I found this article on a website – www.yourmortgage.com.au, and thought it would be a good one to share…

Buying a good home or investment property can be a fantastic financial asset for you and your family.  Patrick Bright shows you how you can avoid making costly mistakes when buying your property

1. Lack of research
Before you can decide whether you’re getting a good deal or not you need to do some detailed research to work out the market value of the property. The process is called comparative market analysis and it’s extremely powerful when you’re trying to negotiate the best possible price.

You need to select a maximum of three suburbs and see as many properties as you can in preferably a 6-12 week time frame as 2-3 months is a long time in real estate and prices can move quite substantially. As a general rule I would advise you to inspect at least one hundred properties within that time frame and document all relevant features. 

If you’re serious about getting a good deal and saving yourself thousands if not tens of thousands of dollars then you will be prepared to invest the time.   If not, then the selling agent will certainly have the upper hand when negotiating the price with you!

2. Thinking Selling Agents are there to help you, the ‘buyer’
To put it bluntly, the Selling Agents are NOT there to help you get a good deal.   They are working for the seller, NOT the buyer.  Selling Agents will tell you what they want you to know about the property and they can be very persuasive especially when they’re using negotiation and influencing tactics.  If you want to really know important details about the property, then you need to ask the right questions and do your own research. 

Some good questions to ask when doing your research are:
* How did you come to the asking price?
* Are there any recent sales in the street or surrounding streets that are comparable to this home? If yes, make sure the selling agent can show you the evidence of this.
* What are the offers so far on the property?
* How long has it been on the market?

These questions will assist you in gathering important information when trying to establish a property’s market value and the vendor’s likely flexibility on price.

3. Searching without finance approval
Another common mistake is searching without finance approval. The last thing you want to do is to watch the home of your dreams slip through your fingers while someone else is exchanging contracts, especially while you’re trying to arrange an interview with a mortgage broker or your local bank. It can be a very emotionally draining experience.  Don’t waste your time and put yourself on an emotional roller coaster ride.  Make sure you know how much you can borrow before you start your search. 

4. Overstretching your finances
We’re currently seeing the heartache of thousands of people across Australia who have financially committed well beyond their means.  Don’t repeat their mistakes. 

I have two rules that if you follow you shouldn’t get yourself into trouble.
1. Despite what the bank says, make sure your repayments are no more than 25% of your total household net income. 
2. Don’t borrow more than 80% of the property’s value. That way, you avoid paying mortgage insurance and you actually have some equity in your property in case there is a down turn in the market. 

These days, you can obtain loans for 90, 95 or even 100% of the purchase price.  Why would you want to put this sort of financial pressure on you and your family?  I believe that if you don’t have a 20% deposit, then you can’t afford to buy that property.  Remember, it is much better to be able to sleep well at night in a smaller house, than to be at the mercy of a bank and constantly worried about having your home sold from under you.

5. Ignoring inspections
Termite infestations, dodgy wiring, sub-standard renovations… there are many potential problems with any home that you’re not likely to pick up yourself. Most solicitors I speak with tell me that only about 30 – 40% of their clients obtain all the appropriate inspections. 

For your peace of mind just get the inspections done. I have seen first hand many homes that are riddled with termites. It’s simply not worth the risk!

6. Not factoring in running costs
Unfortunately the price you pay for your home or investment property is only the first in a series of home ownership expenses. Before you rush off and make an offer on a property you should determine whether you can afford the running costs on top of the mortgage such as council rates, water rates, land tax etc.

If you’re buying an apartment, find out how much the strata fees are and how much money is in the sinking fund.  Strata fees typically range from $500 to $2,500 a quarter, sometimes more.

7. Being influenced by rental guarantees
Personally I would steer well clear of anything that comes with a rental guarantee. In my opinion a good property doesn’t need one. From my experience often properties marketed with rental guarantees won’t achieve the rental figure that is being guaranteed in today’s market. In addition, the inflated rental figure pushes the return on investment up against the yield (the ROI / Yield) and allows the seller to put a higher price on the property and still maintaining a yield of say 5%.  A rental guarantee is a form of insurance and you always pay a premium for insurance. As the saying goes – anything that’s too good to be true probably is!

8. Buying property sight unseen
Buying property sight unseen is a recipe for disaster. Sure you can do virtual tours on the web etc but how many times have you read the ad, looked at the photos, the virtual tour and then upon physical inspection the property looks nothing like your expectations.  It may look out over a car park, into a brick wall, face a busy road etc. This goes for buying off the plan as well.

Unless you do a site inspection yourself or have an exclusive Buyer’s Agent acting for you, who knows exactly what you want, then I would suggest you are being foolish. You’re parting with hundreds of thousands of dollars – surely you can take the time to inspect it.

9. Limiting your selection choice
A lot of people come to me for help with buying a property but they don’t want to go through the auction experience.  They perceive it as too stressful, emotional and out of their control.  The problem with this perception is that they are significantly reducing their property selection pool and automatically cutting out potentially good buys because they are not comfortable with the method of sale.

My advice is to again do your research.  Go to a number of auctions and see how it works.  Do your research so that you know the value of the property.  Set yourself an auction plan including a maximum bid price and stick to it. 

Be honest with yourself. If you know you are likely to get carried away in the auction hype, then hire yourself an expert to bid for you.   Auctions are growing in popularity as the sales method of choice nationally.  You can no longer ignore them if you want access to the entire market.
 
10. Listening to too many people 

Everyone’s an expert when it comes to real estate.  Family, friends, work colleagues will all offer you advice – some with strings attached and some without.   The only way that you will know whether you have secured a good property at a good price is if you put in the necessary hours and do the research.  If you don’t have time, then I recommend that you find a Buyer’s Agent to do the work for you, a good one will save you thousands.