Your first home is often your largest purchase and often an important one. We are bombarded with information as to what to do when buying a property and sometimes rather than helping us we are more confused. So where do we start?
Often first time buyers pay too much for their first home; usually this is because they aren’t aware of the market or don’t have the confidence to negotiate the best price or terms. So how can you be better prepared?
- Don’t just take what the real estate agent tells you at face value; they aren’t working for you, at that time in the process, they are working for the vendor. Often these purchasers (buyers) are told by the vendors (seller) agent, “If you don’t offer a price or figure close to the asking price then you will miss out!” Unfortunately this could result in the purchaser buying the property for thousands of dollars more than needed, and missing the opportunity to get a better price, however a good bargain is about the ‘best’ value not always the lowest price. Ask how the agent determined the price on this property, how can an asking price $20,000 more, be justified if the property down the road, which is very similar with same number of rooms/bathrooms; sold for $20,000 less, a couple of months prior?
- It comes down to your ‘reason’ to buy. For those who are buying for lifestyle, usually the initial purchase price becomes less important. So if you’re buying to live in, it’s a ‘lifestyle choice’, and not a ‘profit choice’. Eventually the market will shift over time (usually every 7 years) so you will still need to know your market if ever the choice of profit becomes critical.
- Often the ‘excitement’ of buying your first home can be a major influence on your judgement. It is important to remember the objective of ‘why’ you are purchasing, and to keep the emotion out of the equation. Meaning, if you stay rational and stick to what the numbers say instead of focusing on why you ‘love it,’ you will end up with a better, fairer deal for yourself. If you think this will happen to you, ask someone else to help you with negotiations. This could be an ‘experienced’ family member or you could employ the services of a ‘Buyers Agent,’ as they can save you money by making sure you’re spending correctly and understanding your budget. However; make sure they are aligned with the Real Estate Institute of Australia (REIA).
- Do your own research: check comparable sales for similar properties in the area you wish to purchase in, preferably within 500 meters of the property you wish to buy. Look at the number of rooms/bathrooms, garage/parking, land size (roughly similar to yours) etc. Look at the price it sold for, if recent. This is the only way you know what a ‘bargain’ looks like. By doing your homework this allows you greater negotiating powers by knowing if the price being asked by the agent is too high.
- Using a service that provides access to up to date real estate numbers can be a powerful tool and either saves you ‘thousands’ or confirms your feelings as to what a property is really worth.
- Use questions instead of answers when negotiating like “Would they accept an offer of?” rather than “My offer is…” Don’t get caught up on property advertisement like “Offers over $400,000.” Often properties are sold for less than the suggested figure.
- Know what could impact on the price of the property. This could be structural problems, lack of growth (of local economy), bad neighbours and undesirable features like close proximity to sewage plant, main road, flight path. Ask questions; talk to locals. By doing ‘your’ own due diligence it means you get a sense of the property you wish to purchase, and understand it’s not about screwing the vendor over to get the lowest price, if you don’t have a good understanding of your local market and when the market is ‘hot’ by offering a price well below 10% could mean you lose out, as it will sell very fast. You should determine the figure you are happy to pay by knowing your budget and stick to it!
Finally, if you miss out remember: there’s plenty more properties out there.