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It may surprise you that we're all the way at step 6 before we're encouraging you to start property shopping.
But this is the reality of buying a home – you need to do a lot of groundwork to get your ducks in a row first, so that the process is as stress-free and seamless as possible.
If you kick things off by browsing the classifieds and finding your dream home at the outset, you could be setting yourself up for a whole lot of stress, disappointment and frustration.
For instance: What if you find a property that ticks all the boxes, but it turns out to be $100,000 above your budget? What if your credit card debt is putting a big dent in your borrowing power and you didn't realise, and you need 6 months to pay it off before you apply for a home loan?
These are the types of issues you've hopefully worked through in the first 5 modules, so now you can get your hands dirty with your property search. This truly is where the fun begins!
How to shop for property
In the last module, you set your property criteria, which means you now have a clear list of your real estate wants and needs. This week's module is all about how to actually shop for property and negotiate the best possible deal.
Here's how to find your dream property:
1. Get real estate agents working for you.
In any market, but especially in a booming market, it can be really stressful trying to find a property that suits your needs, is in the right location and falls within your budget.
Your first step will be to shop the classifieds online and in newspapers, like every other first homebuyer in the market. But you can also take an extra step to get real estate agents on your side.
Ask any first home buyer and they'll tell you they donated countless weekends to open homes and meetings with real estate agents. So to give yourself access to the inside track, here's what you do:
- Look at local listings in the area you're shopping in and take note of the agents' names. You'll see a pattern of the same dozen or so agents appearing again and again. These are the busiest, most successful agents in the area, so add them to your shortlist.
- Get your Google on and find their email addresses. If you can find their assistant's or co-agent's email addresses, even better!
- Email each agent individually. Introduce yourself and share the exact criteria of the type of property you want to buy, including location, features and budget.
- Ask them to contact you if any property crosses their desk that could meet your criteria.
By doing this, you're on the radar of all the local agents. If you develop a good relationship, you could shoot to the top of their list of contacts to reach out to when they get a new property listing.
Keep in mind:
• Developing good relationships with local agents can also get you access to properties where the owner doesn't want a lot of strangers and neighbours traipsing through their home.
• For these sellers, a swift sale and a way to avoid endless weekends of open homes is the aim of the game. These types of properties only get marketed to the agent's private database.
• It also pays to be friendly. Agents are people after all! Being friendly and open about your situation is going to get you a lot further – the days of holding your cards close to your chest and being coy with your real estate agent are well and truly over.
2. Learn how to negotiate on price
Negotiating well isn't about paying the lowest possible price. It's about getting the best possible outcome.
As a first homebuyer, that means getting into a home. You don't want to pay a cent more than you need to, but you also don't want to set arbitrary boundaries and price limits that stop you from achieving your goal.
So here's how you negotiate to get a win-win outcome:
- Set a firm budget. This can be guided by the amount a lender is willing to loan you and it may actually change from property to property. The important thing is to know what your limit is before you start negotiating.
- Be creative with your number. Having a little more budget than a round number can give you room to negotiate a bit higher. In 10 years from now, you probably won't remember if you paid $620,000 or $623,500 for your first home – but that extra few thousand dollars could seal the deal.
- Create an ultimate price ceiling. For each property you review that you get really serious about, set an absolute price ceiling. The best way to work this out is to ask: What amount is too high and would make you walk away from the property? Now, go $1 below that.
- Don't be emotional. When you fall in love with a property, it can be all too easy to get emotionally attached, and you're then tempted to go higher and higher and move mountains to make it yours. Use facts and figures to guide your decisions.
If you really want to get the competitive edge when buying your first home, you could use a buyer's agent, like Sydney-based first homebuyer Francesca Guerrera.
She paid a small fee to a buyer's advocate to help her secure a spacious, well-kept one-bedroom apartment in the middle of a property boom. Here's how her experience went:
3. Make your offer stand out
To get the upper hand in negotiations and make your offer stand out against other would-be buyers, your best bet is to get to know what the buyer needs.
People sell properties for all sorts of reasons: because they've bought another home, they're getting rid of an investment, or a relationship is ending.
Ask the agent questions about their situation, advises property expert Michael Yardney, managing director of Metropole Property Strategists – this way, you can tailor the offer to suit the seller.
"The vendor may be in a hurry to sell, for personal or financial reasons, but at the same time stressed out about where they'll live once the sale is complete," Yardney says.
"So, you might offer to rent the property back to them for a month or so while they figure out their future plans. You'll stand out from the crowd as a sympathetic buyer who has compassion for their situation."
Other ways to make your offer stand out:
- Offer longer or shorter settlement conditions, to suit their needs.
- Hand over a bigger deposit; this shows the vendor you're really serious about the property.
- Negotiate other inclusions in the sale price, such as heavy furniture, an over-sized kids cubby house, or a transportable storage shed. It could be a major hassle for the owner to move these items, so this works in their favour.
- Have pre-approval in place. It gives the seller confidence that if they accept your offer, it's likely to settle without delay.
"With your deposit ready to hand over, and your pre-approval sorted and some of these tricks up your sleeve, you'll be a step ahead of other buyers and with any luck, you'll be signing a contract in record speed," Yardney says.
What if you're buying at auction?
An auction is highly charged, emotional and designed to get you excited.
This can cause buyers to over-pay, which is exactly what the auctioneer wants.
To give you the inside scoop, professional auctioneer Damien Cooley shares his top tips for beating both the auctioneer and your competition on auction day, to make sure you're the one who walks away with the keys.
To sum up:
Hopefully in this module, you've picked up all the tips and tricks you need to locate the property of your dreams and negotiate the best possible price.
I wish I could say this process is easy, or fast, but that may not be the case. Finding the right property can take time, and it can require a huge amount of patience as the days turn into weeks and months.
Try not to get disheartened, keep your eye on the prize (your big, bold goal of becoming a home owner), and if it's all getting too stressful, take a pause. There are always going to be more properties, so pausing your search for a week (or a month, or longer!) is not going to prevent you from reaching your goal.
Next week, we're going to drill down even further into the process of making an offer. You'll more than likely make multiple offers during your search, and we're going to explain exactly what that means, how it happens, and what the laws and regulations are in each state and territory. Until then, happy house hunting!
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