RESEARCH FOR FIRST HOME BUYERS
As a first home buyer, your research and investigations into the property should not simply mean obtaining a Pest and Building report or a Strata report.
Every property should be considered individually with the first home buyer’s future plans taken into account.
THE LOCAL AREA & THE PROPERTY
With first home buyers, it is likely you are intending to live in the property. In these circumstances you should do research about the local area.
When considering the local area, a first-time buyer should not just consider their current circumstances but take into account any future needs. For example if the first home buyer has just moved in with a partner, it may be that space is required in the future for children or simply a big yard for a future dog. You may consider that you will need to renovate or extend the property in the furture.
Buyers should therefore not only look at the property itself but consider what is available to them in the area such as childcare, schools, public services, as trains, Metro, buses. Additionally, you should consider whether or not there are any major road or rail projects being undertaken by the government which might impact their land, or their enjoyment of the property.
In terms of the property itself, most first home buyers visit the property once for a very short inspection before signing on the contract. We recommend, if possible, at least two inspections of the property so that abuyer can inspect the property carefully for any issues such as uninhabitable spaces, water pressure in the taps, checking if appliances are working and so on. This second inspection often takes the emotion out of the purchase and enables a buyer to make an offer on the property with their eyes open as to the value and condition of the home.
Other matters to look out for could be unapproved renovations such as a garage turned into a granny flat without Development Application (DA) approval.
If it is obvious that renovations have occurred, a first home buyer should always ask the agent in writing if those renovations have been DA approved and request copies of any insurance, warranties and DA approval
THE CONTRACT
First home buyers should always seek advice on the contract before signing anything however a buyer should review the contract carefully first.
One of the many issues that a buyer should look for in the contract are any easements, restrictions on the use of the property and any covenants on the title. Any of these matters could affect a buyers enjoyment of the property or ability to develop the property in the future.
For more information on reading the title search in a contract, please click on the following link to our article entitled ‘” what is a certificate of title and title search’”
FINANCES
One of the most important matters when purchasing a property is a buyers financial due diligence.
Finance should be preapproved prior to beginning your search. You should speak to your broker or bank lender about matters that may affect the bank’s ability to approve any loan.
Some issues arising in your property search may mean that the bank will not lend you the money that they preapproved for. For example it may be that the lender will not lend funds on an apartment that is under 40 or 50 m², there are areas where there is an oversupply of units and the banks will sometimes restrict the amount of money they will lend to purchasers in that area, if there are issues with the title such as multiple mortgages and other debts owed, banks can refuse to sign off on the loan and course if the first home buyer has not saved 20% deposit, the bank is likely to require the buyer to pay a premium for loan mortgage insurance.
Other aspects to be considered are future repayments of the loan. In an environment where interest rates are at record lows, the only certainty is that eventually those rates will increase. First-time buyers should calculate their repayments and then project those repayments into the future if the interest rates were to increase by 1% to 2% and ensure they can afford to repay the loan in their current circumstances.
Finally, a first home buyers due diligence should include detailed research on the sold prices of similar properties in the area to avoid paying over and above what the property is worth.
CONTACT eConveyancing NSW to discuss your needs on (02) 8812 5459 and we will guide you through the process and ensure you are in control and have assistance and guidance on each step required.