Seven Habits of Highly Effective Home Buyers

If you find the prospect of buying your first property a little intimidating, don’t worry. Doing some basic research is easier than most people think. It increases your confidence and reduces the chance of making a mistake.

Buying a home is about the biggest financial commitment you’ll ever have to make. However, it’s also going to be an exciting turning point – one that will almost certainly make the most impact on your lifestyle. For many it will be something never done before. Selecting the right home in the right area, organising finance and negotiating the sale – it all sounds a little daunting. Yet it isn’t as complicated as you may think! Turning the home of your dreams into a reality is easier if you’re prepared.

Why seven habits of effective home buyers? Because over the years we’ve seen some traits (habits) the our successful buyers share. What is a “successful buyer”? Let’s just define it as someone who finds the home they want, and gets through the often home buying process without killing themselves, a loved one, the seller, or their real estate agent.

Effective Habit #1: Get pre-approved for a loan

Don’t miss out on a ‘hot’ property, do everything you can to be able to push the ‘GO’ button. It is wise to seek “approval in principle” from your Lender, meaning the Lender has given you approval to borrow up to a certain figure.  This step will save you the grief of looking at homes you can’t afford and put you in a better position to make a serious offer when you do find the right one.

Buying a home is not a task undertaken everyday. It’s important to understand the process of real estate, what you can comfortably afford and the type of loan product best suited to

Choosing the right home loan from the many products available can be daunting. It’s important to understand all the alternatives before making your choice.

It is crucial to work with a good lender throughout the home buying process. Talking to several brokers as well as a finance adviser will definitely help you sort the wheat from the chaff. There are two options available to you when organising finance. You can apply directly to a finance institution or you can use a mortgage broker to help you through the process.

A lending institution will apply a “Qualifying Ratio” which is the percentage of a home buyer’s gross income that can be prudently allocated for debt, based on personal income.

As a general guide, lenders limit the total sum of monthly mortgage principal, interest, tax and insurance payments to 28 per cent of the borrower’s gross monthly income. Furthermore, they may limit the total of all long-term debt payments to 36 per cent of the borrower’s gross monthly income.

Effective Habit #2: Define your must haves, like to haves, and cannot haves

Shopping for a property should be an exciting adventure. If you have a clear picture of what you want and how much you can afford, it can be a fun and rewarding experience.

Face it — when working within a budget, sometimes you have to make some compromises. Knowing what you really need can help narrow your home options and also make decisions easier when it comes to making an offer.

The first step is to decide what kind of home will suit your tastes, your lifestyle and your budget. Start an all-family member housing priority discussion before beginning to look at your options. Determine what you MUST have in a home. Then determine what you would LIKE to have in a home. Talk to your agent about these things. Don’t forget to include what you CAN’T have in a home — that will often be more important than anything else.

Aside from basics such as the suburb, number of bedrooms and price range, there are other important things to consider, depending on your circumstances. Take your time and consider things like proximity to schools, transport and amenities, and the condition of the property. Does it need major repairs?

Don’t know exactly what you must/like/can’t have in a home? That’s OK, it happens ALL the time. Your agent can help you by showing you different homes in your price range with different features to help you get a better understanding of what you’d like in a home.

But at some point you are going to have to make decisions and not wander aimlessly through every home that may possibly fit some undefined set of criteria. That would be a waste of your time, the time of your agent, the home sellers, and everyone else that is involved in a real estate transaction.

Effective Habit #3: Be realistic

Naturally everyone wants to get the most home they can for the least amount of money. Which is, of course, in opposition to the home seller, who wants the most money for their home.

Think about what your expectations are, and work with your agent to see if they are realistic. There’s no point looking for a mansion if you can only afford a cottage. You’re not going to get everything a $300K+ home has to offer for say $160K – it just doesn’t work that way. Once you’ve set your price range, identify the suburbs that have properties in that range – it will save you a lot of legwork. Work closely with your agent, ask them for recent sale prices of similar properties in the area, build that trust and get out there and find that perfect home!

Being realistic also applies to things besides the home itself. Buying a home in a low price bracket and expecting no repairs or maintenance? Good luck with that. Buying a home and thinking if the building inspector finds anything wrong with it (other than major structural problems), I’m not buying the house? Well you might as well stop right now because I can assure your there aren’t any homes where the building inspector finds nothing to report.

Don’t wait for the perfect market conditions – they will never appear and you’ll miss out on significant capital growth. Just be realistic. It will greatly reduce your stress levels.

Effective Habit #4: Be flexible

As a home buyer, it is important to be flexible. Unless you are having a home built to your exact specifications, it’s very unlikely that you will find the absolutely perfect home for you. Maybe you find a home that has everything except the perfect kind of flooring, colours, kitchen, whatever. If you have some flexibility built into your must haves and likes, you will find the entire process much less painful.

Don’t be tempted to make a very low offer in an attempt to grab a bargain as others may also be making offers and you could miss out. If you really want the property make sure your offer is realistic. The more attractive you can make your offer in terms of price and conditions, the more likely your offer will be accepted.

Effective Habit #5: Understand the home buying process

You don’t need to understand every step of the home buying process — that is your agent’s job. But the more you do understand, the less stressful and mystifying the process will be. Buying a home is a stressful event. Anything you can do to reduce that stress will go a long way not just toward saving your sanity but in helping ensure the transaction moves to settlement.

So, you have found a place you’d love to call home? Once you’ve considered other comparable nearby properties, take a deep breath and make an offer – IN WRITING!

There are two ways to do this:

Unconditional offer:

An unconditional offer is when you offer an amount to buy the house as listed (with or without drapes, fixtures, etc.) without adding or negotiating any other conditions.

Conditional offer:

A conditional offer is when you offer to buy the property only if certain conditions are accepted by the vendor. These must be listed on the Contract of Sale. For example, your offer may be conditional on arranging finance. If finance cannot be arranged within a certain period of time, the offer becomes void. For your own protection, you should nominate a specific lender as your source of finance. Leaving out a nominated lender or having open-ended finance conditions on your Contract of Sale may force you to take up finance at substantially higher rates, perhaps shorter terms, and from a lender you would not prefer to deal with. Another condition might be an extension of the settlement period. If the seller does not accept the conditions, further negotiation may take place or the offer may simply be declined.

Also be aware that if making an offer, never assume that your agent or the property owner will come back and forth to you – and you should take the approach that your first offer may be the only opportunity you get to obtain the property. A willing seller may not wish to wait around and may accept a reasonable offer from another buyer.

Do not be afraid to ask your agent questions. Lots of questions. Be advised that everyone in the process tends to toss about terms and jargon that only those dealing with real estate on a daily basis understand. Sometimes we forget we’re speaking in a different language. Don’t be shy. If there’s a term you don’t understand, ask.

Effective Habit #6: Be responsible

When you are looking at potential homes, be responsible and respectful that you are in someone else’s home. It’s OK to look in their cupboards, to flick light switches, to turn on the stove. But be responsible and leave the home in exactly the same condition you found it in.

Much of this habit really boils down to two things: 1) use common sense; and 2) treat others how you expect to be treated.

As a home buyer, you are going to have to work with a lot of different people in order to make sure your transaction progresses and ultimately settle.  Once an offer has been negotiated you’ll pay the deposit to the real estate agent who places it in a trust account. This is also the time when you should

• Organise your solicitor/conveyancer
• Arrange the balance of the purchase price—that is finalise the finance and sign the mortgage documents.
• Organise any inspections
• Insure the property

Effective Habit #7: Have fun!

We already mentioned that buying a home is a big step – both financially and emotionally. Take a look around at lists of “life’s most stressful events” and you’ll see things like taking on new debt, financial change, moving — that’s buying a house. You are about to enter into one of the single largest financial transactions of your life. Stress is a given.

But buying a home is also an exciting time! There isn’t a law that requires you to mope around, dreading every moment. There’s nothing wrong with having fun during the process. Hopefully you are working with an agent that you enjoy working with. That doesn’t mean you all need to participate in group hugs or go camping together. But it’s OK to laugh, to enjoy yourself, to have a little fun in the process.

The Bottom Line

Buying a home doesn’t have to be torture. If you understand the process, work with the right people and try to have a little fun along the way there is no question that you can find a great home and get to move into your new home. Think about the habits shown here, do a little online research, have open dialogs with your agent and lender and you too can make it through a home purchase.

Preparation is the key. Understand your rights and have everything in place. And no, applying seven habits, or even one hundred habits is going to ensure you have a successful home buying experience. Nothing can guarantee that. But you can certainly increase the likelihood of a less stressful and successful transaction by applying some of the habits listed here along with advice from your solicitor/conveyance and your agent.