Until now, your biggest purchase was probably a car, or maybe a really big couch. It’s normal to feel nervous about money when you’re buying a house for the first time. Like all first-time buyers, you want to keep your mortgage affordable, pay the right price and still end up in a place you love.
You’ve probably heard rumours of real estate agent tricks. Not the good kind, like finding a dollar behind your ear, but ones that make you believe a house is worth more than it is.
Remember, real estate agents work for the seller. They’ll tell you nice things – it’s a buyer’s market, there are other offers on the table, the kitchen cabinetry matches your eyes – but at the end of the day, their job is to make as much money as possible for their client.
You can avoid paying too much by doing your research. What is the home really worth? What are others in the area selling for? Is it true Beyoncé used to live here?
In a fluctuating market, your money may stretch further than you expect. Follow our steps to first-home buying success.
1. Invest in research
Don’t buy into the hype. You may have your heart set on this suburb, but house prices don’t care about your Pinterest board. Thoroughly research the area you’re looking at. Be as objective as possible. Look at median values, population growth, local developments, school zoning – any information that will help you understand how house prices are set. You might even consider subscribing to property data services, for example those offered by CoreLogic or APM.
2. Hit the streets
Paying the right price for your first home can mean wearing out some shoe leather. Get out there and see the market up close. There’s no better way to pay the right price than by investing time to check out a wide range of properties. Look at signage – you can learn something from an auction date that’s passed without a sale, or a board that’s looking worse for wear. Check out nearby construction or demolition, road works and street noise. Anything that impacts on the appeal of a property is a bargaining tool now.
Plus, you can use the time to get some insider info on your new area: how’s the traffic? does it feel safe? who does the best coffee?
3. Test the waters
A common home buying mistake is to pay what the real estate agent says it’s worth. Don’t let them set your budget. Ignore the list price. You’ve done the research, so you know what similar properties are achieving and can make an offer based on what you think it’s worth.
When this much money is at stake, you need to back yourself. Maybe your offer doesn’t line up with what the listing says. Use your research as ammunition to negotiate. Arm yourself with real reasons the list price is too high, and don’t be embarrassed to offer less than asking, if that’s your best estimate. The agent isn’t going home to think about how silly you looked. No, they’re going to watch repeats of Friends like the rest of us.
4. Demonstrate some fire power
Being ready to go lets the agent know you’re a good bet, and that can actually take money off the sale price. As a first-time buyer, you don’t have another property to sell, so you might offer flexibility on settlement. Have loan pre-approval in place before you make an offer. Show the agent you mean business and you’ll have more room to negotiate.
5. Know when to bow out
Finding the perfect first home can be a minefield for the heart. When you find a place you love, it’s easy to lose objectivity. A buying checklist can help you focus on what you really need: budget, area, house features, proximity to schools and shops, transport, and so on. Don’t let a real estate agent or beautiful hired furniture trick you into paying more than you should. If they won’t budge on a price you know is too high, it’s time to move on.
Overpaying for a house is every buyer’s worst nightmare. Arm yourself with good research, market knowledge and a clear idea of what you want. Then, speak to a broker about loan pre-approval, so you know you’re buying within budget.