First home buyer tips?

Discussion in 'The Buying & Selling Process' started by jinx77, 17th May, 2019.

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  1. jinx77

    jinx77 Active Member

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    I’m a prospective first home buyer looking to buy a small property to reside in n Melbourne’s suburbs.

    I don’t know much about this process at all. I’ve already gotten preapproval from the bank so I know what my financial parameters are and what I’d like to buy. But I’m not confident or knowledgeable at all when it comes to the buying process. I look at listings every week but don’t know how to go about putting my dream into action.

    Does anyone have tips about what I should and shouldn’t do? Tips about the following would be great:

    - when/how to hire conveyancer
    - how to negotiate
    - terms and key words to look for in listings
    - what questions to ask real estate agent
    - red flags to be aware of
    - things to avoid
     
  2. hammer

    hammer Well-Known Member

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    Heya, the first thing to do is work out your goals. Obviously you would like to buy a place...but then what?

    Do you invest in shares want to buy another property, start a business....etc.

    I only mention this is because how you structure your loans and what type of property you buy now can affect these sorts of things in the future.

    I'd also sit down over the weekend and read this forum. Its free and the knowledge within these threads will save you thousands.
     
  3. Cate Bell

    Cate Bell Well-Known Member

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    This is my process, I have never bought property in Melbourne. 1) I engage a solicitor for conveyancing after signing the contract- I always have the solicitor read the contract before signing (this is at no cost). 2) Negotiation takes time. I let the agent do most of the talking. I have found over 30 plus years that most agents can't negotiate, I have found that the recipe for success is an agent that wants a sale, a seller who has to sell and the property has an upside - this is the sweet deal. Agents don't usually earn any $ until the completion of a contract, one that has had spent months on a property can be more eager to get it sold. I go in with very low offers, I am not emotionally attached to a property- even for my PPOR. I will make many offers until I find the sweet deal. You might offend the seller with your offer, but if they have to sell, they will usually counter offer. I don't chase agents after the offer. I sometimes give them a strict timeframe, "this offer is only valid until 5pm as I have another property that I am interested in". 3) ask the agent about how long it has been on the market (you should be able to find this online with a simple search, but you want the agent to tell you this information- you will get a feel for how they view the property and how desperate they are to sell it. I do a simple search on RP Data and Onthehouse which gives me information on the recent sales and historical information- it is a guide only. I also go onto the council website and look up the property and see if there are any easements and look up the zoning etc. In Brisbane I ignore the list price. Try to get the agent to talk to you about the sellers (not money) circumstances- do they want to settle quickly? Would they rather a longer settlement? Agents usually give you a lot of information in these discussions about the seller, things they shouldn't be disclosing. I also ask the agent about how his/her business is going- I had one recently who told me that properties were falling down on finance so he was looking for a second job (so you know he is desperate for a sale). 4) Red flags, I don't know the Melbourne market, but for a first property any structural damage I would avoid. A red flag for some people is a property that has been on the market for a long time, but I don't see that as a red flag- it is usually a sign that a property has been poorly marketed or the sellers expectations were too high in the beginning. 5) I avoid townhouses, units, apartments, main roads etc, I only buy house and land. I always try and buy the worst house in the best street and reno it (if the sums add up). But this might not suit your budget, strategy or area. I would have a really clear strategy, how long are you looking at holding the property for? Is capital gain important to you? Is lifestyle more important? Would you do a simple reno? I hold for the very long term (20-30 years) and have seen a few cycles in different locations. This is just what I do and my experience, it woks for me. You have to find what works for you. I look at several areas. You could get a few simple books, when I bought my first property at age 20 I read a Noel Whittaker book, it was a good introduction. Good luck.
     
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  4. The Y-man

    The Y-man Moderator Staff Member

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    1. A pre-approval does not mean much, so get your situation checked by a good mortgage broker
    2. Select your conveyancer out before hand and go for a quick "get to know you" meeting - we have always used a conveyancing lawyer in case something goes bad or complicated
    3. How to negotiate - there are entire books and numerous posts on this in the forum.
    4. Listings - this is a tough one - figure the area you want to live in first. Then look for ads within. Key words are up to you - eg "acre", "pool", etc.
    5. Questions to ask agent - always begins with "Why are the vendors selling" and "How much are they expecting" (even if you see the advertise price) as an ice breaker. The rest is part of negotiating, but ends with "send me the section 32"
    6. Red flag: Special conditions, covenants, zoning - all part of the section 32.
    7. Things to avoid: High voltage transmission lines within 500m, train track next to property, etc
    General order of events:

    1. sort out finance beyond pre-approval
    2. go and interview a few conveyancing lawyers and pick one
    3. figure out suburb
    4. go to opens, attend auctions "to get a feel"
    5. Always ask for a section 32 at the open even if it vaguely interests you (the agent will treat you more seriously).
    6. If something genuinely interests you, and you have no idea regarding building issues etc, get a pre-purchase building inspection done (we use Archicentre)
    7. If you have no idea what is in the section 32, give it to your conveyancing lawyer for a look through (expect to pay a small some for their time)
    8. Talk to you legal and finance team on special conditions you will need to put in (not possible for auctions)
    9. Get a valuation report run for the property for a idea of fair market value (my mortgage broker runs this for me)
    10. Negotiate based on the findings of the section 32 and building inspection (eg "Nice house, but the building inspection indicates $Xk worth of work needs to be done...."). Use the settlement date as a negotiating tool.
    11. Make an offer - keep in mind the valuation report!
    12. Wait.
    13. Agent will come back with counter offer. Your call - if the property is too good to let go, adjust your offer. If it's so-so and you can find another, say no and start over.
    14. If your offer is accepted, write a cheque to the real estate agency's trust account (NEVER make the cheque out to the real estate agent!!)
    Steps 10, 11,12, 13 does not apply to auctions.
    Instead, you make bids based on the outcomes of the inspections and valuation report.

    The Y-man
     
  5. jinx77

    jinx77 Active Member

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    I want to hold the property for long term (20 years plus) and use it as PPOR. I'm not interested in owning multiple properties, the only reason I'd sell it would be to upgrade my PPOR when I'm in a better financial position, eg: in my 50s. I'm a 35 year old professional with a partner and no plans to have a family. I want to buy a 2 bedroom unit, apartment or townhouse. Everyone says to avoid apartments but for me, lifestyle is more important than capital gain. I don't want to buy a property in an outer city suburb I hate because it's likely to appreciate in value in 20 years time, nor do I want a hefty mortgage. I want a simple property that I can reside in, pay off quickly and rent out if I decide to work abroad in the future. I also want a decent kitchen and bathroom because in my opinion major renovations on an apartment straight off the bat are a waste of money especially as that money could be put into paying off the mortgage quicker.

    Do apartments depreciate in value over time or is the problem that they don't appreciate in value as well as houses do? I don't want to buy something that I'd have to sell at a loss in the future but turning over a big profit definitely isn't my priority.

    How much under the listing price should I generally offer for an apartment listed at 300-350K?
     
  6. jinx77

    jinx77 Active Member

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    Wow Y Man, thank you so much, I'm printing these words of advice out!

    I'm definitely in the dark about this. I didn't even know what a Section 32 was until you shared it. Sadly I don't have any family members with experience to help me with this process. Is there anyone I can hire to give me professional advice and guidance?

    How do I organise a legal and finance team beyond home loan adviser (or mortgage broker) and conveyancer? Does the conveyancer sort out everything (inc. all necessary pre-purchase inspections) or are there other services I'd need to seek out? Why is it important to get a mortgage broker instead of dealing directly with my bank? Are interest rates really that different between the big banks? How can I use the settlement date as a negotiation tool?
     
  7. The Y-man

    The Y-man Moderator Staff Member

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    Just look for info on the internet - broker sites and REIV itself has some pretty good info.


    Maybe start with a good mortgage broker and get a recommendation for a conveyancing lawyer.
    Note - highly recommend you use a conveyancing lawyer - not just a conveyancer (who is not a lawyer) - until you really know what you are doing. We have always used a lawyer.

    No - you need to get your own building inspector. We use Archicentre.

    This has been debated extensively - there's pros and cons.
    When starting off, chances are you are better off with a mortgage broker - having said that there are a lot of crappy brokers around who don't know what they are doing - so perhaps open a conversation with one of the brokers on this site.

    However, once you know what sort of accounts you should set up, the impacts of these etc, you might go direct to a bank.

    If the seller is buying a new home and the new place is ready to move in on a certain date, you can match your settlement date to their moving date to make it easier for them (you of course offer a lower price for this benefit)



    The Y-man
     
  8. The Y-man

    The Y-man Moderator Staff Member

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    @jinx77

    Welcome to sit down and get some boring talk from me:
    Ad-Hoc meetup (Melbourne East) [VIC]

    or keep your eyes out for the next Melbourne meetup (the Easterners aim for the second Tuesday of each month - although we have been a bit disrupted by various other stuff going on....)

    The Y-man
     
  9. Marg4000

    Marg4000 Well-Known Member

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    Some of our best (highest percentage) capital gains cane from apartments (units).

    The trick is to make sure you buy one of the best units in the block/complex - features such as biggest, views, quiet, huge courtyard, or two car spaces, etc.

    Never, but never, buy the odd-shaped poky one, or the dark one out the back overlooking the rubbish bins. These are usually marketed on the grounds they are much cheaper and enjoy the same complex facilities. They are cheaper, but for very good reasons. And unpopular fir future tenants.

    Always consider resale. Even though you intend it as a PPOR, a future buyer may be an investor. Lifts, gyms and onsite managers are expensive meaning higher body corporate fees, and therefore unpopular with many future buyers.

    Your first step is to get out there and look around.
    Consider it a fact-finding mission.
    Pick one or two suburbs, check open hours for listings, and get out there.
    See what you get for your money, and talk to the agent. Ask about the local area, development plans, public transport etc. ask about the seller, reasons for selling (but be sceptical, the owner is not going to tell the agent about the noisy nutcase next door or the smells in summer from the factory a few streets away).
    The object is to get a good idea of what you can afford, and values.
    Then, when you are ready to seriously consider a purchase, you have a good idea of what constitutes good value for you.
    Marg
     
  10. Trainee

    Trainee Well-Known Member

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    The biggest problem is not asking the right questions. Asking whether brokers can access lower rates to talking to banks directly misses the point.
     
  11. The Y-man

    The Y-man Moderator Staff Member

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    Yup, like buying a car purely based on price, but not considering size, safety, power, fuel consumption, comfort, load space, maintenance costs, insurance costs.....

    The Y-man
     
  12. Trainee

    Trainee Well-Known Member

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    The other thing is just because you plan to only buy one and live in it forever... doesnt mean that is what will happen.

    There are some simple, painless ways to maintain flexibility, but only if you do it at the start.
     
  13. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    If I put myself in your shoes, since you only want to buy one PPOR, I’d be thinking “ Why learn all this stuff, when I’m not going to use these learnings again for maybe 15+ years?”

    I’d be hiring a Melbourne based Buyers Agent (Advocate is the more common term used in VIC). Tell them what you want and where and let them go do what they do. A good place to start would be www.rebaa.com.au.
     
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  14. Trainee

    Trainee Well-Known Member

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    Its not easy at this stage. You dont know enough to make good decisions. You cant be bothered learning all of this just to use it once. You dont know enough to evaluate your advisors.

    Hope you get lucky and listen to someone who knows what they are doing.
     
  15. Cate Bell

    Cate Bell Well-Known Member

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    I think your over thinking things. I bought a house in Brisbane, I was 20 (no internet), with no help, and I am from Sydney! I don't like apartments, units etc- unless you are buying something in a very small complex or something unique, like a terrace in Carlton, I don't think that you are going to do as well- but that is just my strategy and the markets I know. I bought a great unit in Ascot Brisbane, and it didn't do so well- great inner city suburb and nice large unit. There are plenty of units all over the country selling for a loss Units are now selling for a loss at twice the rate of houses - and it may indicate investors are willing to take the hit I forget the listed price, if it says $300-350, I would look to see what other comparable properties there are, what has sold recently? What are other comparable properties on the market? Have you researched what they sold for over the last 30 years? If you just want to buy a unit for lifestyle and not worry about any other factors, that is a simply strategy.
     
  16. Marg4000

    Marg4000 Well-Known Member

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    Why? Because knowledge never goes astray.

    And even if there are no plans to buy again in the future, plans have a funny way of changing. Research will help clarify exactly what is affordable, and decided which features are “must have” and which are “would like”.

    And you need a certain amount of knowledge to instruct a BA if that is what you choose, and to evaluate recommendations to ensure you agree with the suggested property. Even more important is a PPOR.
    Marg
     
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  17. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Most would say, because we dont know what we dont know, and your bank works for whom ?

    ta
    rolf