By Michelle May
Buying a house is one of the biggest decisions you will ever make. It is daunting, and when it comes to a house which you intend to make your home, emotions can get involved very quickly. This often sees potential buyers jumping in feet first, based on an emotional attachment to a property without really considering if the home has everything they really need or really want. Going in with a game plan is the best way to make sure you avoid the trap of buying a property which really just isn’t right for you. Here are my tips to help you along your journey.
- Don’t be swayed by the bank’s pre-approval offer.
First things first, know your expenses, be brutally honest with yourself and stick to your budget. A good broker will be able to talk you through factoring in ALL your expenses (that includes those late night Uber Eats and daily coffees you may have been forgetting about!) and any interest rate changes on a potential loan to see what is actually doable for you. It is very easy to get excited when your mortgage broker gives you a figure for pre-approval which is above what you were expecting, but beware that there can often be a very big difference in what the bank thinks you can afford and what you know your personal budget will allow for. I don’t need to remind you that owning a home is a big long term financial responsibility.
- Know what your non-negotiables in a home are.
We have all heard of the phrase “it has to tick all the boxes” but before setting off to purchase a home, it is crucial to know what those boxes are for you, and also what those deal breakers might be. Take it from someone with over 20 years of property buying experience; no matter what budget you may have, there is no such thing as a perfect home and some compromises will have to be made along the line.
I would start with the things you cannot change, such as location. You cannot change being on a really busy road but those scatter cushions you fell in love with at the open home – you can buy those! Side note: do not fall for the styling in a home, this is not a pair of shoes you’re buying. Look beyond this.
Internal light is another one of those deal breakers. In a house there may be options to improve the internal light but in an apartment you are pretty much stuck with what is there.
Realism and practicality are key, you need to look at what you envision your life being in the next five-to-10 years and what the property may need to do for you in that time i.e. will you have children or perhaps even be empty nesters? If you have a never-ending list of requirements being prepared for whatever life throws at you, I would advise that you take your mind back to practicality and realism.
You must organise a building and pest inspection, or review a strata report if you’re buying an apartment, to look at the property. They will be able to uncover any underlying issues that could be costly for you in the short or long term. Then you can assess if the home stacks up or if you should put it in the ‘no’ pile.
- You aren’t just buying a home; you are buying into the neighbourhood.
OK, so you have mapped out a couple of suburbs you are keen on, now you really have to take the time to get to know your potential neighbourhood. After all, when you walk out the door and go and grab that coffee, it might be nice to see likeminded people, and feel like you’ve found your tribe both for you and your family. Other more practical questions would be – have you thought about how long the commute will take to work? What are the local schools like?
For specifics, are there some particular pockets of the neighbourhood you would prefer to purchase in? Mark them out on a map, keep an eye on this when listings arise and make sure your buyer’s agent (if you have one) knows this would be your ideal spot. They should also be able to think outside the box and suggest other suburbs, with a similar lifestyle but perhap a more affordable price point.
- Desperation could lead to disaster.
In today’s market, many listed homes in the most sought-after locations in Sydney are going to auction in the hopes of securing the best price for the sellers. Auctions can be really competitive; you need to go in with a game plan and stick to it. There’s no room for impulse decisions in property. The last thing you want to do is go to an auction and either spend more than you should have or purchase a home just because of the fear of missing out on securing one. The best game plan for an auction is to stick to your finances and needs and wants list. A buyers agent can also help you wrangle at an auction; they ready the play, take the emotions out of it for you and can bid on your behalf.
- “I bought it but now I hate it” – financial downsides to selling shortly after purchase.
Even after careful and rational consideration, mistakes happen. But before you put the ‘For Sale’ sign out the front, really consider the financial implications of selling when you have not owned the property for long. Think about the fees and charges for deciding to offload your home, not least stamp duty. Whilst there are concessions for first home buyers, did you know in NSW stamp duty on a $650,000 home is in the vicinity of $24,000? We aren’t talking small change here.
Other financial aspects to consider are the agent fees or commissions involved in the sale of the home, the cost of relocating again and any legal/bank fees that would become payable. The general consensus is if you decide to sell within the first five years of your purchase, you would have been better off renting to begin with. Sure, sometimes the desire to move is so strong that whether or not you come out ahead financially is not at the forefront of your priority list, but it is important to understand what the implications will be on your bank balance if you choose to re-list not too long after purchase.
Considering all of the above, if you add up all the costs, could this money be put to better use in a renovation towards your current home instead?
It goes without saying that knowledge is power and the more research you do and the more time you take to take to really understand what you are looking for in a home, the better position you will be in.
–Michelle May is a buyers agent and co-host of Sydney Property Insider.