Rookie errors of first-time buyers
Even people who have bought property before sometimes trip up and miss out on the house they want, writes Sonia Taylor.
Making mistakes is part of human nature – it’s how we learn and grow. But when those mistakes happen with the single biggest purchase of your life, that wisdom can be costly.
Property is an ever-changing beast and one that can get the best of anyone, first timers and seasoned purchasers alike.
‘‘Buying your family home, whether you are a first-home buyer or not, is always a challenging process,’’ says Felix Taing, a buyer’s agent and property coach who has helped numerous first-home buyers and aspiring investors.
‘‘Homeowners typically change houses on average every seven to 10 years, so just because you’ve done it once doesn’t make you an expert.
‘‘With market movements and a changing economy, it’s difficult to keep up unless you are consistently in the market.’’
But first-home buyers can be overwhelmed with an entirely foreign and complicated process, leaving room for multiple errors.
Taing, who is based in Sydney, Australia, runs us through the most common mistakes that first-home buyers should avoid and gives some expert advice on how to course correct.
1. You don’t know your financial position
Many first-home buyers can accidentally skip the crucial step of having a realistic (and often sobering) look at their financial position. Instead, they may use the pre-approved loan amount from the bank as their guide to what they can afford.
‘‘Although the banks may provide a pre-approval for a certain figure, it doesn’t mean you need to, or should, spend all of it,’’ warns Taing. ‘‘You need to decide what you will be comfortable with spending on a property by having a good understanding of your own financial habits.’’
It is imperative to understand that buying a home isn’t simply the financial outlay of a deposit. Set aside some extra to cover expenses. Knowing your budget also means you’ll look at areas and homes you can afford, and not let fantasy take the wheel.
2. You don’t understand the market
‘‘Doing your homework is a vital part to building up confidence and knowledge in the market and this will set buyers apart from the rest,’’ says Taing.
However, he emphasises the importance of getting out there in person.
‘‘One of the biggest mistakes first-home buyersmake is that they spend too much time reading about the market rather than being in the market,’’ explains Taing.
‘‘They feel they need to read and understand everything before they can even start inspecting properties.
‘‘This excess of information can spark fear and stop buyers in their tracks.’’
A mix of online research (looking at sold listing pricing and market reports) as well as speaking to local experts at inspections will provide amore nuanced understanding of an area you’re interested in.
3. You’re unprepared
‘‘Before inspecting any properties for my clients, I already know what the property is worth, how much other properties have sold for in the area and what is the maximum value I would pay,’’ says Taing.
‘‘Unfortunately, many buyers have been trained to do the reverse. You’re already behind the eight-ball. Being unprepared will see first-home buyers miss out time and time again.’’
4. You go it alone
‘‘Successful people around the world all have one thing in common,’’ says Taing. ‘‘They have the right team of mentors and advisers supporting them. Purchasing a house shouldn’t be any different.’’
One such adviser is a mortgage broker. They are financial professionals who find the most suitable mortgage for a potential homeowner.
‘‘Having a good mortgage broker on your team helps with the buying process as they can assess your position, your goals and your brief to determine the ideal products to match your purchase,’’ explains Taing.
‘‘Brokers have awide variety of lenders on their panel and their role is to determine the best fit for your situation.’’
Going solo via online research can be overwhelming, as you’ll need to compare multiple factors across a large number of lenders. You might not realise one lender takes longer to process a loan than others, which could cost you a property. This type of intel is where brokers shine.
5. You forget to sort out your pre-approval
Having your finances sorted, including pre-approval – where a lender is tentatively willing to lend you up to a certain loan amount – can be the deciding factor on whether you snag a property over another buyer.
‘‘Finance is one of my biggest negotiation tools,’’ says Taing.
‘‘If there were two buyers submitting the same offer, one was financed approved and the other still needing to obtain finance, I can guarantee you that I know which one the real estate agent and vendor would pick.’’
Arranging pre-approval shows the vendor and agent that you’re serious and ready.
6. You skimp on reports
Pre-purchase inspection reports cost a couple of hundred dollars but can save you tens of thousands if they detect issues.
‘‘You’ll want to make sure you are buying a structurally sound property to save you any headaches in the future,’’ says Taing. Any items that need repairing or attention can be outlined before signing a contract. If a vendor is unwilling to have the items rectified, you can then lower your price to cover the cost of repair.
7. You lack confidence
‘‘Confidence indicates to a real estate agent that you understand the process, the market and you are a serious buyer,’’ states Taing. A lack of confidence can mean you’re slow to react.
‘‘They [agents] don’t have the time to handhold every buyer, so the more prepared and proactive you are as a buyer, the higher your chanceswill be of securing the right property.’’
‘‘One of the biggest mistakes first-home buyers make is that they spend too much time reading about the market rather than being in the market.’’ Felix Taing buyer’s agent and property coach
8. Emotions run the show
Buying a home is a huge life moment and will always have emotion attached.
But there are particular parts in the process where you need to get them in check so that you don’t end up overspending.
Unfortunately, excitement and desperation can cause trouble for a first-home buyer.
Taing sees a common scenario play out: ‘‘They have been looking for months; they become weary and exhausted by the process and will settle for almost anything or overpay to get theirweekends back.’’
Going a little over budget can be OK as it is a long-term investment, but not knowing your limit can spell disaster.
‘‘Where emotions can really get buyers into trouble is when they don’t set a maximum limit and they get into an emotional bidding war with another buyer,’’ says Taing. ‘‘Should valuations not stack up, the buyer will need to find away to come up with the shortfall.’’
This article was originally published on Domain and is republished with permission.