Nath Kelwey
How Not to Fuck up Buying a Property

Overview

Buying a property is not hard, but everyone just assumes you know the process… which is confusing. Here is a basic guide of thinks to do and keep in mind when buying. Obvs this is all just my opinion and my experiance. DYOR, etc. Also for context I have only bought domestically in Australia.

Work out how much you can borrow

Go to the bank (preferably multiple) and book a meeting with a lending specialist, they will then sit down with you and give you an indication of what you can borrow. Make sure you request a formal conditional approval for a loan.

Scope out the market

Some things to consider when looking at the market:

  • Purpose of the property (Owner Occupy or Investment)
  • Budget of the property and what your loan to deposit ratio will be
  • The suburb and state you plan to purchase your property
  • historical prices and growth of the area
  • recent sales in the area
  • rental yield in the area
  • always get a suburb report for the area from the bank, this will include a lot of this information for free
    Make sure you speak to numerous real estate agents about the areas and properties available. Get a feel for the market so you can spot a good deal when it comes up.

You should prepare a list of properties that you are interested in and compare them, talk to the agents and make offers on any that meet your requirements.

Talking to the agent

at a minimum you should ask:

  • Is there a tenant in place
  • how much is the tenant paying
  • what is the rental appraisal for the property (this could differ from the current rent being
  • collected)
  • time remaining on lease
  • how the tenants are treating the place
  • difficulty to get tenants if place is vacant or lease expires
  • any work the property is likely to require in the next 5-10 years (or even longer)
  • motivation for selling
  • their general commentary on the property
  • general condition of the property

Making an offer

So your ready to make an offer, how exciting. If you don’t already have a price in mind that you would like the property for, make sure you come up with a number. This is the max you will offer any more than that you can wait for the next property that meets your requirements.

Always offer below the asking price, as a rough guide 5% below asking price is OK for an initial offer. even more depending on the property and how reasonable you feel the asking price is. This initial offer should always be lower the the max figure you have decided on. You will likely go back and forth between the vendor a few times with counter offers, this is fine, there is no rush. Remember there will always be other properties.

When you make an offer its a good idea to let your bank know as sometimes the postcode of a property can affect the loan capacity. So even though you have loan approval, still worth confirming with the bank.

Once an offer is accepted

Now the fun begins, a fair few things will happen now and this is potentially the most stressful part.

Signing the contract
Once an offer is accepted both you and the seller will sign a contract of sale. This contract will have a cooling off period, usually 5 days. Before these 5 days are up, you will want to have the contract sent over to your conveyancer and have spoken to them to confirm the legalese in the contract is standard.

Organizing the loan
You will also want to contact the bank straight away so they can start processing the loan. As there will be a financing deadline on the contract, this is the date you need to have your loan sorted out by. This can be as short as 14 days. You will need to send the bank:

  • A signed copy of the contract of sale
  • Details for the real estate agent
  • Details for your conveyancer

Paying the deposit
This will often be subject to financing, i.e. you don’t pay the deposit till you have received unconditional loan approval from the bank. It may also be expected that you pay this as soon as contracts are signed by both parties. If unsure on the details for you specific contract, call your conveyancer and they will help you understand.

Make sure you pay your deposit on time, don’t be like me and wait for the real estate / conveyancer / bank to chase you for this. The details for the deposit holding account are on the contract (often the second page).

Booking settlement
Once this is all complete you conveyancer will contact you about booking settlement, this will usually be 30 days from the date you have received unconditional approval for the loan. Take not of this date, it is important, this is the date that the property will become yours. It is also the date you will need to pay a but load of fees like stamp duty etc. When your conveyancer confirms booking of settlement with them you should ask them for a rough estimate of funds required at time of settlement so you can plan ahead. (usually about 5% of purchase price)

Closer to the date of settlement the conveyancer will give you an exact amount with adjustment that you will need for settlement. Make sure you have this amount in the account nominated by your bank on the day of settlement. If you don’t then prepare for a painful experience (I have not had this issue yet and don’t ever plan to)

Settlement
Once the day of settlement arrives, if you have done all of the above. Congratulations, you now own a new house. If you have any doubts please check in with the appropriate stakeholder prior to settlement.