Purchasing property is often one of the most significant financial investments a person makes in their life. However, this transaction also involves a lot of complex processes that require ample planning and preparation for one to be able to successfully navigate.
“Buying a house is one of the biggest decisions you will ever make,” says Michelle May, Sydney-based buyer’s agent and principal at her eponymous agency. “It is daunting, and when it comes to a house which you intend to make your home, emotions can get involved very quickly.”
She says this emotional attachment often leads to potential buyers “jumping in feet first” into purchasing a property without thoroughly considering if the “home has everything they really need or want.”
How to avoid common (but huge) mistakes when buying property
May says that the best way to avoid the trap of buying the property “which really just isn’t right for you” is to go in “with a game plan.”
She lays out five useful tips for property buyers, especially those who are looking for a home to settle, to guide them on their journey.
1. Don’t be swayed by the bank’s pre-approval offer.
Every home-buying journey starts with financing. May says this entails potential buyers to be fully aware of what they can and cannot afford.
“Know your expenses,” she says. “Be brutally honest with yourself and stick to your budget.”
May says finding a broker they can trust is one of the biggest keys in figuring out if it is financially sound to commit to a property.
“A good broker will be able to talk you through factoring in ALL your expenses (that includes those late night Uber Eats and daily coffees you may have been forgetting about!) and any interest rate changes on a potential loan to see what is actually doable for you,” she says. “It is very easy to get excited when your mortgage broker gives you a figure for pre-approval, which is above what you were expecting, but beware that there can often be a very big difference in what the bank thinks you can afford and what you know your personal budget will allow for.”
May says that buyers have to be aware from the beginning that “owning a home is a big long-term financial responsibility.”
2. Know what your non-negotiables in a home are.
“We have all heard of the phrase ‘it has to tick all the boxes,’ but before setting off to purchase a home it is crucial to know what those boxes are for you, and also what those ‘deal breakers’ might be,” May says.
She says one important fact that home buyers need to accept is that no matter what budget they may have, “there is no such thing as a perfect home and compromises will have to be made down the line.”
May’s advice is start looking at the things that cannot be changed.
“You cannot change being on a really busy road – but those scatter cushions you fell in love with at the open home – you can buy those!” she says. “Internal light is another one of those deal breakers. In a house, there may be options to improve the internal light, but in an apartment, you are pretty much stuck with what is there.”
But home buyers also need to realistic and practical, says May.
“You need to look at what you envision your life being in the next five to 10 years and what the property may need to do for you in that time,” she says. “Will you have children or perhaps even be empty nesters? If you have a never-ending list of requirements being prepared for whatever life throws at you, I advise that you take your mind back to practicality and realism.”
May adds that practicing due diligence helps a lot in assessing if “the home stacks up or if you should put it in the ‘no’ pile.”
“You must organise a building and pest inspection or review a strata report if you’re buying an apartment,” she says. “They will be able to uncover any underlying issues that could be costly for you in the short or long term.”
3. You aren’t just buying a home; you are buying into the neighbourhood.
May also advises home buyers to take the time to get know to their potential neighbourhoods before committing to a property.
“After all, when you walk out the door and go and grab that coffee, it might be nice to see like-minded people and feel like you’ve found your tribe both for you and your family,” she says. “Other more practical questions would be - how long the commute will take to work and what are the local schools like?”
If there are “particular pockets of the neighbourhood” a buyer prefers to purchase in, May suggests marking them out on a map and keeping an eye on these locations when listings arise.
“Make sure your buyer's agent knows this would be your ideal spot,” she says. “They should also be able to think outside the box and suggest other suburbs with a similar lifestyle but perhaps a more affordable price point.”
4. Desperation could lead to disaster.
Auctions are great venues to find the ideal property, May says. But buyers deciding to go this route should always come well-prepared and battle-ready.
“Auctions can be really competitive,” she says. “You need to go in with a game plan and stick to it. There’s no room for impulse decisions [when buying] property.”
“The last thing you want to do is go to an auction and either spend more than you should have or purchase a home just because of the fear of missing out on securing one. The best game plan for an auction is to stick to your finances and needs and wants list.”
May says going in with a buyer’s agent can help relieve the tension.
“A buyer’s agent can also help you wrangle at an auction. They ready the play and take the emotions out of it for you and can bid on your behalf.”
5. “I bought it but now I hate it” – financial downsides to selling shortly after purchase.
May warns that mistakes can still happen “even after careful and rational consideration.” When this occurs, she warns buyers against rushing to put the property for sale and carefully “consider the financial implications of selling when you have not owned the property for long.”
“Think about the fees and charges for deciding to offload your home, list stamp duty,” she says. “Whilst there are concessions for first home buyers, did you know in NSW, stamp duty on a $650,000 home is in the vicinity of $24,000? We aren’t talking small changes here.”
May says buyers should also take into consideration other financial aspects, including agents’ fees and commissions, the cost of relocating, and other legal and bank fees.
“The general consensus is if you decide to sell within the first five years of your purchase, you would have been better off renting to begin with,” she says. “Sure, sometimes the desire to move is so strong that whether or not you come out ahead financially is not at the forefront of your priority list, but it is important to understand what the implications will be on your bank balance if you choose to relist not too long after purchase.”
“Considering all of the above, if you add up all the costs, could this money be put to better use in a renovation towards your current home instead?”
May says careful planning and having a clear picture of what they want in a home will help buyers avoid committing these costly mistakes.
“It goes without saying that knowledge is power and the more research you do and the more time you take to take to really understand what you are looking for in a home, the better position you will be in,” she says.