It is no secret that first homebuyers face a Herculean task breaking into our capital city housing markets.
Not only are prices prohibitively high, but a young couple buying their first home faces stiff competition from seasoned investors who know what to look for, how to negotiate with real estate agents and hold their nerve at auctions.
Here are some of the common mistakes first home buyers make with alarming frequency.
You have re-arranged the furniture, fallen in love with the art deco fireplace, and the cottage is just a short-walk to the café with the oh-so-cool bearded barista. You have found your dream home, and are desperate to secure it.
Investor Margaret Lomas, founder and director of Queensland’s Destiny Financial Solutions, thinks you have already made your first mistake when buying a property.
“You need to try and take the emotion out of it,” she said.
“You must remember that if you miss out on a property you love, there will be a better one around the corner. It wasn’t meant to be.”
Paying too much
One of the biggest mistakes first homebuyers make, according to Ms Lomas, is paying too much. While some turn to buyers’ advocates, Ms Lomas thinks this money would be better spent on a professional negotiation course, which can cost up to $2000, but is still cheaper than paying for an advocate.
“The number one thing to remember with negotiations is that ‘meeting in the middle’ is not a successful outcome to the negotiation,” she said.
“If, for example, a property is calling for offers between $400,000 and $450,000 and you sign the contract in the middle at $425,000 then you may have still paid too much. You need to ascertain the market value of the property, by comparing sales in the area for similar properties, which may be a lot lower than what the agent is asking for.”
If you haven’t done your research you are more likely to regret your first home purchase, especially when it comes to apartments.
Property law varies from state to state, but it is especially complex in Victoria, where units can fall under stratum, strata or company share titles. Some first home buyers may sign a contract on what appears to be a great deal, only to find out later they have bought a company shares or stratum titles unit, which can be worth 10 per cent less than the more popular strata titles.
“If I was buying a unit, I would get a solicitor to look at the body corporate documents so you know what the fees are, and how it is run,” said Public Affairs Manager with the Real Estate Institute of Victoria, Paul Bird.
“You really want to make sure there are no hidden surprises.”
Not inspecting the property properly
First homebuyers are often on a budget, but they should never scrimp on the checks and balances. “I would advise all first home buyers to conduct a building inspection before they buy a place,” Mr Bird said.
“Even if it is just a unit you are buying and it looks OK, you want to ensure that what you are buying is structurally sound.”
In the case of houses, Mr Bird also recommends looking at the state of the fencing, and whether the house needs re-stumping.
“The last thing you want to do is move in and find that you are set back $20,000 or even $50,000,” he said.
Not seeking expert advice
Never buy anything until an expert – a Dad who has bought in the same capital city as you or an experienced investor friend – has looked at the property.
“You really need someone to help you with the negotiation phase, who can give you objective advice to make sure you don’t get too emotionally attached,” Ms Lomas said.
Ms Lomas cited the example of her 21-year-old son, who missed out on a unit because she stopped him from offering too much money.
“The apartment went to someone else, but not long after another unit in the same complex came up, and we put in an offer of $35,000 less and it was accepted,” she said.