Surviving the Real Estate Jungle
Spring has arrived and the real estate market will shortly be in full bloom. Prospective purchasers will soon find themselves amidst the real estate jungle, where it is survival of the fittest.
Many of us have experienced the pressure of buying real estate, attending countless open-houses, auctions and the feeling of missing out on your dream home. Here are some useful tips to help you start out and survive in the real estate jungle.
1. WHERE DO I START?
- Financial Advisors – Planning your future:
Establish your proposed budget and ensure you have the necessary deposit. It will pay dividends if you have properly considered the financial risks, your borrowing capacity, potential tax implications, your ability to repay and how to minimise any financial exposure.
- Mortgage Broker – Securing the right loan:
Do your research. Speak to your current bank but also investigate competitor banks or independent mortgage brokers to ensure you get the right loan product.
- Property Market – Where do you want to buy?:
Before taking the leap, make sure you articulate your real estate objectives. Is location key or do you want a specific building type? Are you looking for an investment property, development opportunity or a family home? Be clear on what you want and then research, research, research.
- Legal Advice – Avoid the pitfalls
The right legal advice can save you time and potentially a lot of money. Put your mind at ease by engaging a lawyer who specialises in Conveyancing and Property Law. Your lawyer will assist you at every point of the process – communication is key.
2. PRE-APPROVAL vs UNCONDITIONAL APPROVAL – Not the same
Homebuyers often say “I have Pre-Approval, I’m all set to go”, however there is a notable distinction between having pre-approval and being “all set to go”. Before getting unconditional approval, your bank will need to value the property you intend to purchase.
Relying upon pre-approval can have disastrous consequences.
- If a bank valuation is less than the agreed purchase price it could mean you may not obtain the required finance to complete your purchase
- A disparity in a valuation may also increase your initial costs, for example mortgage insurance which may mean the purchase is no longer viable
3. PRE-PURCHASE INSPECTIONS – Let the buyer beware
Ever heard the phrase, “Caveat Emptor”? It means “let the buyer beware” and it puts the onus on you rather than the vendor in relation to defects in the property or costly issues with the owners corporation.
Below is a guide to the minimum pre-purchase inspections you should do.
- Inspect the property yourself – it’s free and vitally important
- Pest & Building Inspection Report – if there are any issues, get a quote for the estimated costs to fix it as you may need to budget for this down the track
- Strata Inspection Report – You may be walking into a very expensive unit complex, so review the books and be sure there are no surprises
- Pool Compliance Report – be sure the pool is safe for you and your family
4. COOLING OFF PERIODS – A Must for Purchasers
By law in NSW, you have the right to a 5-day cooling off period after you enter into a Contract for Sale. This means, if you change your mind you forfeit your holding deposit of 0.25% but your liability ends there.
In this 5-day period, you should:
(a) Ensure your finance is unconditionally approved
(b) Get the Contract reviewed by a solicitor, negotiate terms and be aware of your obligations
(c) Complete your due diligence (inspections, pest and building reports, strata reports, etc)
(d) Determine if you feel comfortable with the purchase and that it is right for you
Vendors and real estate agents often want purchasers to waive this right to change their mind without incredibly costly consequences. If however you have not completed points (a), (b), (c) and (d) above, do not waive your rights to a cooling off period.
While you may now be ready to navigate your way through the real estate jungle, don’t be afraid to take a minute and re-evaluate your situation. With the property market in such a wild state, purchasers may cut corners to secure their dream home only to be burdened with issues that could have been easily discovered from the outset.
Getting the right advice will help you make the right decisions.
Southern Waters Legal
02 9523 5535