Once you have decided to buy there are some important steps to follow to make sure your dream doesn't turn into a nightmare.    

Look at as many properties as you can to ensure you have a good idea of properties in your chosen area. I have met people who not knowing an area well, having bought in a location that wasn't as desirable as they first thought.

Keep a property checklist so that you can remember the features of the different properties (eg. 3 bedrooms, double garage, close to primary school). When you visit quite a few properties it can be difficult to remember them all and compare one to another. (See our Investment Property checklist form which can be printed out)

You can even take your camera and take pictures of the homes you like.

Often the agents will make comments like recently carpeted, sometimes it is worthwhile to ask more questions or investigate further. I remember when buying my first house and was looking around. The agent for one house proudly claimed the house had recently had new carpet installed. I was working with someone who lived in that area and was advised not to buy that house as there had been major storm water runoff down that street. The house had flooded! The likelihood is it would flood again so was probably their sole reason for selling.

Area checklist

Before you even start looking for a home it is important to ask yourself a number of questions

What type of area do you want to live in?

What type of property will best suit your needs? (House, Terrace, Flat, Unit etc.)

Is the area convenient to work, essential shops, schools?

Is transport nearby?

Is having family and friends nearby a priority?

Are lifestyle amenities important? (Beach, pools, parks, views, shopping.)

Are any risks apparent? (Near industrial areas, flight paths, air or noise pollution, flooding or landfill hazards).

What is the development history and development forecast of the area?

What is the property price performance for the area?

What is the crime rate for the area?

Do you know anyone in the area? Ask them their thoughts on where you are looking.

House Checklist

Before making an offer to purchase, make sure you have had a really good look at the property. Ensure you have spent a couple of hours turning on every light, tap and checking every cupboard. Don't forget to look in the roof and under the house if you can. It is a good idea to write down any particular chattels that you expect will be included in the purchase. Taking photographs is an even better idea and while there, measure the rooms to ensure your furniture will fit! It is not rude to ask the present owners to not be there, so you can have a thorough look around, although they will rightly insist the Real Estate Agent be present.

Another thing worth considering before negotiating a price is to ensure you are comfortable with the neighbours and neighbourhood in general. Walking around the neighbourhood should reveal whether potential neighbours have habits that you would not be comfortable with!

Once you have found the right home, start negotiating. Make sure the Real Estate Agent is aware the purchase is subject to certain criteria. These may include:  

Satisfactory pest inspection

Satisfactory property/building inspection

Satisfactory check of property boundaries to the title

Finance approval

The fees for the inspections may appear high and not worth bothering. It is better to be safe than sorry. Current affair programs are constantly showing houses that have poor workmanship. How do you know whether your dream property is infested with termites or has serious structural faults? This could be why the present owners are selling!

Go to the yellow pages and look up building inspectors and pest control firms and ring them.

Home Loans

While you are still in the buying stage have you checked to see whether you can actually afford the home loan repayments? We suggest you add 3%  on to the proposed interest rate and determine whether you can comfortably afford it. We have been fortunate to have had low interest rates over the past decade.

Memories of high interest rates have faded for most of us. Who remembers home loan rates at 18%. It is hard to see them reaching that level again however we do expect to see rates move to higher levels. We would be very surprised if they don't get to double figures sometime in the next 20 years.  Don't forget to consider how you are able to afford to replace your motor vehicle or live off one wage if that is a possibility.

It's a proven formula - low debt and careful living equals happiness.

Mortgage Insurance

In Australia when mortgage insurance is mentioned the response is often a question back asking to explain further. This insurance is used when a borrower has less than 20% deposit. The insurance is paid for by the borrower at settlement and protects the lender.

When the property is sold (either voluntarily or forced) and the sale proceeds are not enough to repay the loan then the insurer will cover the difference. The lender is then out of the picture. The insurer then goes to the borrower to arrange repayment of the amount owed.

So you can see the advantage of having enough equity to cover 20% & costs.

First Home Owners Grants

In Australia various first home owner grants are provided to assist first home owners buy a home. The amounts vary depending on whether you are building or just buying and also what state you live in. Of course the governments involved make it out as though they are giving you money. In reality all the grants do is cover the stamp duty charges (ie taxes) on the purchase which they charge.

To find out more go to this website 

www.firsthome.gov.au

Deposit Bonds

These are a financial product which can be used instead of cash for the deposit. Usually used when your current property has sold and not settled and you have signed a contract to buy another. The problem is you don't have a deposit to put into the new property.

Deposit Bonds are bought from a financial institution which acts as a guarantee and provides comfort to the vendor of the property you are buying. Talk to your lender about this as well as the vendor to ensure they will accept a deposit bond. At settlement you hand over 100% of the purchase price.

Your lender and Solicitor can explain further.

Interesting points to consider

Once a contract has been signed, arrange building  insurance immediately. By paying a deposit (usually 10%) you now have an interest in that property. How do you know whether the current owner has insurance? You don't, so don't take any risks!

Neil Jenman, author of Real Estate book ""Don't sign anything"" has made the following points about buying real estate.

Investing in an independent valuation is like having inside knowledge.

As a buyer of a family home, if you love the home and you can comfortably afford it, be prepared to pay your maximum price.

When buying, decide on the maximum you can afford and then find the area to fit your price.

When buying always ask: Is there anything else I should know ?

His books are worth reading to provide a better understanding of buying & selling real estate. As we have constantly said self education is the key.