Property Buying Process
Once you have applied for a home loan and have your finance in order, you are now ready to hit the market to start searching for a property...... but what is the buying process and what's the detail behind each stage?
PLEASE NOTE having your home loan pre-approved before negotiating or exchanging on a property is highly recommended!
There are a few steps in the property buying process which are outlined in more detail below. These are:
- Have a strategy, run with it!
- What will make this property a good purchase?
- Research the market and target areas.
- Inspect properties, start speaking with sales agents.
- Know the difference between auction and private treaty purchases.
- Negotiate and get your property!
- Formal approval from your lender.
- Settlement and handing over the keys!
- Home loan health checks
Step 1: What is your strategy?
What is the bigger picture for you? Are you looking for a single purchase, to upsize in a few years, downsize, are you expecting to grow a family?
Is your goal to buy an investment property, grow a property portfolio and build wealth through property?
Do you aim to buy a good quality entry point owner occupied property which will grow in value so you can leverage off the capital growth and buy in a more desired location?
What is your income today, what will it look like in 5 years, how well do you save money for a deposit?
Do you have a retirement plan, somewhere that you aim to relax later on, back home where you grew up or in a luxury location?
Having a clear strategy will assist you to stay on target with achieving your goal. It will allow you to make decisions based on a preconceived plan, with less “what if” uncertainty. Goals and strategies can change however they are a great starting point to enable a buyer to establish what they set out to do, maintain focus and execute.
We see it often enough where a buyer gets a pre-approval, hasn't planned out their strategy, they are forever looking for a property and eventually other "life" interruptions get in the way. Our clients who come to us with a clear strategy, who are motivated, done the ground work and are ready to buy are the people who get the property they set out to secure.
If you don't have a strategy and unsure of what direction to take, please contact us as we are more than happy to assist.
Step 2: What will make your property a good purchase?
If you know what your strategy is then you should start thinking about what will make that property a good purchase. In all cases, you should be thinking about what type of person would want to live in the property.
If buying a property for yourself, what is going to make your life more convenient? Is living close to transport, having access to schools or shops a priority, is living close to the CBD, social networks, community groups or escaping the hustle and bustle of the city what you're after? Do you want a newly built home, to enjoy new finishings, a place where nobody has previously lived your goals?
If you aim to purchase an investment property, then you really do need to think about the perks of the property. Having a property near to transport, schools, accessible to the city or jobs will all play a part of the desirability of your property and this matters when you want low vacancy periods, high rental returns and strong capital growth.
In both circumstances, knowing what local, state and federal projects are planned for an area is beneficial to understand what the property capital growth may look like over time. Hospitals, schools, freeways, shopping centres, employment opportunities, tourism and transport are all highly beneficial project if you are seeking good capital growth for a property.
Once you know what is most important, you can start to narrow down your options, pointing you to the properties within your criteria.
Step 3: Research the market and local areas
Once you have a strategy, have an understanding of what will make for a good property purchase and hopefully have your pre-approval sorted, you should have a good idea as to what your purchase price may be looking like so it's time to jump online and review what's on offer for your price range. We have listed the best real estate websites for 2019 in one of our blogs which will assist you to find properties, details about locations, recent sales, median house or unit prices and much more.
Start researching what is on offer, if it falls within your purchase price and get to know the locations you may be buying in. You should look at transport options, walking score, go to the local shops and see what the local stores have on offer (e.g. good quality coffee seems to be important!). Educate yourself on recent sales for the type of property you are after, speak with your mortgage broker to understand how you can get a property report to provide insights with about the location, property growth and more.
Step 4: Inspect properties and start asking the sales agent questions
It is always a good idea to inspect a property and if you're going to invest a good amount of money into this investment, then you should be inspecting it as much as possible.
If the property stacks up with what you are seeking, then you could start asking the sales agent a few questions such as:
- Are there any issues with the property that you know of?
- Why is the owner selling?
- Are there any special levies (upcoming owner payments for property works)
- Are there any developments happening in the area?
- Are there any changes to zoning in the area (this is related to council opening up an area for new developments such as apartments, high rises, or other)?
- Have there been any renovations that were done without council approval?
- Have there been any offers and what was the outcome?
- Has any other potential buyer had a bank valuation completed and do you know the outcome?
- Do you have a building and pest inspection report available?
Investigation is worthwhile when considering a new purchase and asking lots of questions will also indicate to a sales agent that you are serious / genuinely interested in the property.
Building and pest inspections
A building and pest inspection is a good idea to ensure you have conducted your due diligence on the property however it should be noted that these reports are not guarantees. If you have a friend who is a builder, it may be worthwhile asking them to come to inspect with you as they may be able to offer some additional feedback. Building ans pest inspection reports can be a little vague (e.g. “there doesn’t appear to be any issues”) however they can help to identify any obvious or real concerns that an untrained eye is not looking for. These things could be moisture, structural related issues, termite’s discovered, etc.
All building and pest inspection reports come with the disclaimer (“at the time of inspection” and “from the areas we could access”), meaning they will not move furniture around so it is worthwhile reading the full report to understand what may have been inspected and what may not have been.
Building and pest inspections are usually done when an offer has been made and accepted resulting in a cooling off period commencing. If the property is for auction, then you are likely completing this before auction.
Regarding contract review, your solicitor can do this for you once you have entered into a cooling off period or prior to auction. Solicitors can also arrange for a strata report to be conducted in the event you are purchasing a unit.
Like all services related to property and finance, you can get lucky finding a great service provider or you can go to our contact page and complete the form to connect with our team of professional solicitors to assist with your conveyancing.
Step 5: Private treaty or an auction sale
If you are serious about a property and are likely to make and offer or go to auction, there are a few things to get your head around at this point and they are associated with a private treaty, cooling off period, 66W and auction sale.
A private treaty sale means the property is for sale at an asking price (which can be negotiated) and an offer can be submitted to start the sale price negotiation.
What’s important to know is that a private treaty sale can have a cooling off period or a 66W condition agreed to. The cooling off agreement is generally a 5 day period which allows a purchaser to conduct pest and building inspections, plus get finance in order (i.e. pre-approval upgraded to formal approval after valuation). A 66W agreement means you are proceeding with the purchase and waiving your rights regarding things like a building and pest inspections or a bank valuation for formal finance approval. When you sign a contract and a 66W, you are committing to the purchase.
Sales agents will always prefer a 66W and a buyer can prepare themselves appropriately for this however it does come with it's own issues and you need to speak with your mortgage broker about this before hand.
An auction sale is very similar to a 66W by which you are buying the property and paying a 10% deposit when the hammer drops. You can conduct inspections prior to the auction and undertake all the due diligence you like prior to auction but once you are the highest bidder and the hammer falls, you must provide the 10% deposit on the day (non refundable). Some states may differ and the 10% can be negotiated prior to auction, however the principle remains that the deposit is paid on the day of action.
We have a team of professionals who can assist with the buying, negotiating and even represent you at auction. To connect with one of our team who can assist you with this process, please go to our contact page and complete the form.
Step 6: Negotiation was successful
Once you have successfully agreed on a price or purchased at auction, you will need to have your mortgage broker order a valuation on the property from the lender which your application has been conditionally approved.
Once the contract of sale has been supplied and the valuation has been completed, you are ready to proceed to formal approval.
There are a few considerations at this point if the lender values your property under the purchase price, or if the property is in a location which the lender will not take the property as an acceptable security, so again, it is essential to speak with your mortgage broker to pre-qualify any property you intend to purchase.
PLEASE NOTE: if valuation comes in lower than than the purchase price, the purchaser will need to cover the difference (i.e. purchase price is $500,000 and valuation is $450,000, then the lending amount may change and the deposit amount will increase).
Step 7: Formal approval from the lender
Once the valuation is completed and all conditions are met, formal approval will be confirmed and loan documentation will be issued.
Loan documents will either be sent to your mortgage broker or directly to you to sign. Loan documents will require a witness to sign and preferably, this should be your mortgage broker to ensure all loan information is accurate and loan documents executed correct.
Once all loan documents are executed and sent back to the lender, their legal team will certify them to ensure all requirements are met. If all requirements are met, then settlement can be booked.
Step 8: Settlement
Once settlement is booked, all requirements have been met. Some of the last minute requirements prior to settlement being booked may include an insurance policy for the property. Settlements are normally conducted in the afternoon with the legal team from the lender, the buyers solicitor and the vendors solicitor which can be online or in person.
After settlement is completed, you can collect the keys to your new property!
Step 9: Post settlement - home loan health checks
Post settlement, it’s essential that all your loan application details are confirmed so you have full transparency on what your loan structure, product type and repayment requirements are. This is a service we provide to ensure you are set and have all the home loan product features you expected to have upon application.
Post settlement, we will monitor your loan and continue to ensure you are getting the most competitive rates for your personal circumstances, negotiating rates with your lender and we will provide feedback on options for lender choice if available.
If you feel like this information has been helpful to provide you with a clear guide on what the property buying process looks like, we're happy to have been able to assist, however if you feel like the above is quite complex and would like to speak with a buyers agent who can do all the above on your behalf, then have a read and consider a buyers agent to assist you with the purchase as they do this for a living.
If you’re motivated, have the time and happy to tackle the above with Fordable guiding you along the way, then we're here to help.
To speak with one of our team about the buying process, go to our contract page and complete the form.