Home buyers tips: From search to sold

Buying a residential porperty can be a long, tedious process. And if you’re not ready, you could easily fall into a hole of home buyers stress and frustration. But don’t lose hope. Armed with the right knowledge and a solid plan, you’ll be a homeowner before you can say ‘sold’!

Let’s walk through the key steps you need to take (and prepare yourself for) to score the best home.

 

Homecoming: A special report Buying a home is likely to be the biggest purchase of your life. Which is why we’ve done a deep dive into ALL you need to know. Follow our four-part series here:

Part one: Real estate agents: How to spot the right property agent

Part two: Close to home: How the government can help you buy a house anywhere in Australia

Part three: Buying a home: Budget for all the extras, not just the house

Step 1: Start looking around

There are three ways to buy a home — through an auction, off the plan, or privately. You might want to explore each one of them before deciding on your preferred way.

Buying at an auction

As the name implies, this is a public sale where bidders vie for a specific property and is popular with sellers in a competitive property market. Serious home buyers are all in one place at the same time, making it faster than selling privately.

It is important to note, however, there is no cooling-off period for this type of sale. A property sold at an auction is a final transaction. So before you bid for your next home — and risk heartbreak at missing out — go to another auction to get a feel for how it works.

 

 

In this market, you might also want to keep a lookout for snap auctions. A typical auction with multiple homes for sale is usually run over four weeks and an auction date is set. Snap auctions are when an agent brings forward the date of the auction or changes the mode of sale from a private sale to an auction. Interested home buyers are notified of the change and advertisements are updated with the new auction date, usually within the week.

This style of auction helps to get a higher sale price, plus a “premium” for home buyers skipping auction-day jitters. These on-the-spot or pre-auction sales have escalated over the years - according to CoreLogic, they accounted for 41 percent of auctions in May 2021, a huge jump from just 2 percent in early 2018.

Buying off the plan

This is when you buy units during or even before construction. Basically, your property is still just a plan - and you may even get some say in its fitout.

This method is becoming more popular with the surge in property prices, low-interest rates, and government grants and schemes. Since the prices are high now, buying a home off the plan may save you money on a property that may appreciate in value in the long run. But there’s also the risk of a downturn in particular kinds of properties, such as inner-city high rises.

You also need to make sure the builder is credible. Ask them about everything you need to know about the units, including the project’s completion or end date. Make sure these dates are part of the contract or agreement. You might also need to make sure compensation is available if the units are not completed by the promised date. Home buyers should think twice before signing up to buy these kinds of units.

Buying privately

This is when you find an advertised property and are invited to make an offer to the seller or seller's agent. It’s important to note that you have to find a good real estate agent to score a great deal.

In this kind of sale, you’re entitled to a cooling-off period when you’ve exchanged contracts. It means that home buyers having second thoughts can still back out of the contract. You usually have five business days to decide whether or not you’ll finalise the purchase. Cooling-off periods are usually for home buyers only - sellers can not withdraw their acceptance of the sale or sell the property to someone else.

• • Does the deck open to the backyard?
  • Is there a garage?
  • How big is the carport?
  • Are bathrooms renovated?
  • Is the dishwasher dirty? (This may mean it’s not working, be sure to check all the kitchen appliances.)
  • How’s the pressure on the tap?
  • Is it town gas or bottled gas?
  • What’s the condition of the inside of cupboards under the sink? (Look for signs of leaks.)

Step 2: Make an offer

If you have found the right home for you, it’s time to make an offer. There are two types you can make:

• • Unconditional - a binding contract where you’re sure to buy the property outright
  • Conditional - certain conditions have to be met before home buyers are bound to buy the property; best for people still in the process of getting valuations, finance approval, and inspections

Contract of sale

Your contract should include your offer price, information on the date of your deposit, and specific details (time and date) of settlement.

As with any contract, it's always smart to ask for legal advice before signing. Don’t be pressured to sign! Take a copy of the contract to discuss with your solicitor.

It is important to note that contracts are only legally binding if both you and the seller have exchanged and signed them. Even if you’ve paid the deposit for the home, if the seller still hasn’t signed the contract, you can’t be sure the property will be yours.

Property inspection

As you’ve agreed to buy a house and exchange the contract, ensure you make it conditional on it passing all the inspections you should get done. These include:

• • Building and pest
  • Plumbing
  • Electrical

Also, check if the neighbours have any building approvals confirmed but not yet started.

Yes, that is a lot of inspections and will cost a few thousand dollars but can save you a lot more money and potentially years of heartache.

 

 

If the property doesn’t pass the inspections, you can still buy it if you wish but negotiate a reduction in the purchase price based on how much it will cost to fix the problems. There are no hard and fast rules here, it’s a negotiation. Getting quotes will help you argue from a position of strength.

You might also ask if the seller has made these same inspections, can’t I just rely on their documents? We recommend getting your own reports so you have more control over the person doing the inspections and can be involved in the process.

Get a recommendation for a great inspector. Some inspectors only examine areas they can access. So, make sure they go through each room looking for cracks, corrosion on steel, and water damage, which might be a small sign of a much bigger problem that will cost you a lot of money to fix.

Inspectors try to protect home buyers from mistakes by determining the condition of the house before sale so that they get an idea of how much it might cost to fix any problems. They are also looking for anything that hasn’t been built to the standard required.

Again, if you engage your own experts, you can have open and honest conversations with them about the property, as they have no vested interest.

Step 3: Apply for a pre-approval

A pre-approval is not required when buying a home but it is good to know how much you can borrow before you start house hunting. It means you can look for a property with a clear idea of how much you can afford to spend. In addition, this will also prevent you from wasting time eyeing off properties that are outside your budget. Be realistic.

Most banks will let you apply for a pre-approval, online or over the phone. Initially, the application process will start by verifying your personal information such as name, address and age. Then after the verification process, your lender will typically assess the following:

• • Your credit rating and credit history
  • How much you earn, your assets, expenses and other debt
  • Your ability to be able to pay the loan you want to apply for

After that, once the lender has analysed your financial standing, they will decide if you’re eligible for a loan or not. If you were able to prove your capability to repay the loan, then it’s likely that you will be granted pre-approval. This can last up to six months, depending on the lender.

Step 4: Finalise your loan

Once you’re ready with your deposit and contracts, it’s now time to finalise your loan. There are different government grants that can help ease what will be the biggest expense of your life. And if you have all the required documents ready to go, you'll be able to fast-track the process. Start with the following items:

• • The required deposit amount
  • Certification of a good credit score — this can help increase your chances of approval
  • A clear debt record and stable source of income
  • Identification cards such as licences, passports, etc.
  • Proof of income, such as payslips or bank statements
  • Council rates for any owned properties
  • Other documents that may be required

 

 

You may now inform your lender that you’ve found a property to buy, so they can work out your application. The loan application process generally involves the following steps:

• • You need to gather all the required documents and pass it over to the lender.
  • The lender will do a preliminary assessment to make sure you meet all the qualifications.
  • Once you pass the preliminary assessment, it's time to formally submit your loan application.
  • A property valuation will be conducted by the lender.
  • The lender will then decide to approve or reject the application.

When your lender receives all the documentation they need and confirms that they are willing to lend you the money, formal approval or unconditional approval is granted.

Step 5: Organising settlement

The settlement date is the day you officially take ownership of your new home and is the date that you and your financier (if you have one) must be ready to settle, meaning you pay the balance of the sale price as per the contract. Settlement can be anywhere between 30 to 90 days, but can be longer or shorter, depending on what has been negotiated with the seller. You will need to engage a settlement agent to ensure all the relevant paperwork is completed with due diligence.

Your settlement agent will, among other things:

• • Verify the property listed on the paperwork is the one you’re buying
  • Make certain that you complete all conditions of the contract on time
  • Ensure there are no outstanding orders on the property
  • Assure your finances are all available for the settlement date
  • Prepare the correct documentation for signatures
  • If applicable, ensure stamp duty is paid
  • Confirm rates (such as council and water) are up-to-date
  • Ensure the property is transferred into your name after settlement

Generally, you will have a final inspection of the property one week prior to the settlement date. Everything you’ve asked to be fixed in the contract should be done by this date.

 

 

Common issues that may affect settlement include:

• • Appliances not working
  • Significant damage over what was present during the sales inspection
  • Missing items, such as garage remotes and plans for work done within the last 20 years
  • Agreed repairs
  • Excess rubbish that prevents you from taking vacant possession

If any of these issues occur, this doesn’t necessarily mean settlement can’t happen on the planned date. Rather some additional negotiations are required. If, however, there’s substantial new damage, there may be a case to make for a breach of the contract.

Dreams do come true

Buying a home is still an Australian dream and while high property prices are a big obstacle in some capital cities, with a little due diligence, you can find the home that’s right for you.

So, if you ever run into any trouble buying a home, with agents, lenders or sellers, lodge a complaint with us and we’ll make sure you get a fair hearing. Just say the magic words 'Help Me Handle It'.