Friday, 02 August 2019 00:00


steps to buying a property

Last week we explored the initial process of identifying a property you like enough to pursue. One that meets your needs and that is within your price range in an area you would like to live.

Provided you can afford the property and it’s still on the market by the time you contact the estate agent you can begin the process of more closely assessing the property to see if it fulfills enough of your 'must haves' and is a sound investment.

A second inspection (or even third) is always nice, particularly if its a private one so you can explore the property on your own or with your family without others around. Now is the time to take a closer look and view the property with a critical eye.  Also take this opportunity to ask if anyone has made an offer and find out where you need to be in order to compete.

Making an Offer

Real estate agents don’t like to give too much away, ultimately they want the best price for their client the owner. But they do have to let you know if someone has made an offer in writing (the only official way to make an offer) and whether the offer has been presented to the vendor (owner). They don’t however have to tell you how much the offer was, instead they’ll give you a ball park figure to work upwards from. If there is no other interested party then you have the ability to negotiate perhaps below the asking price. However a property that has been on the market in a popular area for more than a few months might not yet have sold for a reason so thorough research of the property and local area are important. There will likely be a bit of back and forth between you and the estate agent as you come to a mutually pleasing price.

Once you decide on a price the vendors are happy with, you need to determine if the property is actually worth that amount. Your lenders will only approve a loan for a property that is priced appropriately (or they will only lend you what they think it’s worth and it will be up to you to make up the difference - keeping in mind there are other costs to consider such as stamp duty, legal costs and other lodgement fees - so you need to be able to afford to cover the difference and all the other costs associated with a property purchase). It’s certainly not advisable to pay above market value for a property (unless of course you are extremely wealthy and can afford to make a loss on a property).

Getting a Home Loan Approved

A pre-approval becomes a loan approval once the bank sends their valuer to the property to ensure you have offered a price which aligns with the market value.  A valuation will usually take a couple of days to eventuate and includes a trip to the property by the valuer and a detailed report comparing the property to comparable properties which have sold in the area over the previous months. The valuer will take into account the age of the property, view, location to amenities such as schools and shops, what kinds of risks exist (such as flood prone area or bushfire zones) and many other considerations. Provided the valuer assess the property at or above the price you’ve offered then the bank will most likely approve your loan provided affordability isn’t a problem for you based on your income and existing assets (another thing the bank will investigate).  There may also be a request for additional evidence of your financial situation if these haven't been cited as part of the pre-approval process.  

What's Next?  

If the bank, vendor and you are all happy with the price, the next step is arranging a building and pest inspection to check the property doesn’t have any major structural issues or potential for termites as well as having the contract investigated by a conveyancing lawyer.  You also need to discuss or negotiate settlement periods (which will be in the contract) and arrange a date to sign and exchange contracts and pay the initial deposit. We’ll investigate these final steps next week.  

Endeavour has a comprehensive Home Buyer Guide which details the process of buying a home and includes lots of handy hints and tips if you want to learn more.  Endeavour also has a wide variety of home loan products, all with competitive rates and a fabulous range of standard home loan features.    

Alison Gallagher is a freelance writer, resourcefulness expert and entrepreneur. She has been featured in various publications including Stellar Magazine, Australian Health and Fitness Magazine, and Cleo Magazine. Alison is particularly passionate about sharing practical tips on how to live simply, sustainably and seasonally.