Buying your first home needn’t be a daunting experience. In fact the more prepared you are, the better.
After you’ve maximised your chances of getting a loan, had some experience looking at properties for sale and practised making proper inspections, you’re ready for the final step – actually buying your first property.
Once you’ve found your ideal home you’ll need to do your best to make it yours. You must do some research to work out how much you should pay for it, based on what other properties in the area sell for, as well as possibly getting an independent valuation.
Your approach to securing the home will vary depending on whether the property is up for auction or private treaty. Auction is a popular method in Melbourne and Sydney but not so much in other areas of Australia. If the property you’re interested in is going to auction it doesn’t hurt to make an earlier offer. If your offer is knocked back, you’ll need to decide whether or not you’re willing to go to auction.
If you do, make sure you don’t get carried away and pay more than you can afford or more than the property is worth. Buyers agent with EPS Property Search, Patrick Bright, says it’s a good idea to get someone else to bid at auction for you, especially if you’re emotional or nervous about buying.
“Ideally you should call in a professional; however, at the very least get a trusted friend or family member,” Bright says in his book The Insider’s Guide to Buying Real Estate. “Tell them your maximum and instruct them not to go above it under any circumstances. It’s a great insurance policy against bidding too much.” If you are the winning bidder you’ll need to sign the contract on the day and pay a 10% deposit. There is no cooling-off period, so you’re stuck with the property or you’ll have to forfeit the deposit.
If it is for sale by private treaty and there is a fixed price, things are a little more straightforward. Most people know that in these sales there is definitely room for negotiation. “The rule of thumb for making offers in a private treaty sale is start low and work your way up in very small increments,” says Bright.
It’s worth noting that even if your offer is accepted, nothing is official until contracts are exchanged, so someone can come in, make a higher offer and gazump you. Once the contracts are signed and a deposit is paid, the NSW Department of Fair Trading points out that you have a financial interest in the property so it’s wise to consider getting it insured.
There may be a cooling-off period if you change your mind – it varies from state to state – but you can still be penalised if you withdraw.
Something else we’re seeing more of is when the price guide advertised says “offers over” – the problem is working out how much “over” you should offer. Some say 10% over, others say 20%. Bright says there are no hard and fast rules.
“Just as buyers need to determine an accurate value before submitting any offer on a property or attending an auction, in an ‘offers over’ scenario buyers also need to conduct thorough research to determine value,” he says.
Bright warns that it can be easy for buyers to overpay to secure the property. “As in any purchasing situation you shouldn’t be guided by the “offers over” amount but by your own research,” he says.
Whichever way you purchase your property, it’s not yours until “settlement”. Settlement usually takes place about six weeks after contracts are exchanged – unless you have negotiated something different. “This is when you become the legal owner of the property,” says the NSW Fair Trading website. “The balance of the purchase price and other adjustments are paid on this date.”