- Subject to finance: The sale will only go ahead if you finance lender provides the finance
- Subject to satisfactory building, pest or surveyor’s inspection: The sale will only go ahead if you are satisfied that the house and the land it is on are sound
Depending on circumstances, there may be other conditions you need to factor into the sale and the contract such as ” Subject to repairs to be carried out”. You really must ensure that any conditions such as this example are prepared or approved by your solicitor. In this example ‘subject to repairs to be carried out’, if the clause is not drafted correctly it could actually be a binding contract, and not in fact give you the right to rescind (cancel) the contract. It might be interpreted as only giving you the right to sue the Seller for damages.
Unconditional Offers – Sellers love these for all of the reasons Buyers love conditional contracts. Once you have signed an Unconditional Contract the deal is done so to speak – no backing out. With an unconditional offer you need to be 100% sure that this is the right property, with your inspections already carried out and your finances in order. An unconditional offer carries a lot of punch though, and it is certainly always going to be better than a conditional offer of the same or similar $ value. So if you are confident you have your ‘house in order’ so to speak, then you may want to consider it.
Looking to buy off the plan?
- Buying off the plan is a great way to get your foot in the door early. Usually an off the plan purchaser will pay 10% of the purchase price on exchange of contract then pay the remaining balance once the development is finished, which can be 12 or even 24 months later. This gives you plenty of time to save which is often a big advantage and also gets you into the market even before you actually settle on the purchase.
- In some instances it can be cheaper buying off the plan than buying an already established property. The downside is that you have to pay a deposit before there is anything built and are basically purchasing an unseen property. There are also risks with developers and builders running into financial trouble putting your investment in doubt.
- You need to engage a solicitor to manage your purchase. Don’t be fooled into thinking that the legal transaction to buy a house is easy simply because it is relatively inexpensive as legal costs go, and happens a thousand times and more every week. Every property is unique, and every property transaction carries with it risk. 99 out of 100 property transactions will go through without an issue, but you really don’t want your purchase to be that 1 in a 100, and if it is, you need a good solicitor.
- Make your solicitor quote you a fixed cost for the conveyancing. This is standard practice now.
Your solicitor is going to give you a long list of possible searches to carry out. If you did them all it could cost you many thousands in costs. Your solicitor will recommend which you must do, and those that you should think about. No matter what the solicitor says, you need to apply some common sense and ask questions and make enquiries around potential risks and issues.
Here is a few examples.
(a) Your home is near overhead power lines. You need to check for easements or restricted access to land under and around these power lines. The previous owner may have built gardens under them, potentially misleading you to think this is part of the property you are buying. This may not be the case.
(b) Your home is old. Perhaps your home could be deemed a character building or even registered on a heritage property register.
(c) Flats or rooms being let in or under the home. You may need to be a registered flat or have council permission to rent our rooms under your home.
You don’t need to know the answer. Your solicitor will help you with that. But you must mention all of these things and anything else that you think could potentially be of relevance to your solicitor so they can discuss with you the potential implications (and do various government searches just to be sure if need be).