Buying Tips

Australian Building Appraisal Services understands that buying a property is not only one of the most significant investments within a lifetime, it is where memories are created.

Below is a list of buyer’s tips and hints that you may want to consider prior to purchasing a property or an investment property.

A property or investment property is a financial asset and more; it could be a place to live and raise children or part of a plan for the future. That’s why we at Australian Building Appraisal Services want all Australians to have an opportunity to enjoy the benefits of owning a property. The “Great Australian Dream” of property ownership, just got easier.

Knowledge is said to open doors. This is literally true when it comes to buying a property. To become a first-time property buyer or even if you have purchased a property previously and think you need a little refresher course, read our tips below.

Firstly, you need to know where and how to begin the property buying process. The following questions and answers have been carefully selected to give you a foundation of basic knowledge.

GETTING STARTED

1. HOW DO I KNOW IF IM READY TO BUY A HOME OR INVESTMENT PROPERTY?

You can find out by asking yourself some questions:
Do I have a steady source of income. Have I been employed on a regular basis for the last 2-3 years? Is my current income reliable?

Do I have a good record of paying my bills?

Do I have few outstanding long-term debts, like car repayments?

Do I have money saved for a deposit?

Do I have the ability to pay a mortgage every month, plus additional costs?

If you can answer "yes" to these questions, you might be ready to start on the path of buying your own property or investment property.
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2. HOW DO I BEGIN THE PROCESS OF BUYING A PROPERTY?

Start by thinking about your situation. Are you ready to buy a property? How much can you afford in a monthly mortgage repayments. How much space do you need? What suburbs do you like? If it is an investment, consider yield and capital growth. Is it negatively or positively geared? After you answer these questions, make a "To Do" list and start doing casual research. Talk to friends and family, drive through neighborhoods, and look in the "properties" section of the newspaper.

For those looking at investing long term or those wishing to obtain the potential highest capital gain, you may want to spend some time researching in detail areas that are likely to provide long term capital growth. Refer to the links page for details on organizations that specialize in providing this information.

3. HOW DOES PURCHASING A PROPERTY COMPARE WITH RENTING?

The two don’t really compare at all. The one advantage of renting is being generally free of most maintenance responsibilities and strata fees and charges (if your property is within a complex). But by renting, you lose the chance to build equity, to take advantage of tax benefits (first property owners grant and/or depreciation), and protect yourself against rent increases. Also, you may not be free to decorate without permission and may be at the mercy of the landlord when rental increases occur.

Owning a property has many benefits. When you make a mortgage payment, you are building equity. And that’s an investment. Owing an investment property also qualifies you for tax breaks that assist you with the cost of owning an income producing asset- like depreciation and the deductibility of costs associated with the upkeep which can be substantial. But given the freedom, stability, and security of owning your own property or investment property, they are worth it.

4. HOW DOES THE LENDER DECIDE THE MAXIMUM LOAN AMOUNT THAT CAN AFFORD?

The lender will typically obtain your financial details, analyse you income and expenditure and then work out your borrowing capacity.

Before you proceed to make an offer on any property or investment is vital that pre-approval is obtained. Pre-approval is a lenders actual commitment to lend to you. It involves assembling the financial records mentioned (without the property description and sales contract) and going through a preliminary approval process. Pre-approval gives you a definite idea of what you can afford and shows sellers that you are serious about buying.

The loan the lender will provide is called a mortgage. Generally speaking, a mortgage is a loan obtained to purchase real estate. The "mortgage" itself is a lien (a legal claim) on the property or property that secures the promise to pay the debt. All mortgages have two features in common: principal and interest.

Shopping around for a property loan or mortgage will help you to get the best financing deal. A mortgage whether it’s a property purchase, a refinancing, or a property equity loan is a product so remember that the price and terms may be negotiable. You’ll want to compare all the costs involved in obtaining a mortgage. Shopping, comparing, and negotiating may save you thousands of dollars.

property loans are available from banks, mortgage companies, and credit unions. Different lenders may quote you different rates and fees, so you should contact several lenders to make sure you’re getting the best price. You can also get a property loan through a mortgage broker. Brokers arrange transactions rather than lending money directly; in other words, they find a lender for you. A broker’s access to several lenders can mean a wider selection of loan products and terms from which you can choose. Brokers will generally contact several lenders regarding your application, but they are not obligated to find the best deal for you. Consequently, you should consider contacting more than one broker, just as you should with banks or other lending bodies.

Once you know what each lender has to offer, negotiate for the best deal that you can. On any given day, lenders and brokers may offer different prices for the same loan terms to different consumers, even if those consumers have the same loan qualifications. The most likely reason for this difference in price is that loan officers and brokers are often allowed to keep some or all of this difference as extra compensation.

Have the lender or broker write down all the costs associated with the loan. Then ask if the lender or broker will waive or reduce one or more of its fees or agree to a lower rate. There’s no harm in asking lenders or brokers if they can give better terms than the original ones they quoted or than those you have found elsewhere.

Click on the link to locate a lender / mortgage broker.

5. HOW CAN I DETERMINE MY HOUSING NEEDS BEFORE I BEGIN THE SEARCH?

Your property should fit way you live, with spaces and features that appeal to the whole family. Before you begin looking at properties, make a list of your priorities - things like location and size. Should the house be close to certain schools? your job? to public transportation? How large should the house be? What style of property do you prefer? What kinds of amenities are you looking for? Establish a set of minimum requirements and a wish list." Minimum requirements are things that a house must have for you to consider it, while a "wish list" covers things that you’d like to have but aren’t essential. Buying an investment property will be a less emotional exercise and should be based on a combination of factors including yield, potential capital growth, ease of obtaining tenants, etc.

FINDING YOUR property

1. WHAT SHOULD I LOOK FOR WHEN DECIDING ON A LOCATION?

Select a location that will suit your daily life. Many people choose locations based on schools. Do you want access to shopping and public transportation? Is access to local facilities like libraries and museums important to you? Or do you prefer the peace and quiet of a rural community? When you find places that you like, talk to people that live there. They know the most about the area and will be your future neighbors. More than anything, you want a neighborhood where you feel comfortable in.

2. HOW CAN I FIND OUT ABOUT LOCAL SCHOOLS?

You can get information about school systems by contacting your local council, the local schools or the Department of Education.

3. IS AN OLDER property A BETTER VALUE THAN A NEW ONE?

There isn’t a definitive answer to this question. You should look at each property for its individual characteristics. Generally, older properties may be in more established neighborhoods, offer more ambiance but will have higher maintenance costs. People who buy older properties, however, shouldn’t mind maintaining their property and making some repairs. Newer properties tend to use more modern architecture and systems, are usually easier to maintain, and may be more energy-efficient. People who buy new properties often don’t want to worry initially about upkeep and repairs. When considering an investment property age is of significance, as new properties attract higher allowances for tax depreciation.

4. WHAT SHOULD I LOOK FOR WHEN WALKING THROUGH A property?

In addition to comparing the property to your minimum requirements and wish lists, you may want to consider the following:

Is there enough room for both the present and the future?

Are there enough bedrooms and bathrooms?

Is the house structurally sound?

Do the appliances work?

Is the yard big enough?

Do you like the floor plan or the layout?

Will your furniture fit in the space? Is there enough storage space? (Bring a tape measure to better answer these questions.)

Does anything need to repaired or replaced? Will the seller repair or replace the items? Can these repair be negotiated off the price?

Imagine the house in good weather and bad, and in each season. Will you be happy with it year-round?

5. WHAT QUESTIONS SHOULD I ASK WHEN LOOKING AT PROPERTIES?

Many of your questions should focus on potential problems and maintenance issues. Does anything need to be replaced? What things require ongoing maintenance (e.g., paint, roof, AC, appliances, carpet)? Also ask about the house and neighborhood, focusing on quality of life issues. Be sure the seller’s answers are clear and complete. Ask questions until you understand all of the information they’ve given. Making a list of questions ahead of time will help you organise your thoughts and arrange all of the information you receive. Be sure to ask the vendor for their reason for selling. As you are negotiating directly with the vendor, you may be able to negotiate additional items in the sale. For example, an owner may state that they are relocating overseas or interstate and you may ant to sell you or include contents of their property. Or conversely, you may state that you would like a shed removed as part of the sale and the owner has the right to accept this request or decline it.

Do I need to bring anything along when I’m looking at properties?

Bring your own pen and pad, a torch for seeing enclosed areas and a camera so you can photograph parts of the property (if the vendor allows you to do this). Be prepared to "snoop around" a little. After all, you want to know as much as possible about the property or investment you buy. Sellers understand that because their property is on the market, it will be looked over pretty thoroughly. If you need to go back to a property for another look, call the vendor to reschedule another appointment. Be sure to ask any questions you have about the property, even if you feel you’re being nosey. You have a right to know.

When you find a property you may be interested in buying, make sure we ask the owner the following questions:

1. How much money do you pay for items such as council rates or strata fees if it is within a complex

2. What features have you enjoyed most about living in this property?

3. Are there defects or problem areas that need to be fixed?

6. HOW CAN I KEEP TRACK OF ALL THE PROPERTIES I SEE?

If possible, take photographs of each house: the outside, the major rooms, the yard, and extra features that you like or ones you see as potential problems. And don’t hesitate to return for a second look. Use the Australian Building Appraisal Services site to shortlist properties that you interest in. Email the details to friends or family members if you would like a further opinion.

7. HOW MANY PROPERTIESCONSIDER BEFORE CHOOSING ONE?

There aren’t a set number of houses you should see before you decide. Visit as many as it takes to find the one you want. On average, property buyers see 15 houses before choosing one. Just be sure to communicate often with vendor exactly what you’re looking for. It will help avoid wasting your time.

YOUVE FOUND IT

1. WHAT DOES A PROPERTY DO, AND HOW DOES AN INSPECTION FIGURE IN THE PURCHASE OF A PROPERTY?

An inspector carry’s out a through detailed investigation of your potential new property. property Inspectors focus especially on the structure, construction, and mechanical systems of the house and will make you aware of only repairs, that are needed.

The Inspector does not evaluate whether or not you’re getting good value for your money. Generally, an inspector checks the property internally and external and in some cases gives estimates for repairs that are required to be carried out. Be sure to hire a property inspector that is qualified and experienced. It is also a good guide to obtain a pest inspection report. Termites are prominent in Australia and it is well worth spending a few hundred dollars to have the all clear! In some cases both reports can be carried out by a single organisation

It’s a good idea to have an inspection the completed report from the inspector before you make a written offer. The inspection will also give you some leverage when negotiating for a property, for example if serious problems are found, it gives you the ability to renegotiate the purchase price if repairs are needed. You may also negotiate that the seller must fix the problem(s) before you purchase the house.

Ask if the inspector belongs to a local inspection association, how long the inspector has been in business and if the inspector is experienced in residential construction. Also, find out if the inspector or company is associated with other services such as mortgage companies, real estate companies or repair services that may cause a conflict of interest.

2. DO I NEED TO BE THERE FOR THE INSPECTION?

Its not required, but it may be worthwhile. Following the inspection, the property inspector will be able to answer any questions about the property and can address any problem areas. This is also an opportunity to hear an objective opinion on the property you’d I like to purchase and it is a good time to ask general, maintenance questions.

3. DO I NEED A SOLICITOR TO BUY A PROPERTY?

You may want to hire a lawyer to help with the complex paperwork and legal contracts. A lawyer can review contracts, make you aware of special considerations, and assist you with the purchasing process.

Some people choose to use a conveyancer to do the paperwork and they can provide a similar level of service for a lower fee however they are not solicitors and may not be suited to all purchases where more detailed analysis may be required.

Click on the link to locate a solicitor or conveyancer:

4. DO I NEED INSURANCE?

The answer is Yes. You must take out building insurance prior to settlement on the property. This will insure that when the title diverts to your name, the building is covered.

Be sure to shop around among several insurance companies. Also, consider the cost of insurance when you look at properties. Newer properties and properties constructed with materials like brick tend to have lower premiums. Think about avoiding areas prone to natural disasters, like flooding.

Also, check the inclusions within the policy to see what items are actually covered.

If it is an investment property, you may want to consider taking out landlord’s insurance which will protect the property from damage caused by a tenant.

Remember to also take out contents insurance if you plan to live in the property. This is specific insurance designed to insure the contents within the building such as personal goods.

A simple way to lower insurance costs is to include insuring your property and car(s) with the same company to obtain a multiple discount or to increase the security within the property such as installing a burglar alarm or locks on windows.

5. WHAT OTHER ISSUES SHOULD I CONSIDER BEFORE I BUY MY PROPERTY?

Always check to see if the house is in a low-lying area (which may be prone to flooding), in a high-risk area for natural disasters (bushfires), or in a hazardous materials area (adjacent to factories, contaminated land sites). Be sure the house meets building codes. Also consider local zoning laws, which could affect future plans if you wish to renovate or making an addition to the existing structure (heritage zoning laws) Speak with the local council in regards to future planning of the area such as road widening or possible rezoning.

6. HOW DO I MAKE AN OFFER?

Your solicitor / conveyancer can assist you in making an offer, which will include the following information:

Complete the front page of the contract

Specify the price you are offering

Specify the deposit you are offering

Specify contract exchange and settlement dates

Provide details of the offer including inclusions, special conditions, etc

Remember that a sale commitment depends on negotiating a satisfactory contract with the seller, not just making an offer. Also take into account the possibility of other competing offers, when you formulate an offer or counter offer. The seller may have competing offers for the property. Therefore, the initial offer may be the only opportunity to buy. It is important to recognise there is no requirement that the Buyer be informed by the Seller of the existence of other offers before another offer is accepted.

The Seller has the right to negotiate with Buyers and this negotiation may continue until the Seller accepts an offer.

Generally, the terms of a Buyers offer are confidential, but the existence of the offer may be communicated to other Buyers to obtain better terms or price. This is strictly the decision of the Seller.

The Seller may accept an offer on terms other than price

All Buyers may be notified to present their highest and best offer. The Buyer may choose to:

1. Make a better offer
2. Leave the original offer
3. Withdraw the offer in writing if the period for acceptance is current
4. Do nothing

7. HOW DO I DETERMINE THE INITIAL OFFER?

Calculating your offer should involve several factors: what properties sell for in the area, the properties condition, how long it’s been on the market, financing terms and the seller’s situation. By the time you’re ready to make an offer, you should have a good idea of what the property is worth and what you can afford. And, be prepared for give-and-take negotiation, which is very common when buying a property. The buyer and seller may often go back and forth until they can agree on a price.

SETTLING

1. WHAT SHOULD I LOOK OUT FOR DURING THE FINAL WALK-THROUGH?

This will likely be the first opportunity to examine the house without furniture, giving you a clear view of everything. Check the walls and ceilings carefully, as well as any work the seller agreed to do in response to the building inspection report. Any problems discovered previously that you find uncorrected should be brought up prior to settlement.