Because buying a house is an important milestone, especially for many Australians, it is natural to feel a mix of anxiety and excitement when locking in your decision for a specific property. As we all know, the real estate market can be both dynamic and challenging and first-time home buyers can find themselves navigating a complex maze of options and factors to consider.
Unfortunately, Australians are not exempt from committing mistakes that can have long-term consequences on their financial well-being. Amby Buyers Agency looks into the top common mistakes buyers make when buying their first homes, in the hope that they may serve as a cautionary tale when it’s your time to choose your first property:
1. Not Researching the Market Well Enough
One of the most prevalent mistakes first home buyers make is not conducting thorough research. Over 40% of first-time homebuyers admit to not conducting adequate research before making their first property purchase. This lack of diligence can lead to misunderstandings about the market, property values, and financing options.
To avoid this mistake, first home buyers should dedicate time to researching the property market in their desired location, staying updated on market trends, and understanding the financial aspects of homeownership.
2. Ignoring the Importance of Location
The location of a property plays a pivotal role in its long-term value. Overlooking this factor can lead to buyer’s remorse and financial setbacks. As a first-time home buyer, you must consider factors such as proximity to amenities, schools, offices, transport links, and future development plans when selecting a location. It’s also worth your while to look into investing in an up-and-coming area as it can tremendously contribute to the property value over the years.
3. Underestimating the Extra Costs of the Purchase
You don’t think that once you bought a home for its purchase price, the expense just ends there, do you? Many first-time buyers make the mistake of underestimating additional costs, including stamp duty, legal fees, inspection costs, and ongoing maintenance expenses. According to the Reserve Bank of Australia (RBA), these additional costs can add up to 5-7% of the property’s purchase price.
Which is why it’s crucial for first home buyers to create a comprehensive budget that includes all potential costs associated with purchasing and maintaining a property. This allows one to have a more realistic financial outlook and helps prevent financial incapacity in the long run.
4. Not Getting a Mortgage Pre-approval
Securing a mortgage pre-approval is a critical step that many first-time homebuyers often overlook. In fact, only 56% of first home buyers obtain a pre-approval before property hunting. Without a pre-approval, buyers risk wasting time looking at properties that are beyond their budget, and this can lead to them losing out to more prepared buyers in a competitive market. A pre-approval not only gives buyers a clear understanding of their borrowing capacity but also positions them as serious contenders in the eyes of sellers. It streamlines the purchasing process and provides a solid foundation for making offers on properties.
5. Failing to Plan for Future Needs
Another common mistake is failing to consider future needs when purchasing a property. Unfortunately, many first home buyers end up outgrowing their properties within the first five years. This oversight can result in the need to sell and incur additional transaction costs. To avoid this mistake, first home buyers should assess their long-term goals, such as potential family growth or changes in employment, and choose a property that aligns with these considerations.
6. Overlooking Building and Regulatory Obligations
A surprising number of first home buyers skip the crucial step of obtaining building/housing permits and pest inspections before finalising a property purchase. According to the Australian Institute of Conveyancers, approximately 20% of first-time buyers forego these permits and inspections, potentially exposing themselves to costly issues down the line.
Building and pest inspections can uncover hidden problems, such as structural issues or termite infestations, that may not be apparent during a regular property viewing. Investing in these inspections is a small price to pay compared to the potential expenses of major repairs.
The end-to-end process of buying your first home can sometimes be an emotional experience. This is the reason why some buyers make decisions based on sentiment rather than practicality. By knowing the common mistakes above, we can counteract these emotions and make informed decisions based on adequate research, future plans, and long-term goals.