In Peter's last column he covered off on the first five of his Top ten tips for first home buyers which were: 1. Make sure you’re ready for home ownership; 2. Work out your budget; 3. Select your home loan carefully; 4. Partner with the right lender; and 5. Perfect properties don’t exist. In this week’s column Peter completes his list.
6. Caveat emptor
There has never been a more apt statement then “let the buyer beware” when it comes to residential property, especially when buying by auction. To avoid buying a lemon make sure you inspect before you sign on the dotted line. Start with a thorough inspection yourself and bring in family and friends if you’re after a more objective eye. If there’s any doubt or you’re a bit worried about some of the things you’ve found (like cracked walls, signs of damp, soft or spongy window panes or springy floorboards) bring in the experts. A pest or structural inspection might cost you a bit up front, but could save thousands down the track.
7. Doing the deal
The unfortunate reality of buying a home is that the deal isn’t done until all parties sign the contract of sale. A verbal agreement or handshake doesn’t bind anyone. For instance, have you noticed that immediately after an auction the selling agent quickly escorts the winning bidder inside to sign the contract? They do this to make sure the sale is binding (and secures their commission!). Similarly under a private treaty sale you may see an “under contract” sign plastered on the sale board. This is done to let everyone know the property is close to being sold but a higher offer may be accepted. So the lesson here is to make sure the contracts of sale are executed and exchanged as soon as the terms are agreed.
8. Don’t sign what you don’t understand
It’s probably stating the bleeding obvious but buying a residential property involves reading, understanding and signing a lot of forms and documents. From lenders’ application forms and loan agreements to the contract of sale itself there is a lot to take-in and comprehend. Never sign anything you don’t understand because if things go pear-shaped it will be the documents you signed that will do the talking in court, not the conversations or emails you’ve had or exchanged. This is why you should always get independent legal advice (from a lawyer or conveyancer) before you sign and if you use a mortgage broker always get their advice in writing just in case.
9. Manage your finances
For many just getting their home loan approved is an achievement worth celebrating. But the hard work doesn’t end there; in fact it is just beginning. A home loan is a long-term commitment and must be managed over the long-term. The first five years of your first home loan are often the toughest because this is when the need to make ongoing loan repayments, rain hail or shine really bites. The reality is you’ll have to keep making financial sacrifices, like the ones you made to save for your deposit, to keep up your loan repayments so making a budget and sticking to it is vitally important.
10. Check your emotions at the door
Without question buying a home is an emotional experience. We often focus on things like how a property makes us feel, how it looks, and the role it will play in keeping our family safe and happy. These are important considerations and should not be ignored. But equally important is to ensure the home you choose meets your practical needs and is something you can afford. If you act with your heart and not your head you may end up ignoring major defects or problems or buying something you really can’t afford, and this will cause you emotional and financial heartache.
Read the first half of this column - Top tips for first time home buyers - Part 1
Peter Boehm's book The Great Australian Dream: A Guide to Buying Your First Home is available online and at all good bookstores. It’s an easy to read and comprehensive how-to guide that will help you successfully navigate the numerous challenges everyone faces when entering the property market as an owner occupier or investor. It is also available as an iBook