5 Things you must do before Buying a House
Purchasing a property is a big life decision. It’s a complicated process and you need to make sure you’re ready for every step. If you don’t prepare properly, you might find yourself in serious financial or legal trouble.
From organising your finances to understanding the legalities and responsibilities of home ownership, there’s a lot for first homebuyers to wrap their heads around.
But don’t worry, we’re here to break it down for you. To make sure you have everything set up, here are five things you must do before making an offer on a house.
- Organise your Finances
Before you even start shopping around for properties, you should take a good look at your financial situation.
It’s important to first assess your current financial commitments. Are there debts you’re still paying off? Any existing debts, including credit card debt, will affect your ability to get a loan. You should also examine your budget to work out how much you can afford to spend. Remember that your budget will change as your situation changes. Having children or changing careers can significantly affect your income, so it’s important to work these potential changes into any forward-looking budget.
Talking to a financial planner or advisor can be invaluable at this stage. They can help you clearly work out your financial position, determine how much you can spend, minimise risk, and ensure you present the best possible loan application to the banks.
You should also understand the additional costs associated with buying a property. You have to take into consideration conveyancing fees, legal fees, government charges, stamp duty, moving costs and so on.
- Look over Legal Documents
Next, make sure you have a solicitor to look over legal documents. Sometimes, you simply will not understand the implications of these agreements. Legal advisors will help you identify clauses in the contract that are not in your favour. This will prevent you from getting into an unfair commitment.
You can choose to act on your own behalf. However, this means you’ll have to do everything that the solicitor would do during the process. This includes reading a whole bunch of legal documents, dealing with banks, booking your settlement, liaising with the other party and, in some cases, attending settlement. This is complex and time consuming and involves taking on a significant amount of risk.
- Building and Pest Inspection
A pre-purchase property inspection is an essential part of the home buying process and should be carried out prior to making an offer. While the property might look fine on the surface, a qualified registered builder can identify any potential issues prior to purchase. These can include pest infestations, water damage, structural problems, electrical or plumbing issues and more. Any one of these could leave you with repair bills in the tens of thousands of dollars after settlement.
- Know the Rules about making an offer
There are different rules to making offers depending on the state or territory that you’re in. For example, in New South Wales, you’ll likely have to pay a preliminary deposit to express interest. Even when you’ve paid this, they have no obligation to sell you the property nor are you obligated to buy it. It simply notifies the vendor that you are serious in your offer.
In South Australia, you must provide a written offer. In Western Australia, there is a 48-hour clause. This allows another party to make an offer on the property in question and if the original party cannot produce the finances to buy it within 48 hours, the second offer will be accepted. In Victoria there is a three-cooling period for contracts and in Queelands, it’s five-days.
Make sure you check official government pages for more information on buying property.
- Understand how Settlement Works
Settlement is the date when the ownership of the property is transferred to the buyer and the balance of the sale price is paid. The seller sets the settlement date in the contract. The settlement period is usually 30 to 90 days, but it can be longer or shorter depending on seller preferences.
The settlement process is usually handled by your legal and financial representatives, like your mortgage broker or lender and conveyancer or solicitor. Prior to the settlement date, you will need to ensure that your finances are in order for the final payment and that the contracts are appropriately signed and dated. You should also have your building and contents insurance ready to start on the settlement date.
Prior to settlement you should be given the opportunity to carry out a final inspection. This is important because it gives you a chance to ensure the property matches the condition in which it was sold and that the property meets all contractual obligations.
This was just a quick checklist of things you need to sort out before you make an offer. We recommended that you consult certified professionals for further legal or financial advice. Purchasing a property is a complex process, but if you’re prepared, it becomes a lot easier.