“Buying a house is one of the biggest decisions you will ever make.”
As a first home buyer, you will often ask yourself the simple question of “How do I buy a house?”. However, the thing is that it’s not as simple as most people make it appear to be and buying a house is in fact, one of the biggest decisions you will ever make.
It’s not just a financial consideration but also a lifestyle one; you want to make the right decision for your finances, your loved ones and yourself.
Buying your first home will be an exhilarating and rewarding experience. At the end of your property buying adventure, you’ll have the keys to a home to call your own and an investment for your future.
But where do you start?
This guide will start you off on the right foot and provide practical tips and advice to help you along the way by covering the following:
- RESEARCH: Determine your non-negotiables
- INSPECTIONS: Get the most out of house inspections
- FINANCE: Take the correct steps to secure your finances
- BUYING: Auction tips and the legal process
- MOVING: Get organised and moving will be a breeze
1. RESEARCH
Once the decision has been made to buy a home, the majority of people turn to the internet for their research.
There can be an overwhelming amount of information to wade through online, but there are ways you can narrow down the search.
“What are your non-negotiables?”
Before you even turn to Google, sit down and write out your property deal-breakers.
- In which suburbs would you most like to live?
- Do you like the neighbouring suburbs?
- Are local schools a consideration?
- What’s the proximity to shops, sports facilities, cafes, restaurants etc?
- What are the dream features of your home?
- Is a garden or balcony important?
- How many bedrooms do you need?
- Do you need a garage?
TIP – Use Technology
Most online real estate agents and portals give you the option to set up alerts for houses that match your parameters.
Look out for the ones where it’s possible to add inspection times and auctions to your digital calendar.
2. INSPECTIONS
You’ve set up the alerts on your phone, planned out the calendar and resigned yourself to giving up your Saturday morning sleep-in. Bring on the open for inspections.
What’s the best way to approach them? Firstly, go to as many as you can. Housing inspections are about more than just the house. It’s a chance
to see the rest of the street, explore the neighbourhood and check out the ‘competition’ – the other potential buyers.
“What should you be looking out for at an inspection?”
As you’re walking through and around the property, take note of the following.
- Does everything open and shut?
- Do doors close smoothly or do they stick?
- Do lights turn on and off without flickering?
- Do taps work and is the water flow adequately?
- Are there signs of water damage (i.e. peeling or bubbled paintwork, mould, stained ceilings)?
- Do the floors slope or bounce? This may mean stumps need replacing.
- Are there cracks in the walls, which could be an indication of subsidence?
- Is there any fretting (cracked) brickwork that could indicate major structural problems?
- Don’t forget to walk around the outside of the property to check fences and the condition of the building’s exterior including gutters and downpipes.
TIP – Get Digital Help
Keep all your inspection notes and checklists on your phone using an app like Evernote or Quip. Evernote also lets you add photographs into your notes.
3. FINANCE
Buying a house is a major investment, and it’s important to make sure your finances are in order before starting the process. Once you have started to gain an understanding of the market, the next step is to start thinking about how you’re going to pay for it. So how much money do you need?
“How much does it cost to buy property?”
Deposit
How much are you willing to pay upfront to secure your home? The simple truth is that the more deposit you pay, the more likely you are to get a loan.
The Australian Securities and Investments Commission recommends having a deposit of 20 percent of the purchase price of your anticipated property. Some states will allow as little as 5 percent for a deposit.
Of course, it depends on your lender and their rules, as well as your financial situation.
Other Costs
Inspection fees are not compulsory, but it is a good idea to get a house inspection to uncover any likelihood of hidden costs you may have to pay once you’ve bought the property.
Loan establishment fees, legal fees and stamp duty all vary from state to state, so check in with your local authority.
“How do I get a home loan?”
Buying a new home? It’s an exciting decision, but it can quickly become overwhelming if you’re not prepared.
Nearly half of all Australians who take out property finance use a broker to do the hard work for them so you’ll be in the right position to secure your new home.
How does it work?
A mortgage broker can compare hundreds of loans – from big-name financial institutions you know and trust, to small banks and credit unions – and works with you to match the right loan to your goals and financial position.
A good broker will:
- Assess your needs and financial position and recommend competitive loan options.
- Take the time to explain the full process, from application to settlement
- Do most of the legwork, acting as an intermediary and negotiating with the lender.
- Complete mountains of paperwork, leaving you to simply review and add your signature.
- Liaise with key parties, including solicitors and real estate agents (and you!) to ensure a smooth settlement.
- Perform ongoing reviews for you after settlement to make sure you are always on a competitive loan.
Four Steps To Securing Your Home Loan
- Set your goal
Once you know the type of property you want and have a rough idea of what it’s likely to cost, set yourself a target for saving a deposit. Remember, if your deposit is less than 20% you may need to pay Lenders Mortgage Insurance or get a guarantor to offer their property as security – be sure to factor this into your plans. - Talk to a broker
Before you start actively looking for a property, it’s worth speaking with a broker. They’ll give you an accurate assessment of your borrowing capacity (more accurately than an online calculator) and determine your eligibility for government grants. Your broker will explain all the government fees and charges and ensure you’ll be eligible for a loan when the time comes to buy. - Get the green light
Whether you’re bidding at auction or placing an offer with an agent, you’re in a stronger position with a pre-approval. Pre-approval is essentially a green light from a lender to spend up to a certain amount. This means you’ll know how much you’ve got to work with. You’ll usually receive pre-approval within a few days of application. It’s generally valid for three to six months and assumes your financials stay the same. - Close the deal
Whether you buy at auction, by private treaty or off-the-plan, securing a property is cause for celebration. But before you pop the champagne, you’ll need to move fast to organise a few important things:
- A holding deposit – usually $500 to $1,000 or 5-10% for auction purchases
- A solicitor/conveyancer – your broker can recommend someone they trust to take care of the legal work
- Notify your broker – so they can quickly move you to formal approval.
Final Credit Assessment
During the time when you are closing the deal, the lender will value the property, process your application and make a final credit assessment. If you haven’t already, you’ll also need to pay the full deposit at this point.
If you would like to know more about securing a loan in South Australia, get in touch with our finance broker, David Nguyen on 0403 714 258.
4. BUYING
You’re satisfied that there are no major problems with your chosen property and have explored the local area to ensure it meets all of your non-negotiable requirements. The next exciting step is to think about buying. At this point, there are a few ways you can proceed, depending on the vendor and the advice given by both parties real estate agent.
“How to buy at auction?”
The excitement and anticipation of an auction is probably the way most people imagine they will buy a property.
The idea of bidding at auction can be daunting or thrilling depending on the individual. Most likely it will be a little of both. Of course, the best way of approaching an auction is to take the emotion out of it, but that’s easier said than done.
Preparation
Before you get hold of that paddle, it’s a good idea to do some field research. Attend as many auctions as possible to understand how they work and observe bidding behaviour. The experience will go towards informing your ‘game plan’ for auction. Begin taking note of the recently sold prices in your area of choice so you know what price range to expect.
Ahead of the auction, thoroughly read the contract of sale and get all of your questions answered by the agent before the big day.
Bidding
It can be easy to get caught up in the moment when the auction is in full swing, so it’s important that you set yourself some limits and goals.
- Consider your top bid while you’re in a calm and rational state of mind and stick to it.
- Stand right at the front with a good view of the crowd and auctioneer – ask a question right at the start to show you mean business.
- Start with a strong bid, then increase by smaller increments.
- Record the bids so you don’t lose track.
- Keep calm and be aware of your body language – give the impression you know what you’re doing.
- If you don’t trust your emotions, consider employing a buyer’s agent to bid for you.
Make a pre-auction offer
It’s not all about auctions. There are other ways to buy a house at auction such as making a pre-auction offer. If you’re unwilling to wait until the auction date, it might be worth making an offer to the vendor to see if they would be willing to accept it.
“Private treaty”
A private sale has no specified closing date and is usually negotiated between a buyer and vendor with the assistance of an agent or legal representative.
“Expressions of interest”
Similar to a private sale/ treaty except that a formal written offer is submitted for the property by a specific date.
TIP – Set your limit as an uneven number
People tend to think in round numbers so it could give you an edge. For example, instead of $700,000 set your limit to $703,000.
“What happens once my offer has been accepted?”
Congratulations! Your offer or bid has been accepted. So what happens next?
Your purchase now begins the conveyancing process which is formalised into two parts:
- The exchange of the contract of sale
- The settlement of the contract of sale
At this point, it’s highly recommended to employ the services of a professional conveyancer or conveyance solicitor to ensure the process goes as smooth as possible.
They will help you with:
- Undertaking title searches to determine if there are any liens, restrictions, encumbrances, or taxes against the property.
- Meeting all special conditions in the contract of sale.
- Ensuring that council and water rates are up to date in payment and that any other rates are similarly paid and adjusted as needed.
- Paying any other fees or charges, including registration fees and stamp duty.
- Preparing all legal documents required to transfer the property’s title from the seller to the buyer.
“What is a contract of sale?”
A document signed by both the seller and buyer. It outlines all of the property details including the price agreed by both parties.
Usually, the contract of sale is drawn up by the real estate agent on behalf of the seller. However, if the property has been sold at auction or there’s no agent involved, the conveyancer will draw up the contract.
“What is a vendor statement?”
This document sets out details about the property being sold such as:
- Body corporate fees
- Any planning details associated with the property
- Payable taxes
- Any encumbrances on the property
Again, it is recommended that you employ a conveyancer to draw up the contract as any incorrect information can render the contract of sale invalid. As part of their research, they will conduct title, planning and rate searches.
“What is stamp duty?”
Stamp duty is a tax imposed on numerous acquisitions, including selling real estate, cars and assets belonging to a business.
In the case of real estate, the purchaser is the one who pays the tax. It is a legal requirement for stamp duty to be paid within 30 days of the settlement date. All transfers of land or sales of property, including gifts of property attract a duty, but there are a few exceptions to this, including:
- Pensioners
- Young farmers
- Deceased estates
- Principle place of residence
- First home buyers
- Off-the-plan sales
- Family farms
Most transfers of land are charged as detailed below. A number of concessions are detailed in the Stamp Duties Act 1923 (for example, the purchase of an off-the-plan apartment which meets certain criteria), and other conveyances may be exempt (for example, transfers from an estate of a deceased person to a beneficiary under the will).
The stamp duty rates for conveyances are shown below:
Please note: the calculation of stamp duty on transfers of real property can take into account a number of factors (e.g. Section 67, landholder provisions).
(Source: revenuesa.sa.gov.au)
To make the settlement period a smooth process, there are a few items to check off the list:
Title Search
Deal with any caveats or encumbrances prior to the settlement period. You can do this by instructing your solicitor or conveyancer to carry out a title search prior to purchase.
Funding
One of your top priorities after signing the contract of sale is to get your funding in place – failure to do this is one of the major reasons that a settlement can be delayed.
An alternative to this is to find a bank that will pre-approve the loan, so you don’t have to worry as you go into the settlement phase. (See the finance section, page 10.)
Settlement period
Although a standard settlement is between 30 and 90 days, you can negotiate a period that suits both you and the seller, making the process much smoother.
Keep in touch
Finally, chase up the key players seven-ten days before the settlement. Call (don’t email) your conveyancer or solicitor, your bank or mortgage broker, and the vendor’s solicitor or real estate agent to ask the following questions:
- Is everything on track for settlement on [this date]?
- Is there anything that is missing that could stop settlement?
- Is there anything I can do to help?
5. MOVING
Finally, the big day has arrived. All the paperwork has gone through and you have the keys in your hand. Moving into your new home should be the exciting and easy part, right? Some people rate moving house as one of the most stressful experiences you can go through, but if you get yourself organised in advance and keep it flexible on the day, moving will go with a breeze. Follow these tips and you’ ll be cracking open that bottle of sparkling at the end of the day to congratulate yourself on a job well done.
Pre-move
- Throw away, recycle or donate all your unwanted items in advance. You’ll be amazed at how much easier it will be to pack (and unpack) when you’re not taking all that junk with you.
- Book the removalists and boxes in advance. Once this is done, you have a schedule to work towards and your move is imminent.
- Make a note of all the mail you get and gradually change your address with all your received mail.
- Clear your schedule for at least a couple of days. If you are moving mid-week, book days off work.
- Pack and label your boxes by room. Resist the temptation to pack similar items together from different rooms.
- Have plenty of stationery equipment – you can never have enough tape, scissors and black markers for moving.
On the day
- Finish packing your boxes before the removalists arrive.
- Have plenty of water and snacks throughout the day. Staying hydrated and energised is essential on moving day. It’s also a good idea to keep some cash handy for unexpected items like taxis and pizza.
- Pack a box or suitcase of items you’ll need for the first night. You don’t want to be trawling through your boxes looking for your PJs and toothbrush.
Post-move
- Organise the collection of used boxes, either back to the box company or to be recycled.
- Book the cleaner for the day after moving, rather than on the day to give yourself more time to clear everything out.
Additional Information:
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