Buying a property can be over whelming.
Let’s face the facts … most of us only ever buy a very small number of properties in a lifetime.
But for us, it is our profession, so to help property buyers, we have complied the following 7-steps to outline the process so you can have more confidence when buying a property.
1. Step 1 of the Buying Process – Get Finance Ready
We wanted to start this article at the very beginning – right when you first make the commitment to invest in your future and purchase your very own property.
When you first decide that buying a property is your next step, there are a number of things you will need to do to get on the front foot.
First, get out and about and do solid research into the current market and property values. This will assist in making realistic goals for you next property purchase. The market will change when the time to actually buy comes, so monitor the market right up until you are ready to put in offers. This will keep you educated so you don’t frequently miss out on properties that appeal to you.
Look for a mortgage broker that you trust so you can discuss your property goals with them. You may need to meet a few mortgage brokers until you find the right one for you. Some will be more focused on finding you the lowest interest rate. Others will create a longer term finance strategy. This will depend on you as an individual and what you are hoping to achieve in the future. All mortgage brokers will have their ideal clients so it is best to ask which type of property buyer that they specialise in.
You may find a mortgage broker that caters to the first home buyers’ market which may be great if you are feeling nervous about the process and need a bit of support. However if you are looking for a Mortgage broker who has experience with investment strategies then that may work better for you if you are looking to invest. We always recommend talking to your mortgage broker about your long term plans, because even if you are buying a home, if you have plans to upgrade in the future, then some mortgage strategies might be better suited than others if the first property is to be retained and converted into an investment.
Make sure you are on board and comfortable with the broker you have selected.
The Mortgage Broker will be able to put a plan in place and will be able to help you with the following:
- How much you can afford to borrow
- Give you education on current interest rates
- Educate you on the different set finance options and loan products (principal & Interest vs. Interest only, fixed & variable rates, offset and redraw facilities)
- If there is a particular budget you have in mind they can let you know if that is achievable
- Educate you on all fees involved when purchasing a property
- Set a plan in place so you have a clear idea of what you can afford to buy
Mortgage brokers are also free for consumers to use, mortgage brokers get paid by the lenders they place the home loan with so you are not up for any costing with going with a broker.
Once you have your goals in place as well as a plan on how to achieve them you can move to the hardest step in the entire process…
You may find that your bank may do a bundle package to provide an attractive rate so it is important to look into all of your options and work out which one will work the best for you.
2. Step 2 of the Buying Process – Saving the Deposit
Saving the deposit for your property purchase can feel like the longest journey so it’s important to stay focused during this process. It is very easy to lose sight of what you want to achieve when the end goal seems so big.
Our top tips for saving the deposit are below:
- Revise your budget to see how much can be saved each month and each pay date, ensuring you break down the savings goals into smaller more manageable goals helps keep you motivated and on track.
- Now is the time to stop any unused memberships and look at ways you can reduce your spending. This may be gym memberships you don’t use or cutting down take away from three times per week to once per week. The important thing to remember here is not to go overboard, restricting your spending too much may end up being more harm than good, you still need to enjoy yourself during this process but make a conscious effort to manage your money a lot closer.
- Pay yourself first. On each pay day it is important to revise your budget and move the amount you have allocated straight to a savings account, this way you don’t accidentally reach into that amount with your everyday spending, out of sight, out of mind. Treat your savings account like a bill that is due each month.
- Have a designated saving account for your property purchase. This is important and there are a lot of options on how to do this so look into what would work best for you. Term Deposits can prevent you from spending money due to limits on withdrawals. Be disciplined and avoid potential spending sprees.
By following the above steps you will be well on your way to your first property purchase.
3. Step 3 of the Buying Process – Pre-Approval stage
Once you have your deposit saved you are ready to put things into action. The hardest part is complete and now it’s time for the next step in the buying process.
What is a pre-approval you may ask?
A pre-approval is an “in principal” commitment from the bank that you can borrow up to a certain amount of money for the purchase of a property. Banks will assess your financial details and credit history to ensure that you are a suitable candidate for a mortgage. Having a pre-approval in place gives you confidence when entering the searching phase. This is because you will know what your top budget is and you can confidently know where you stand when negotiating with agents.
Re-engage with your chosen mortgage broker at this stage. They will be able to assist you in this process and run you through the steps of getting that pre approval in place. The pre-approval phase is a valuable step in getting you closer to your new purchase.
Pre- approval is not formal approval so be careful when putting in your offer as you still may need a finance clause in the contract of sale in order to for banks to make a final assessment on your application. Your mortgage broker will be able to assist in how long the finance clause may need to be in place.
4. Step 4 of the Buying Process – The search begins
This is where the fun really begins. There is a lot of decision making during this phase so it can often feel quite stressful during this part of the process.
We have compiled three tips to remember when searching for a property to buy:
- If it is meant to be… it will be. There may be instances where you may miss out because another buyer was willing to pay more than you, especially when the demand for property is high and there is a lot of competition. If you miss out simply, move on as your ideal property is still waiting for you. It is ok to feel disheartened … but do not let it consume you!
- Going to multiple open homes every weekend can become overwhelming and exhausting. You may be feeling very excited for the first few weekends, however if the right property is not presenting itself, then this can get exhausting very quickly.
We recommend completing comprehensive research before inspecting. Do you like the area? Does it have the right floorplan for your needs & is the property still available?
Just because it is listed online, it should be available…right?
You would be surprised how many agents still show homes that are under contract or sold off market. This is the agent working for the seller in case the contract doesn’t work out, but it is also wasting your time so give the agent a call and ask them as many questions are you can.
- Take photos and a measuring tape. In high demand markets there is not usually a second… or third opportunity to inspect and take measurements, or you may have forgotten what some parts of the house or site look like.
After you have walked through and made an assessment if you really like it then take another walk through to take pictures or videos of every corner of every room & measure the important spaces (eg. fridge space, washing machine space, bedrooms and living areas) to ensure your furniture fits.
If you are overwhelmed by this searching process or want to know about off market opportunities, then looking into how a buyer’s agent can help may be of benefit to you.
5. The Buying Process – Making an offer
Making an offer on a property is serious business.
There is so much to consider in such a short space of time and this process can become overwhelming, especially when the competition is high.
You need to understand how much to pay and how to present your offer to the seller or their agent. We have written an in depth Article on the Contract Process in Queensland that you can find HERE.
If you are fortunate enough to purchase property using cash, then your offer will be strong. However most people do have to go through the banks and obtain a loan to purchase a property. This means that there needs to be some conditions on the contract before the offer is made.
The items you need to consider when putting forward an offer are:
- Initial and balance deposit amounts
- Offer amount
- Finance clause and how long to satisfy
- Building and pest inspections and time frames
- Settlement date
- Any other special terms that are needed (due diligence, rent back, body corporate searches etc)
You may think that the highest bidder always wins … and this is likely is most cases, but not always. There are many instances where the highest offer has not been the accepted contract due to other offers having better terms in place.
Our best tip to you is to talk to the agent and figure out what is really important to the seller when it comes to selling their property. Once you have this information, you can use it to make your offer more appealing to the seller. For example, this may be a longer settlement because the seller has not yet found their next home and therefore needs more time to relocate.
Sometimes the agent may pre-populate the information for you on a contract to help guide your offer. However it is important to note that you can change these particulars to suit you or the seller more favourably.
Everything is negotiable ….
6. The Buying Process – Conditional and Unconditional Stage
Once you submit your offer and it is accepted, if the offer is subject to any conditions then you enter the conditional stage in the Buying Process. This is where you would organise a building and pest inspector and work with your mortgage broker and bank to satisfy any finance clause included in the contract. You will need to engage a solicitor that is based in the state you have purchased to communicate with the sellers solicitors and handle the conveyancing process.
It is very important for you to get a building and pest inspector to provide a report if the contract is conditional to a building and pest inspection. They will look into all the sections of a property that you cannot physically see from a standard property inspection and provide a report of their findings. You want to know that the property has no hidden defects or maintenance concerns, as there are huge costs associated with buying a property and mistakes can be costly.
If you do find something that you may need to fix, you can try and negotiate the cost of repair off the purchase price or get the seller to rectify it prior to settlement. It may be something structural that could put you out thousands of dollars without actually adding any value to the asset, so uncovering these issues at this time is critical. You also may have the option to withdraw from the contract if the results of the building and pest inspection are not to your satisfaction. These are all options available to you under a building and pest clause.
Once you have completed your inspections, obtained your final finance approval and satisfied any other conditions in the contract, your contract will become unconditional. This is time to celebrate! At this time the solicitors will prepare for the settlement to take place on a specific date.
7. The Buying Process – Settlement
This is the final stage of the buying process and one to be heavily celebrated! All that hard work has now paid off. Settlement day is when the seller will receive the payment of the agreed contract price and the buyer will legally take ownership of the property.
This is where key collection takes place, that picture in front of the sold sign can be taken and the moving in process begins.
I hope the seven steps have brought some ease to the buying process journey. If you need help with finding and securing your property please reach out at Streamline Property Buyers.