Common mistakes buyers make – and how to avoid them.
Buying a home is one of the biggest commitments you’ll make in a lifetime. If you can get it right the first time, you’ll obviously increase the chances of adding more properties to your net wealth.
In doing so this article may help you prevent some common mistakes buyers make.
You may also enjoy our article on “First Home Buyers – 5 Important steps to buying your 1st property“.
The following are common mistakes buyers make:
Not understanding your situation
The most common mistakes buyers make is not understanding their circumstances. It’s very exciting to think you are ready to buy a home, regardless if it’s to occupy or invest. It is very important to understand your financial situation including both your employment circumstances and your lifestyle needs.
If you disregard your situation this can cause you to lose the property quickly. Take the time to recognise what you own, owe and what you can afford. We would recommend spending the time consulting a mortgage broker who can assess your financial situation, identify your borrowing capacity and review your expected mortgage repayments. Having some form of indicative or pre-approval will ensure you are buying within your means.
Not properly researching your purchase
You may initially look at buying a home near a school or park but there are other items to research to ensure a good purchase. Understanding the location may be a game changer…
It’s important to find out the crime rates in the area, transport infrastructure, amenities and other possible upcoming zoning issues. Not all parts of a suburb are the same, so take note of the area.
Waiting for an expected property downturn
It’s pretty sweet to purchase a bargain, but often a cheap deal may be “too good to be true”. The property market does move in cycles so there are various stages in the cycle where prices may be cheaper or more favourable to a buyer. However in tougher property cycles it’s often a harder time to access funds to purchase. It’s best to buy within your own needs and that may not correlate directly with the property cycle. Don’t gamble your investment, buy when you can afford.
Friends and family may mean well but their advice and/or knowledge can cause you to make a terrible decision. The media can also be either confusing or misleading. Keep your decision simple. You often buy for the long term, so most short term trends will be immaterial.
Spending past your budget
Once you start shopping it’s very easy to become emotionally attached to a property. This emotional attachment can cause you to impulse buy and blow your budget. An extra $10,000 can be the difference between getting approved by the bank and losing the property all together.
To avoid common mistakes buyers make, consult a mortgage broker. If your mortgage broker makes it work and you acquire the property above budget you could derail your finances in the future.
When buying a property to occupy or invest, always shop within the guidelines of your bank approval. Don’t allow temptation to get the better of you.
Price is not actually everything
As we mentioned earlier, winning a bargain buy is very satisfying, but it’s actually not everything.
It’s been acknowledged over time, you make money in the buy, but that does not mean you must buy cheaply. You will be better off buying the right property over the cheapest one.
The old real estate anecdote is “price is what you pay, value is what you get”. It sounds a little cliché, but the meaning rings true. It essentially means cheap properties can be sourced everywhere, but the longevity in generating an investment return may very well not compare to the right property.
You can always buy cheap properties in secondary locations but they may not produce the investment return to something that is better situated but cost a little more.
Not considering the full costs to buy
Another common mistakes buyers make is not considering the full costs. When buying a property, the purchase price is not the entire cost. There are a number of additional upfront costs associated to the purchase.
Other costs include:
- Stamp duty
- Loan application fees
- Mortgage insurance (if any)
- Conveyancing and/or legal costs
- Professional fees (if any)
- Other government fees and charges
There are also ongoing costs that can be often overlooked. If you were boarding, renting or living with parents you may not have experienced the costs to keep the property.
Ongoing costs can include:
- Council rates
- Gas and electricity usage
- Water rates and usage
- Owners corporation fees (if any)
- Insurance (building and contents cover)
- Property maintenance
Ignoring the importance of employing a professional building inspector
When walking through a property pre-settlement it’s important to employ a building inspector. This applies to all property types and off-the-plan.
A property inspector’s service is to find defects or faults. Don’t stress if they identify a few points to rectify. They are very pedantic and are paid to find the smallest concern.
If there are any major defects, particularly structural then seek further advise as this may cost you time and money in the long run.
Do you need help?
If you are in a situation where you are wanting to buy your next property or investment property, we have a proven process to help. There are many common mistakes buyers make. We can help you avoid them. Please feel free to contact us at your earliest convenience to discuss your your buying plans. Best of luck!
While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you want to learn more, please contact us. We welcome the opportunity to assist you.
Mar 2020
