Buying A Home

While we're assuming that you are purchasing a home to live in, the information provided on this page will also assist if you're are contemplating the purchase of an investment property.

If you are purchasing specifically for investment purposes, see also our page on "investment".

• Get good advice
• Determine your budget
• New or established?
• House or Unit?
• Organise Your Finance
• How much should you pay?
• Negotiation Strategies
• Conveyancing

Get good advice

Whether you are a first home buyer, or have bought and sold many times over, you will need good advice. This means investing in an experienced real estate lawyer.
Conveyancing Costs

There was a time when it was expensive to use a lawyer for a real estate purchase, but the high level of competition in the real estate conveyancing industry means that there is little difference in the cost of a conveyancer and a lawyer.

Why Are Lawyers Preferable To Conveyancers?

Although there is little difference in costs, there is a vast difference in the level and type of services offered by conveyancers and lawyers.
The crucial difference is that conveyancers are restricted to the performance of the simple clerical tasks associated with the conveyancing transaction, whereas lawyers are able to provide legal advice, perform all legal work, and can be called upon to sort out any problems that may arise.

(To find out more about the conveyancing process, visit the affiliated website of Lawyers Conveyancing.)

Determine your budget

The amount you are able to spend on your purchase depends on a number of factors, but most important of all is your ability to service the loan – in other words, your ability to make regular repayments.

To work out how much you can afford to pay, you will have to be honest with yourself, and make an accurate list of all your outgoings on a weekly, monthly, and yearly basis.

Be sure to include ALL of your expenses, including credit cards, utilities, transport costs, and even the amount you spend on morning tea each day! You should also set aside an amount for holidays, entertainment, gifts etc.

Add the costs of your purchase, including stamp duty and registration fees (see our Purchase Calculator for a list of the costs associated with the purchase of real estate).

New or established?

The answer to this question is often related to the purpose of the purchase. If the property is being purchased as an investment, there may be good reasons for considering and investment strategy that involves buying off-the-plan. If you are buying for investment purposes, see our page on Property Investment.
The 3 types of “new”

Basically, there are three types of new property:

• Land that has not yet been subdivided (known as off-the-plan).
• Land that has been subdivided, but not yet built on (vacant land).
• Land on which a new house has recently been completed.

There are also combinations of these, as it is possible to sign a contract for a house & land package where settlement will not take place until the land has been subdivided, the home chosen by the purchasers has been built, and a certificate of occupancy has been issued to allow the purchasers to move in.
Location, Location, Location

The purchase of an established home is often influenced by location, and location is usually based on lifestyle.

If you want to live close to the city, you may be forced to consider established homes. However, if you would prefer to build, then the outer suburbs are more likely to meet your needs.

You will have to do the research in order to make a good decision, as compromises may have to be made with regard to lifestyle, the type of home you want, and the costs associated with both of these.
The maintenance issue

If you are buying new there will be fewer maintenance costs in the early years. However, if you purchase an established property, the issue of maintenance becomes quite important. Good advice is crucial when purchasing an existing property, as style, deterioration and the cost of repairs or refurbishment can make the difference between a good or bad investment. Always consider building/pest inspections, and a valuation from an accredited valuer is also advisable.

(See our page “Buying New Or Established? for further information)

House or Unit?

Again, the choice her may be influenced by the purpose of your purchase. An investor may choose an established unit or an off-the-plan unit as part of an investment strategy. Similarly, first home-buyers may do the same through a desire to own an investment property as a “stepping stone” to home ownership.

While there are financial advantages in purchasing a unit, it is important to remember the compromises involved. Neighbours are very close, and there are usually strict rules governing the behaviour of residents in units.
Borrower Beware!

Beware of the type of unit you buy, as some units are not acceptable as security by lenders. For example, company share developments, stratum units and studio apartments are often rejected as security. (Your Real Choice Mortgages personal lending manager can assist with further information in this regard.)

Organise Your Finance

The easiest way to organise your finance is to contact Real Choice Mortgages, and discuss your needs with a Real Choice Mortgages personal lending manager. You will find out which lenders will accommodate certain types of purchases, how funds will be made available (for example the purchase of a house/land package will involve the drawing down of funds over a number of stages), and how to position yourself for the making of an offer.

Discovering your loan options may have a strong bearing on the type of property you intend to purchase, particularly if it is an unusual property, or you circumstances require special consideration.

An important part of determining your finance needs is calculating the costs associated with your purchase. Use our Purchase Calculator as a memory-prompt for the likely costs involved in your purchase.

How much should you pay?

Never accept the agent’s advice on price

A major problem facing vendors and purchasers alike is the fact that estate agents often regard property prices as “secret agent’s business”, using it as a tool for taking and retaining control of the sale transaction.

When the estate agent has secured the listing by convincing the vendor that a high price can be achieved, and the agent has not yet conditioned the vendor to accept a more realistic price, there is a danger that you may accept the listed price. (See "Negotiation Strategies" below).
The property must have value as security

If you pay too high a price for your property, you may find that your lender will refuse to accept it as security. It is not uncommon for a borrower to have a loan pre-approved, only to have the property rejected as security when the valuation indicates that too high a price has been paid.
Educate yourself

Take time to compare properties in the area. In this way you will gain knowledge of the area, and an understanding of the local market. You will find out which parts of a suburb are regarded as “the dress circle” and which are less popular. Buying the worst house in the best street is usually a good proposition, whereas the best house in the worst street could be an example of overcapitalising.

Obtaining a valuation from an accredited valuer is a good way to ensure that you do not spend too much on a property. Although a valuation may seem expensive (usually around $500), the amount to be saved or lost on a poor purchase will usually be in the thousands). Make sure that the valuer is not in any way associated with an estate agents, and is local to the area.
It’s your decision

Having determined what the property worth in terms of its market value, and as security for a loan, you must now determine how much you will actually offer for it.

Emotion may cause you to pay a little more for the property than an investor would pay for it, but there is nothing wrong this. What is important is that you do not allow emotion to carry you into the making of a bad decision.

Negotiation Strategies

Understand how properties are priced

It may sound cynical, but properties are priced according to the requirements of the estate agent. It all relates to the system of real estate commissions, and corrupting effect that they have on the industry.

In order to win any commission at all the estate agent must first win the listing. If a vendor has no idea as to the value of their property, the agent may be tempted to give a low estimate so that the property will sell quickly. However, if the vendor tells the agent how much the vendor believes the property is worth, the agent is tempted to confirm the vendor’s asking price (in order to win the listing), with the intention of later "conditioning" the vendor to accept a lower figure.

You may be fortunate enough to find a property that has been under-quoted in value, and buy it soon after it has hit the market. However, the most common scenario is the over-quoted and therefore over-priced property.
Take control and retain control

The only way an estate agent can create problems for you is if you lose control of the situation. Loss of control can occur for a number of reasons, such as desperation (you want the property at all costs, and cannot contemplate walking away from it), you listen to the estate agent’s propaganda, and you believe it, or you fail to seek and obtain expert advice (whether it be legal advice, financial advice, or the advice of building/pest inspectors).
Turn the vendor’s agent into your “buyer’s agent”.

If you can convince the agent that you are firm, determined and in control the agent will go for the softer target – his/her own client, the vendor.

Here’s how it works. The estate agent has won the listing, which means that the agent now stands to gain around $10,000 in commission. All the agent has to do is to have a purchaser sign the contract by way of an offer, and then to have the vendor sign the same contract to complete the sale (and secure the commission).
Given that a difference of $50,000 in the purchase price converts to just a few hundred on a commission of $10,000, it doesn’t matter to the agent whether the vendor accepts the purchaser’s first offer or not. What does matter to the agent is the fact of the sale. So long as the sale proceeds the agent will gain a commission.

If you are the only person making an offer on the property, and you can convince the agent that your offer is final, the agent knows that there is the possibility that the sale could be lost and that, in time, the vendor may decide to use another agent. This is a powerful incentive for the agent to work hard to convince the vendor that your offer should be accepted.

We know of a purchaser who paid $40,000 less than he was prepared to pay for a property, by adopting this strategy. For more information about negotiation strategies, contact Real Estate Lawyers Victoria.

Conveyancing

Conveyancers and Lawyers

If your property is in Victoria it is important that you understand that Victorian conveyancers are not qualified to give legal advice or to perform the legal work involved in the buying and selling of real estate.

Despite this, a very large number of conveyancers act illegally by offering pre-contract advice, and even preparing legal documents without authority.
Always Use A Lawyer

It is most important that you engage a lawyer to act on your behalf, and that you seek sound legal advice before you sign any contract to buy real estate.

The most comprehensive website for real estate related matters is that of Real Estate Lawyers Victoria. We advise any person who is contemplating the purchase or sale residential real estate in Victoria to take advantage of the conveyancing information and services provided on the Real Estate Lawyers Victoria website.
Co-ordinating Loan Draw-down & Settlement

Our affiliation with Real Estate Lawyers Victoria gives our clients the advantage of access to low-cost conveyancing in Melbourne and all areas of Victoria, with close co-operation and co-ordination of the loan draw-down and settlement processes. As settlement is always booked with a purchaser's lawyer, direct access to the client's Real Choice Mortgages personal lending manager, as well as the lender itself, allows for a timely and hassle-free settlement.

For further information on conveyancing, and the co-ordination of the home loan and conveyancing processes, contact Real Estate Lawyers Victoria for conveyancing in Melbourne and all areas of Victoria.

Ready to talk home loans? 1300 139 284 Just ring us, and let us know your requirements. We will have one of our Personal Lending Managers make immediate contact with you to discuss your specific needs and the available options - Quick, Easy, Personal. You can also CLICK HERE to access our online form.