The following advice is of a general nature only and intended as a broad guide. The advice should not be regarded as legal, financial or real estate advice. You should make your own inquiries and obtain independent professional advice tailored to your specific circumstances before making any legal, financial or real estate decisions.
Buying your first home is an exciting time but it can be a daunting process too. But don’t let your nerves get in the way of moving on with your life. To be more prepared for your journey the First National Rochedale team have put together some answers to the most common buyer questions.
What are things I need to know when buying a first home?
You need to know:
• How much you can afford to borrow
• How large a home deposit you will need
• What the other costs are that you will incur
• How to make an offer
Talk to one of our friendly sales agents for advice.
Is there an ideal time to make an offer on a property?
The ideal time is the moment you decide that you are interested in it. Whether it is for sale by Auction or For Sale (Private Treaty) the owner is always interested in hearing offers.
Should I buy now?
First National Rochedale sales staff are local experts and can give you the tips, trends and predictions for their particular area, especially concerning whether you should buy now. The First National Real Estate group has over 400 offices around Australia & New Zealand.
Is there an Australian real estate bubble?
Some of the most respected institutions and banks in Australia say no, and not without good reason. Check out our Blog for more information.
How can I be sure I’m ready to buy?
- You can be certain you’re properly prepared when you’ve covered these bases:
You’ve saved your deposit, consulted a mortgage broker or financial planner and made sure you can afford the monthly repayments on your proposed property loan.
- You’ve prepared yourself mentally, meaning you’re prepared to move on from being a renter and sacrifice the flexibility, or you’re ready to invest in property and accept the responsibilities and concerns of becoming a landlord
- You’ve properly considered where you can afford to buy and the standard of property your budget will stretch to
- You’ve done the footwork in the suburb/s you want to buy in and feel confident you understand fair property values
- You’ve considered whether it would be wise to obtain income protection insurance, in the context of your personal and family obligations
- You’re happy that the real estate market conditions are right for you and that you’re not buying because you feel compelled by others
- You’ve considered renting versus buying and weighed the benefits and downsides carefully
- You’ve received legal advice (or at least had a Conveyancer inspect the contract of sale) and you’ve carried out a building and pest inspection that is to your satisfaction
- You’re prepared to accept your obligations as a good neighbour i.e. contribute your share to maintenance in a strata plan or share costs of replacing fences and pruning gardens with houses
Which is the better purchase; a new or existing home?
- Older properties are sometimes cheaper than new ones, depending on the location and condition of
- Older homes offer charming period features and, often, higher ceilings, quality timber floors and unique architectural features
- Older properties may need renovation of major systems such as heating/cooling, wiring, plumbing, roofing. But, they can offer significantly more margin for turn around and profit
- New homes are designed to suit today’s fashions and lifestyles. They’re more likely to appeal to a wider market of tenants if well located
- New properties may be entitle you to claim depreciation, giving you extra tax benefits
How do I work out market value so I don’t overpay when buying real estate?
“Market value” is whatever a willing buyer will pay for a property when it sells. While this advice doesn’t help new buyers, or even experienced buyers, there are ways to work out what you should pay for a property. Here are our tips:
Use technology: Many real estate websites provide suburb median prices and recent sales details. Remember that a median price is only indicative of the middle price in a suburb; it may not reflect the value of the property you are considering.
Ask real estate agents: When buying an investment property, rental returns are the key factor in determining value. 5 per cent gross rental return is considered the ‘rule of thumb’ which essentially converts to $1 in weekly rent for every $1,000 spent buying a property
Obtain a valuation: Formal valuations can cost between $500 and $1,000 but a licensed valuer must support his or her indicative price with solid comparative market evidence
What’s the first hurdle when buying your first home?
For most, it’s working out how big a deposit you’ll need and then saving that home deposit.
- Work out what you can afford to borrow and still live comfortably
- Get advice from a financial planner, friend or family member who has bought property before. Arm yourself with as much advice as possible
- Don’t over commit when buying your first home. Most people will qualify for loans far above what they can afford to pay back. Don’t fall into this trap. You’ll need adequate reserves to cover more than just mortgage repayments
- Start looking around once you have around 5% of the purchase price and keep saving
How much deposit do I need to buy a property?
To obtain finance, buyers normally have between 5% and 20% of the property’s purchase price. If you have less than 20% of the purchase price, your lender will almost certainly require Mortgage Insurance.
How much money can I borrow to buy a house?
A bank or mortgage broker can help you establish a realistic figure. If you have less than 20% of the purchase price, you may need to pay Mortgage Insurance. This allows you to borrow a larger percentage of the purchase price but slows the rate at which you pay off your loan.
Mortgage Insurance can be included either in your upfront costs or in your loan repayments so that it’s spread out over the term of the loan.
Once you have decided that you are comfortable with the amount your Lender has approved for you, it’s wise to get your lender’s ‘pre-approval’ or a ‘Deposit Bond’. Then you can bid confidently at an auction, or make an offer on a ‘private’ sale, knowing your lender won’t say no.
What is a Deposit Bond? Why would I want one?
A ‘Deposit Bond’ acts as a substitute for cash and you can use the bond when exchanging contracts, including at auctions.
For a small fee (several hundred dollars normally), you and your lender agree a maximum amount that you can use as a deposit to buy and you don’t need to use your cash. The Deposit Bond works like a guarantee. It’s your lender’s way of saying ‘we’ll pay this deposit at settlement, instead of now’.
How can I get a First Home Buyers grant?
The best place to start is with the Federal Government’s advisory website. It explains the First Home Owners Grant and connects you with any additional grants available from your State Government. The First Home Owners Grant is a national scheme funded by the states and territories and administered under their own legislation. A one-off grant of up to $7000 is payable to first home owners that satisfy all the eligibility criteria.
Additional State Government grants may be available to assist your first purchase.
Visit www.firsthome.gov.au for more information and links to any grants available in Queensland
Can my parents help me buy my first home?
Saving for a deposit isn’t easy, especially if you want to save enough to avoid Mortgage Insurance. If your parents are willing and able to help you buy your first home, then perhaps a Family Equity Loan is the way to go.
A ‘Family Equity Loan’ or ‘Limited Guarantor Loan’ is a great way of buying your house sooner and avoiding Mortgage Insurance. Your parents are able help you without being left out of pocket because they’re using the equity in their property to cover a portion of the loan. However, if you can’t repay your mortgage, your parents would be required to pay the unpaid amount of the loan. In a worst-case scenario, this could force them to sell their home to cover your debt.
It gives you the freedom to concentrate on finding the right property – and keeps your deposit savings earning interest, right up until the day of settlement. Your Lender can arrange this as part of your pre-approval.
What do I need to think about when buying a property with a friend?
83.5% of Australians say they wouldn’t even conceive buying a property with one of their friends. However, for many single Australians, buying with a friend solves the challenge of how to get a foot on the first rung of the property ladder.
So, if you’re considering buying real estate with a friend, take our advice and cover these bases:
Use a co-ownership property agreement. This sets the ground rules from the outset and outlines what your expectations are and seriousness of the commitment. As a co-ownership agreement is a legal document, there will be clear steps to follow in a disagreement.
- Determine how property costs will be shared
- Have an exit strategy. Whatever can go wrong might go wrong so you need to plan for the worst and hope for the best.
- Things to consider are:
- What happens if one of you dies, becomes seriously ill or disabled?
- Loses their job
- Goes bankrupt
- Develops interpersonal problems with partners, friends or family
- Your property has to be sold at a loss
- Choose the correct title on the property. A ‘joint tenants’ title means that, following the death of one of the borrowers, the property will automatically transfer to the co-owner and not those specified by the deceased in a will. ‘Tenants-in-common’ is the other type of title whereby the death of a co-borrower results in the property rights passing onto those nominated in their will. This is the better situation for passing on assets to a spouse, relatives and dependents.
- Understand how the title you choose affects your borrowing power. Get adequate property insurance cover. You will be bound by a co-borrowing agreement so it is important that you are covered if the conditions are proscriptive during times of financial stress.
- Consider life insurance options, health cover, income protection and home and contents insurance.
What is Stamp Duty? How much will I need to pay?
Stamp Duty is a tax levied by states on various types of transactions such as transfers and agreements for the sale of real estate. The amount of stamp duty you pay is based on the price of the property you buy. The amount varies from state to state. Visit the Queensland Office of State Revenue for further information:
Do I need to keep the property I’ve just bought insured until settlement?
It’s wise to insure from the moment you have signed a contract to buy your home. Risk passes from seller to purchaser, immediately upon purchase, even though you have not settled and taken possession of your new home.
When should I involve a solicitor or conveyancer in the purchase of my home?
Before a contract is signed is the best time to get legal advice from a qualified lawyer, solicitor or conveyancer. Opportunities to end the contract can be severely limited if legal advice is sought after the contract has been signed.
Can I negotiate the settlement period or deposit?
Yes, both can be negotiated with the seller prior to signing the contract.
What’s the difference between ‘Auction’ and ‘For Sale’?
A property is advertised for a set period and a date set by which buyers must have completed their enquiries (legal, building/pest inspections), arranged their finance & be ready to bid. On the day of the auction, buyers compete, bidding in an upward direction until no higher bid is offered.
If the seller’s ‘Reserve Price’ is reached, the property will be declared ‘on the market’ by the auctioneer. The ‘Reserve Price’ is the lowest price the seller is willing to accept. If the ‘Reserve Price’ has been reached or exceeded, the property will immediately be sold to the highest bidder. If the ‘Reserve Price’ has not been reached, negotiations will commence with the highest bidder.
If the property has been sold, the highest bidder must exchange contracts and pay the deposit, which is 10% of the purchase price, immediately. There is no ‘Cooling Off Period’.
If you plan to bid at auction, it’s a good idea to have a ‘Deposit Bond’, which will act as a substitute for cash if you don’t have 10% deposit in cash or a cheque book
‘For Sale’ is the standard term for a Private Treaty sale. It usually has a fixed asking price although there can be slight variations. Sometimes, the seller will seek ‘offers above’ an indicated price. Interested parties make offers and negotiate with the seller through the agent. The agent may be negotiating with several parties at once and acts under the instruction of the seller. When you commence a negotiation, it’s important to be serious and respond quickly, fairly and decisively.
Be mindful that if you are reluctant to negotiate a fair offer, the owner may accept an offer from another party and sell to another party. The agent does not have to tell you what the other party’s offer is.
You will be required to pay a refundable holding deposit once your offer has been accepted. However, you must sign the contract to buy the property as quickly as possible. Until you do, even if a deposit has been paid, the seller retains the right to sell his/her home to anybody else they choose. If a higher offer comes along, they are free to accept (your deposit must be refunded, but the owner and agent are not obliged to refund any other costs).
Private Treaty sales are subject to a ‘Cooling Off Period’. The ‘Contract of Sale’ will explain how long this is – typically five business days
What is the process of an auction?
- The auctioneer starts proceedings with a short explanation of the contract and terms of the auction. Buyers are entitled to ask questions at this stage
- The auctioneer will then call for an opening bid. If a genuine bid is not forthcoming, the vendor is entitled to make a “vendor bid”
- Once the reserve price is reached, the auctioneer will generally state that “the property is on the market”. This is when bidding can become more competitive
- If the highest bid falls short of the reserve, the property may be passed in or the auctioneer may pause the auction while the agent discusses the situation with the vendor
- The vendor may choose to reduce the reserve to the highest bid and recommence the auction; or
- If the vendor refuses to revise the reserve price, the property will be “passed in”. You may then be approached by the agent and invited to negotiate in an attempt to agree upon an acceptable offer for the vendor
What is a reserve price?
The “reserve price” is the minimum price that the vendor will accept. This is set by the vendor prior to auction and can be changed by the vendor during the auction if desired.
Are there any tips and tricks for an auction newbie?
The chance to market and sell a home within a set timeframe, while making sure full market value is achieved, has led to auctions becoming a popular way of buying real estate. However, if you’re an auction newbie, the whole process can seem a little scary at first glance.
One of the best ways to ensure a successful auction purchase is to prepare well in advance and perform as much research as you can. Then you can be sure you will enter the market with the confidence you need.
Sort out your finances early
The first step when purchasing real estate by auction is to get your finances in order as soon as possible. Get in touch with a mortgage broker or lender to determine how much you can borrow. This will give you an idea of your budget and what sort of price range you should be looking for.
You can also get your home loan pre-approved, which is definitely useful once auction day rolls around. Pre-approved finance can last for a few months, so this should be sufficient time to look for a home.
Set a bidding limit
Once you have your budget in mind, you can set your bidding limit. It’s crucial to stick to this figure on auction day to prevent spending more than you can afford. Remember to leave some space to accommodate any last-minute bids, but know your absolutely final limit.
Select a strategy
Before the auction starts, it’s best to determine a bidding strategy. Some buyers prefer to bid straight off the bat as soon as the auction starts, while others wait until the last few minutes as things begin to really heat up. A few buyers may jump in with a large bid to knock others out of the water, or some people might up the ante with a series of small increments.
Whichever strategy you decide to adopt, make sure you keep your budget in mind and your feelings at bay!
What is the best strategy to win when buying real estate by auction?
While it may all come down to who has the deepest pockets on the day, sometimes how you bid will influence just how high the other bidders are prepared to go. However, the most important factor with a real estate auction is to decide what is your realistic limit in advance. Be prepared to be a little flexible, but don’t allow yourself to get carried away with emotion.
Here are First National’s tips:
- Obtain pre-approval for your loan before the auction. This provides you with confidence that the bank will support your highest bid
- Some people like to enter the bidding early and then keep bidding strongly in the hope that other buyers will find their tenacity off putting
- Some buyers like to open the bidding with a very high bid but this can risk paying too much for the property.
Others prefer to wait until the bidding appears to be exhausted, before starting to compete
- If two bidders keep upping their bids by similar amounts, some buyers believe it is advantageous to suddenly bid with a stronger, larger increase than has been generally taking place throughout the auction. This is thought to convince competitors that you are determined to succeed and will just keep bidding
- If the auctioneer indicates that the property is to be ‘passed in’, make sure that you are the highest bidder if you wish to have the ‘first right of refusal’ following the auction. This means you will be first to have the opportunity to negotiate with the vendor
Whatever your style, the one thing that rarely works to anybody’s benefit is being loud and obnoxious. Other bidders sometimes say they are prepared to pay much more to make sure that somebody that is rude does not get their way.
What do I need to know when buying an apartment off the plan?
Buying ‘off the plan’ provides investors with the opportunity to buy some of the best-positioned apartments within a complex. When the market is rising, it can also sometimes offer property investors a capital gain by the time construction is completed.
Here are some tips to help you make sure you make the decision that’s best for you:
- Make sure you look carefully at the displays that developers make available. These will show examples of carpets, tiles, kitchen fittings and finishes, colour schemes and general fittings
- Ask about previous projects that the developer has completed. Arrange an inspection to make your own judgment as to the quality of construction
- Ask residents of the developer’s previous projects how happy they are with the property they purchased.
If you’re not confident you understand floor plans, consider asking an architect to assist you with your decision making
- Banks generally won’t provide unconditional approval of your property loan when you buy off the plan. If the market moves downwards, between your purchase and settlement, you will need to be prepared to find additional funding
- It is a good idea to include a finance clause in your contract and get a valuation ‘as-if-complete’ when you’re getting your initial approval. This will allow you to gauge how the property stands within the current market, as well as how the bank views the area and the property’s potential
- Get legal advice before signing a real estate contract. Make sure you understand delivery timeframes, sunset clauses, size variation clauses and confirm that you are buying what you believe you are buying.
By conducting your due diligence and taking your time, you can take advantage of what off the plan purchasing can offer buyers; a way to secure a quality property in the future, at today’s price.
Should I get a building and pest inspection?
Building and pest inspections typically cost around five hundred dollars but are a vital part of the due diligence process when buying a house. When buying an apartment, a strata inspection report may be more appropriate, depending on the size and construction of the block. Remember though that almost all inspection reports reveal some form of problem, particularly with older properties.
A building and pest report will provide crucial guidance as to the condition of the property you are considering and can be useful in price negotiations, if significant problems are present.
Here are some tips on understanding and responding appropriately when you receive your report:
- Don’t be shocked if your report is in the order of 30 or more pages. That’s normal.
The presence of ‘past termite activity’ should not be viewed as a deal breaker. What is important is the extent of the damage and whether there is evidence that corrective action has been taken. Naturally, if current termite activity is present, this is potentially serious and needs to be fully assessed and dealt with
It is the building inspector’s job to point everything out that he/she sees to ‘cover’ themselves. It’s important you calmly read through the information and understand what it means.
- If you have a question, phone the inspector. They will often be happy to discuss their findings and explain their relevance.
- If major faults have been found, discuss these with your real estate agent. It may be possible to negotiate a suitable adjustment to the agreed property purchase price.
- Be realistic. A small range of typical faults may not be fair grounds to renegotiate price
What is an Owners Corporation or Body Corporate? How does it work?
A ‘Body Corporate’ is a legal identity that manages the affairs of an apartment building if it is Strata Title or ‘Community Title’. The term ‘Body Corporate’ has been replaced by the more modern term – ‘Owners Corporation’. ‘Company Title’ buildings have a similar legal identity known as a ‘Board of Directors’.
The Body Corporate looks after the management and administrative services the property/properties require
A Body Corporate decides what, if any, levies are payable in order to share the costs of maintaining a building
What is conveyancing and how does it relate to the buying process?
Conveyancing is the protocol by which legal title (or ownership) of a property is transferred from one party to another.
This is usually done one of three ways:
· A solicitor
· A conveyancer
· By the purchaser, using a do-it-yourself (DIY) conveyancing kit
How does the settlement process work?
It usually takes four to eight weeks from the exchange of contracts for settlement to be completed. The terms of the contract will make the exact date clear.
Until settlement, the property remains in the possession of the vendor, however, risk passes to the purchaser so it is recommended that the property be immediately insured with a building insurance policy.
Your solicitor/conveyancer will prepare all the documentation that will be required to complete the purchase on the day of settlement. They will contact the vendor’s legal representative to arrange the date, place and time of settlement. Your solicitor/conveyancer willalso advise you prior to settlement, of the exact date, time of settlement and the amount of funds that you are required to provide prior to settlement (if applicable).
After settlement, the vendor’s solicitor will contact the real estate agent that sold you the property and instruct them to release the keys to the property to you. Your solicitor will contact you to confirm settlement has taken place. They will also send you a Statement of Adjustment to show you how the funds have been disbursed to all parties involved.
What are 3 tips to help me in the real estate settlement process?
During the settlement period, purchasers are entitled to ask for accompanied access to the property for “reasonable” purposes. Remember though, the property still belongs to the owner and they are not obliged to grant access.
Stay in close contact with your legal representative when planning removal van booking times. It’s crucial that your belongings will be delivered to your new home at a time that fits tightly with the legal process.
Your agent cannot hand over the keys to your new home until instructed in writing to do so by the vendor’s solicitor (in writing). You must be prepared for possible legal or banking delays when moving out of your current residence.
How can I renovate to improve my property’s appearance and value, for the least cost?
First National Real Estate has a detailed ‘Home Sellers Guide’ that you can download here. It offers all manner of tips and renovation advice. Alternatively, we have a brief ‘Preparing your home for sale’ brochure.
However, it’s always best to ask about what’s most popular and effective in your locality. Contact a First National Real Estate agent and we’ll happily give you all the advice you need.
What are the most cost effective renovations?
Performing a few renovations here and there can even help you to add some value to your home or investment property – an important step if you’re thinking of selling soon!
Here are three budget renovations you might want to think about:
Refresh and repaint
Have you ever walked through your home and spotted countless chips, scratches and marks on your walls and ceilings? Perhaps your wallpaper has begun to peel or mould has gotten the better of your bathroom paint?
A few licks of paint throughout your home can do wonders. It’s also an inexpensive and creative way to make your home look new again. Repaint cupboards, walls, ceilings and drawers to freshen up the interior of your home.
Tidy up the backyard
Green thumb or not, it’s easy to get right into your backyard and give it a makeover. All you will need are some gardening tools, a few helping hands and a skip to tidy up your backyard and get it looking neat and tidy.
Topsoil, bark and plants are cheap additions to your backyard and can turn your garden from an overgrown patch into a manicured entertainer’s paradise.
While you’re at it, why not re-stain and refurbish some of your neglected outdoor furniture?
Replace fixtures and fittings
Have a look at the most-used items in your home and determine whether they’re in need of replacement. Items such as taps, door handles, wall switches and light fittings can all easily become worn down over time due to overuse.
However, they’re also not that expensive to replace. You might want to update some of these to ensure they tie in with the new decor in your home and are more functional.
Remember, DIY renovations require you to stick to a strict budget. Always keep this in mind when you’re purchasing tools or hiring extra help.
What is an easement on a property and how does it affect me?
An easement allows another party to access, cross or use your land for a specified purpose. Some properties have easements such as:
- Drainage easements – for sewerage, stormwater etc.
- Electricity easements – for underground or overhead power lines
- If you want to put in a pool and find an easement across that particular area, you will be prevented from putting the pool in.
What are the most important things to look out for at open home inspections?
Open house inspections can be equal parts fun, exciting and nerve-wracking, especially if you find yourself falling in love with a property at first sight.
However, there will be plenty of time to dote on your home in the future – inspections are all about keeping your eyes open for any signs that your potential new abode might be a major lemon.
Homes may not have voices, but that won’t stop them from trying to tell you something. Here are some of the more serious open inspection red flags to be on the lookout for.
A shaky foundation
It’s often said that a strong foundation is the most important part of whatever’s built atop it, and this can hold true for houses. While costs can vary, cracked foundations are notoriously difficult to fix and can cost homeowners tens of thousands of dollars.
Keep an eye out for cracks on steps and walkways outside. Small cracks may be normal and come with age, but wide, horizontal cracks may be a dead giveaway that the home is falling apart underneath.
Nothing quite compares to the risks associated with water damage. Not only can moisture rot building materials, it can lead to the growth of mould and mildew. In turn, this can lead to serious respiratory problems for people with allergies.
Signs of potential water damage include dank, musty smells, water stains, mould spots and warped walls. While water damage itself can be fixed, even more important is what caused it. After all, a leaky pipe will be much easier to fix than a hole in your roof.
Not only can vermin and insects make your skin crawl, they can also be terribly difficult to get rid of. The damage caused by pests like mice and wood borers can be far-reaching, and the costs associated with eliminating them aren’t cheap.
During an inspection, take time to look around for signs of pest problems. These include dead bugs, animal droppings and mouse holes.
What are some of the common mistakes landlords make?
Some property investors choose to manage their own rental properties. This has both advantages and disadvantages. One advantage is that you can save on real estate agent costs but there are challenges you need to be mindful of.
Some mistakes self-managing landlords make are:
- Access – Landlords must obtain permission from their tenant to access their property – some fail to give adequate notice. Whether it is for inspections or to undertake maintenance duties, landlords must not ignore the rules about access
- Bonds – Some landlords ask for more than four weeks rent (which is against the rules) and/fail to lodge a rental bond with the appropriate authority, where applicable, in their state
- Proper documentation – Some landlords fail to put written tenancy agreements in place, complete comprehensive property condition reports, or keep proper records of rental payments. This can lead to significant difficulty if or when a dispute arises.
- Charging for utilities – There are clear rules for when you can and can’t charge for water usage and other utilities but these vary from state to state.
- Failing to make communication easy – Some landlords fail to provide tenants with their full name and address or phone contact details. This can make it difficult for tenants to communicate about problems or respond appropriately in emergencies
- Not seeking help – Landlords often forget they can seek guidance from appropriate tenancy authorities in their state. Many services and information sheets exist and state based real estate institutes can help direct landlords to the help they need.