Top tips for first homebuyers By Keren Bellos
REIWA President Damian Collins and other experts offer the following advice for FIRST HOME BUYERS.
How do you know the price is right?
When it comes to determining the worth of a property, start with its suburb.
Look at other recently sold properties in the area and see what they sold for and how long they were on the market.
This will give you a ballpark figure of what properties are worth in the area.
You will also need to assess the standard of the design and finishes of the house when making an offer. Clearly, a property with a good layout and modern finishes will be worth more.
If it is older and needs work, you should assess what it would cost to upgrade if you bought it and deduct that from what you would be willing to pay for a more modern home.
As a first homebuyer, it is definitely worth considering the help of a registered valuer, as they will be able to give you a more validated estimation of your property’s worth and help take the guesswork out of what price to offer.
While you may make the initial first move by calling up the agent and making a verbal offer, it is not binding until you present it in writing.
Your solicitor or a licensed real estate agent will help you prepare a written offer that will be presented to the seller. A binding contract will not come into place until both parties sign, and there will most likely be some back and forth negotiations before the final offer is accepted.
As a first homebuyer, you have the right to retract your offer prior to the seller accepting.
What to look for at home opens
If you find a home you are interested in, do not just walk through it – take pictures to remind of what the property looked like when you return home or on to the next property you have short listed and make sure you ask the seller or their agent many questions, including:
• Why is the property for sale?
• How long has it been on the market?
• Does the property have any issues such as building defects or pest problems?
• How old is the property?
• Will anything need to be fixed in the next few years?
. Is the property encumbered by a mortgage?
• Have any other offers been made?
Do not skip the pre-settlement inspection
At the final inspection you make, make sure the property is in the same condition as at the date of the contract.
Unless you have specified in the contract that everything must be in good working order at settlement, there is no obligation on the seller to fix anything that was not working when you bought the property.
In this circumstance, you are simply inspecting to make sure there has been no damage since the purchase date.
If your contract states everything must be in good working order, then you are also inspecting the property to make sure the electrical, plumbing and anything you specified in the contract is functioning properly.
Settlement takes time
Generally there is a settlement period after your offer is accepted, which gives you time to organise your finance (which you really should have had pre-approved), paperwork and everything you need to settle the transaction. This time period is normally around 30-60 days however it is negotiable.
When the settlement date arrives, the whole property transaction officially settles and you have paid for the property and become the legal owner.
It is understandable that you want to get into your new home as soon as possible, but it is important you discuss and work out an appropriate settlement date with your lender and settlement agent before signing a contract.
Typically, a minimum of four weeks is required for settlement and potentially longer if a lender is involved, but you should not rush the settlement date. Ensure you give yourself enough time so all relevant paperwork can be approved and looked at as thoroughly as possible.
What financial assistance is available?
If you are building, you can apply for the First Home Owner Grant of $10,000 towards the purchase of your new home. This grant varies from State to State and does not apply to the purchase of established homes.
If you are building new or buying established, you can apply through the appropriate Government Department in your State for a grant from the Home Buyers Assistance Account, which reimburses you for some incidental expenses that come with the purchase of a new home, including mortgage registration fees, solicitor and/or conveyancing fees, valuation fees, inspection fees, establishment fees, mortgage insurance premiums and lending institution fees.
If you meet the criteria, you may receive a grant of up to $2000.
Building a home is an exciting step for many first homebuyers, but it can be a stressful experience with a number of potential pitfalls.
Master Builders Association Director Jason Robertson shared his tips for people about to embark on building a new home.
Ask as many questions as you can
There is so much choice in the market at the moment, from larger lots of land with traditional standard four-by-two builds, to narrow lots with townhouses, right through to creative studio apartment-style products and rear strata offerings.
In terms of construction materials, the list is considerable – from double brick, brick veneer, reverse brick veneer, timber frame/clad, steel frames, adobe construction, tiles and steel roof coverings.
We are also seeing more upgrade options being included as standard.
When speaking with your builder, speak openly and freely about what you would like and what you expect from the (registered) builder. They are there to help and will answer your questions.
Some questions to ask include:
• How many builders and supervisors are on the ground at any one time? This is a good indication of the builder’s quality assurance framework.
• At what stage do I meet the building supervisor and how many times during the build process will I see them?
. How many homes have you built in my area and can I view any?
• How many years have you been in business and how many homes have you built in total, can you provide references please?
Be completely happy with all the details before you sign the contract. It is possible to add or change the home’s features – such as floor or wall tiles – during the build, but this can alter the cost and is something many first-time builders don’t expect.
Be prepared for delays
In the current climate, builders are navigating challenges stemming from the global pandemic, including materials supply shortages, which may impact some build times.
It is a matter of looking at the products you are choosing and understanding that often things are outside a builder’s control and a substitute product may be offered or needs to be selected by the client, with potential cost implications.
Most builders have regular suppliers that give them special deals so a change in supply/supplier will likely cause a cost variation.
Ask about current build times for your design and material selection and get a written estimate.
It is important you understand costs associated with building – ask what the price includes and what it does not.
The most important aspect of pricing is understanding your budget and finances, and it is essential your plans and specifications match it. For example, if you decide to have certain tiles in your bathroom or fixtures and fittings, make sure you have budgeted for them.
Also ask whether the deposit is refundable and what the extra costs involved on top of the deposit are. This is an area often not clearly understood by many homeowners about both the builder’s and the client’s rights and responsibilities.
It is important that a Preparation of Plans Agreement (PPA) is undertaken by the builder to give you documents, including working drawings and engineering details of your new home.
What is vital to note is this is all done and agreed prior to signing a building contract. Unless agreed to by the builder, the fees relating to the PPA are generally not refundable – once you have entered into the contract, the deposit is non-refundable.
Challenges can arise
It is possible your brand new dream home may have an issue.
Before you commit to building, it is worth asking questions around warranties – what sort of new home warranty does the builder offer?
It is often not clearly understood what warranties cover and can exclude. Builders are required to rectify defective works identified within six years of practical completion under the Western Australian Building Services (Complaint Resolution and Administration) Act 2011 this may differ State to State.
This is often referred to as the statutory defect liability period. It is important, however, to discuss and resolve maintenance issues and requirements with your builder. Maintenance is generally the responsibility of the property owner after handover.
All new homes built are required to have home indemnity insurance. This provides cover during construction and up to six years after practical completion. It applies to new homes and extensions or renovations where the contract price is more than $20,000.
If there is a problem, you can contact the insurance provider.
However, for multi-unit developments that have more than three levels, home indemnity insurance is not required, so you do not have the benefit of this cover. It is a good idea to check if your current insurer offers home indemnity insurance.
Buying an apartment
Buying an apartment is often an attractive option for first homebuyers, as they are typically cheaper than a house, especially in popular lifestyle hubs and current trend zones.
Buying off the plan
Many new developments are springing up in popular areas and understanding the quality of the apartment build is an essential component to ensuring you have a stress-free lifestyle.
Some key questions to ask during the purchasing process are:
• How long has the developer and builder been constructing apartments, in contrast to standalone homes or commercial property?
• Can the developer provide the manufacturer’s waterproof membrane warranty? This aids your building in being protected from water ingress and tends to be for 10-15 years.
• Will a structural engineer be inspecting the building’s underground elements?
• Can I have a copy of the acoustic reports to ensure privacy from sound and neighbours?
• Is the appointed strata manager certified and experienced?
• How long is the defect liability period? This is the period whereby the building company repairs all defects after completing construction and should ideally be 12 months.
• Does the building have any combustible cladding?
• At what point will construction commence and what is the length of the construction period? This can be anywhere from 12-36 months.
The property market continues to prosper, so people need to take extra steps to ensure their purchase is a sound decision.
We are seeing companies enter the Australian market from overseas and, within months of registering, they are selling apartments.
But what is crucial to understand is how experienced they are and if they will provide ongoing support once the building is complete and residents have taken possession.
Before moving in
Before taking ownership of your new apartment, it is important to conduct a comprehensive pre-settlement inspection.
Some things to put on your list include:
• Asking for a flood test on the balcony to ensure water drains away from the apartment and does not pool.
• Checking hot water is flowing from the tap within 25 seconds.
• Testing all power points with a night light or hairdryer.
• Checking that the weep holes in the windows are facing externally to ensure water does not enter the apartment.
There are apartment buyers and owners education kit available that contain an extensive pre-settlement checklist to take you step by step through your new home.
When the property settles, make sure you get the instruction manuals for all appliances, air-conditioning systems, security systems and anything else you might need.
Purchasing an apartment is different to a standalone home, so buyers and owners need to educate themselves about what it entails.
This includes understanding what your strata fees pay for, your insurance requirements and your role as an owner in looking after your apartment and the whole building.
Having bought your first home, you may start thinking about things like having your own pet. If this is extremely important to you, find out what the strata management’s rules are before you buy. Some complexes do not allow pets, some do, and some have restrictions on the type and size of pet you can have.
Interest rates are at a record low, so it is a great time to buy your first home.
Very few first homebuyers will be in a position to pay cash for their home, with most needing to take out a mortgage, so it is important to get your finances in order well before you start looking at properties.
Finance Corp Director Tracey Franco offered her top tips.
Before house hunting
• Find out how large a deposit you are likely to need, 20% of the purchase prices is a reasonable deposit and there are Government first home buyer schemes that allow you to pay a deposit as low as 5%.
• Find out how much you can afford to borrow, get quotes from at least 4 different banks or providers. Try to get home loan pre-approval, as it will let you know how much you can spend, gives you the confidence to buy, leads to faster loan approval and gives the real estate agent confidence when talking to the seller about your offer.
• Save as much as you can to increase the chance of your loan being approved and reduce the need for lenders mortgage insurance. If your deposit is less than 20 per cent of the purchase price, banks will require this insurance. Remember, it protects them should you default on the loan, not you.
• Get your documents sorted – for example, correct names and addresses on identification. Make sure you have the relevant identification and do not forget to tidy your bank statements. Banks will scrutinise your expenditure from at least the past three months before your loan application, so this is not the time to be extravagant.
• Get your credit history in order, go online and find your credit score.
• Credit cards count as potential debt even if you do not use them or pay them off each month. Cancel any credit cards you do not use and reduce the limits on those you are using as this will affect your borrowing capacity.
• Make sure all defaults are paid in full.
• Make sure all current liabilities are kept up to date during the savings and finance period.
Sitting down with a mortgage broker or your accountant is a great way to get everything prepared.
Do not apply for more debt during the savings and finance period.
Also, do not change your job until you have settled on your new home loan, as banks do not like probation and this will lessen your home loan options.
Applying for a loan
Once you have found a residence, it is time to make an offer and formally apply for a loan. If you already have pre-approval, which usually lasts for about 90 days, this will be easier, but a pre-approval does not guarantee you will get the loan.
The pre-approval will be subject to the property valuation, so if the bank deems it to be worth less than the purchase price, you may need to place a higher deposit in order to purchase the property
When you make your offer, it will be made subject to finance and you should specify a lender.
In the current climate, loans are taking longer than usual to approve.
In the contract, give yourself plenty of time for settlement to accommodate potential delays and alleviate stress.
Gather information and knowledge
Before embarking on this journey talk to family, friends and trusted advisors to gain their experience, advice and suggestions.
Try to keep emotion out of all decision making and be thorough and diligent throughout this exciting but sometimes stressful period and you will happily move into your new home as a proud owner.
And, do your research thoroughly from start to finish, keep up to date with what is happening in the market checkout Facebook sites like sellitswapitbuyit to get ideas of house prices, availability, trends and styles that you may not have previously considered.
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