Time and time again, I have seen so many first time home buyers straight jumping online to find a property without much data-driven research and due dligence.
In addtion, solely relying on friends, colleagues and family opinions about good suburbs to live in, schools, transportation etc leads to dissappointment should someone end up buying as per their view.
On the other hand, there are many who end up in analysis paralysis and delay in purchasing the right property unnecessarily due to wide range of opinions and information gathered without considering their own circumstances, suitability and due diligence.
Unnecessary delays can cost you. e.g. if you are in the market looking to buy for 6 months or more chances are you are now to going to end up paying more as a result of market movement in that surburb/area. Combined dwelling prices in Melbourne and Sydney shot up by 5-8% in just 6 months between Sep 2019 to March 2020.
Below are the 10 steps in no specific order to provide a guideline on how to buy a property and avoid anlaysis paralysis or talk to professional buyers' advocate who can help you take the stress out, speed up the process and gain clarity in buying your dream home to suit your circumstances.
Finance: Engage a lender/broker to understand your borrowing capacity and get a pre-approval. Keep the required deposit/funds ready in the bank account and dont use it for any other purposes especially if you are going to buy in next 3-6 months. You may also need to demonstrate to the bank that you have genuine savings and ability to save money
Goals and Requirements: Know what you need vs want to suit your family and lifestyle. Dont just look at the needs today but work out what you need in next 2-5 years. This is a critical step to ensure you and your partner sit down together and agree what's important to you and your family and write them down in order of priority. Once agreed, stick to it!
FHB Govt Benefits: Assess your eligibility and what you are entitled to get from government by going to state revenue office websites or call them. At the time of writing, there are incentives for stamp duty waivers depending on purchase price; goverment grant ranging from 10K to 20K depending on location; first home buyer low deposit schemes etc.
Closing costs: Workout detailed cost breakdown related to securing a property (Stamp Duty, Bank Fees, Legal Fees, Lenders Mortgage Insurance, Other Govt Charges, Buyer Agent Fees, Building and Pest Insp, Council, Utility Rates, Insurance and Settlement costs). Usually these fees vary between 3% to 9% depending on your circumstances.
Asset Protection: Engage accountant to know which entity to buy the property in and maximise your tax benefit especially if you are investing.
Due Diligence: Perform deep data-driven research to find the right property at the right location timing it as per market conditions. Narrow down search by shortlisting suburbs and do apple for apple comparisons based on listings and recently sold properties in those areas to guage the market and price points. For the chosen property, seek a copy of the contract of sale from the agent and perform an initial review it
Professionals: Engage conveyancer/solicitor to ensure they can provide legal advice before you offer or sign on the dotted line with special conditions to protect you.
Offer Stage: Make an offer at the best price and terms to negotiate your position. Make sure special conditions are included when making an offer. If offer is accepted, move swiftly to avoid gazumping. This is "Under Offer" stage
Contract Stage: Usually a small deposit is required upon signing a contract. Sometimes 5% to 10% deposit is required at this stage too. If in auction, there are no conditions and no cooling off period unless agreed prior with agent. Ensure conditions of purchase align with jurisdiction in which you buy the property. Look to satisfy the special conditions. Choose a settlement date carefully. This is "Under Contract" stage.
Seek clearance from bldg. and pest inspector and conveyancer
Get the bank/broker to seek unconditional approval for the loan
Check the cooling off period (could be 5 to 10 days) post which the contract is unconditional. You can also pull out in this period but you forfeit a small % of the deposit (usually 0.25% of the purchase price). May vary in different jurisdictions.
Ensure funds are ready to complete the transaction including govt grants
Final Inspection: On or before settlement day do a final inspection and everything is in line with the contract of sale and special conditions are satisified
Organize Landlord or Building and Content insurance as applicable
10. Settlement Stage: Settlement date is a big day. This is when the monies are exchanged, books are balanced between vendor and buyer. The land title is transferred to the buyer in the chosen entity. Conveyancer/solicitor will organise and settle the property and secure the funds from you prior to the day.
Congratulations you are now the new owners! Get the keys from the agent and move in