Essential steps for first home buyers

Purchasing a property is an exciting time in your life, but it can also be slightly daunting having to deal with real estate agencies, banks and solicitors to get things done.

We’ve put together six essential steps for first time buyers to make this process as hassle free as possible.

Remember, the more you know about the sales process the easier it will be, so do as much research as possible and ask questions if there’s anything you don’t understand.

Step 1 – Get pre-approved for funding 

 It’s a good idea to get pre-approval of your finance from a bank or lending institution before you go house hunting. This way you can proceed with a property purchase knowing exactly how much you can spend. This part of the process is quite simple and usually involves attending an interview, completing an application form and presenting all the necessary documents, such as:

   > Proof of identification – passport, birth certificate, driver’s license etc.

   > Proof of savings – bank statements for the last three months

   > Proof of current debts – credit card statements and other loans

   > Proof of other assets. 

Generally pre-approval certificates from lenders are valid for three to six months, but may be valid for up to twelve months.

Other financial considerations to keep in mind are the deposit you’ll need to transfer once you’ve made an offer, usually 20 per cent of the property value; and stamp duty payable right before settlement. Stamp duty is a general tax imposed by the government and varies from state to state. It can add several thousands of dollars onto the cost of the house. Check on your state government’s website if you’re eligible for any exemptions or discounts as a first time buyer.


Step 2 – Arrange a building and pest inspection

There are plenty of stories out there about people who’ve bought dud houses. Don’t be one of them. It’s vital to get a pest and building report from a qualified inspector before you make an offer on a house. A thorough report will cost you anywhere between $200 and $600 but it’s better to be safe than sorry.

The report will help you decide on the best course of action. If the property does indeed need minor repairs, then you can factor this cost into the purchase price. If the repairs are extensive or there are major pest issues, then you may decide to keep house hunting.


Step 3 – Making an offer

After the necessary inspections, if you’re still satisfied with the property, it’s time to make an offer.The two most common scenariosare private sale and auction. We’ll look at each of these in more detail.

Private sale

This is how most residential properties are sold in Australia. The owner sets a price and a real estate agent markets and sells the property on their behalf. Prospective buyers make an offer through the agent and negotiations go back and forth, either verbally or via a sales summary, until a price is arrived at that suits both parties.

Bidding at auction

Auction can be a quicker process than private sale for an owner and is a popular selling method in a hot property market. An agent puts together a marketing campaign with a set date that the property is to be auctioned. Prospective buyers register their interest and attempt to ‘win’ the property by placing the highest bid once it goes above the reserve price. The property is sold to the highest bidder.

Always know your spending limit when you attend an auction and get your finances in order beforehand as your bid is binding. If a property gets passed in below reserve there is usually an option for negotiation with the owner.

 Step 4 – Exchanging contracts

Once your offer has been accepted or you’ve successfully bid for a property, you’ll pay a deposit to the seller and exchange contracts. You’ll need to enlist the help of a solicitor or conveyancer to do this part to make sure there are no surprises after purchase.

The contract is a legal document that transfers the property title from the vendor to the buyer. It also sets out any special conditions, confirms zoning, lists any outstanding property rates or taxes and notifies each party of the settlement date (usually 30 – 90 days).

Step 5 – Waiting for settlement day

Once you’ve exchanged contracts and everything is signed off, it’s a waiting game until settlement day and the balance of your money is transferred to the vendor. This is the day you receive the keys and become the proud owner of a house.

Be sure to mark the occasion with a special celebration or at least pop the cork on a bottle of champagne to celebrate your achievement!