When it comes to buying your first home, it’s easy to get caught up in the emotion of it all. Which is completely understandable – it is one of the biggest, most important purchases you’ll ever make. Unfortunately, being too emotional during the buying process can lead to buyers paying too much and problems down the track. For this blog, I teamed up with Effie Nicol, Broker and Finance Manager from Yellow Brick Road Earlwood, to highlight the traps home buyers need to look out for and how to avoid getting too emotional.
Paying for the Wow Factor
Michael: I’ve been to hundreds of open inspections with clients who fall in love with a property because of some flashy features. For example, a unit we inspected on the lower north shore was recently refurbished to a very high standard and featured bright contemporary interiors complemented by striking timber finishes. The bathrooms had heated floors and there was even a “Zen Style” winter garden, which benefited from views to Sydney Harbour, Lavender Bay and the Anzac Bridge. But while on paper that might sound very appealing, on inspection, the property had a very minimalist, Asian style theme that would not suit all segments of the market.
The problem with falling for flashy features is that buyers can be distracted by something that sounds amazing and overlook the six or seven things about the property that don’t meet their needs. In the case of the property above, families with young children or indoor pets may have found the floors and other features difficult to keep pristine. I recommend putting together a list of your non-negotiable items. These are the things that you absolutely cannot manage without. For example, it could be the number of bedrooms or bathrooms, a lock-up garage or even the proximity to schools or parks. If a property doesn’t check off all the things on your non-negotiable list, it’s not for you.
Knowing Why You Want to Buy
Effie: There’s an old saying that goes something like: “Just because you can, doesn’t mean you should.” I see this a lot with people looking to borrow for the first time. They get caught up in the process of trying to borrow as much as possible, instead of focusing on how much they actually need.
I like to ask my clients lots of questions to get an understanding of why they want to buy a home and what their plans are for the longer term. For some people, they just really want to get themselves started on the property ladder. For others, they might be looking for the security of owning instead of renting.
Once we know why they want to buy, we can talk about a realistic borrowing number that will allow them to make a purchase and still have enough money to maintain their lifestyle.
Getting Stuck in a Suburb
Michael: Many people get fixated on a particular area where they want to live and don’t realise they could get much more value for their money if they just broadened their search a little. I had one client who was set on buying a house in Drummoyne and had been looking for over 12 months. They had found a place which the selling agent estimated would go for $1.75m and the prospective buyer asked me to see if I thought it was worth the price. Knowing the client’s needs and using my valuation experience, I could quickly see it wasn’t the right home for them and believed the property would sell at auction for over $1.9m (it actually ended up selling three weeks later for $1.92m).
I suggested they broaden their search to neighbouring Croydon. Within two weeks we had exchanged on a property twice the size of the one in Drummoyne, for nearly $200,000 less than they were prepared to outlay. So, it certainly pays to put aside your attachment to a particular postcode.
Getting Pushed into a Purchase
Michael: Unfortunately, there are some selling agents out there who will use every trick in the book to try and get the sale for their vendors. I’ve seen plenty of first home buyers get duped into signing a contract or making a higher offer because the selling agent tells them there is another buyer who is “really interested”.
The best way to avoid this is to set your purchase limit early and stick to it.
Effie: Getting your finance pre-approved is a great way to do this. It means you know your borrowing limit and also makes you more attractive to the seller. If you know you can’t borrow above a certain amount, you won’t be tempted to put in an offer that you can’t afford. Plus, the seller knows you are serious and can start the purchase process straight away.
Asking for Help
There’s nothing wrong with asking for help to take some of the stress out of the buying process. From visiting a mortgage broker to research loans, through to engaging a buyers’ agent who can do the sourcing and negotiating for you, there are plenty of experts ready to share their expertise to help you, so you can get the property of your dreams for the right price.