I found the perfect property, what do I do now?

Familiar territory…. a property lawyer finding the perfect home. That one property amongst endless daily scrolls on real estate apps that makes you say ‘ this is it!’, ‘ I can see myself living here’.

Before you read the rest of this blog know that none of this is fictional. Although my experience is based on the Northern Territory buying process, I have kept the content in this blog as generic as possible as much of it can be applied to other states and territories in Australia.

Now if you’re anything like me, you might have considered the right time to buy and had endless conversations and thoughts about this.

Let’s start with a couple of things to consider:

• Are you ready for this commitment? Analyse your circumstances and see if this is the right time in your life to commit to buying a property. You might need to let go of some habits and maybe give up on those 3 coffees you buy from the coffee shop a day.
• Make a financial plan and make sure that you consider the long-term future plan. Are you looking for your forever home or would you be looking to sell this in the near future?
• And of course – the question that is always on everyone’s mind – when is it a good time to buy? Where is the property market going? I guess the only relevant answer I found is that the right time is when the right time is for you.

Amongst all of this, you have now found the perfect property. So what do you do?

You might know nothing at all about setting foot in the property market for the first time or you might, well in my case, know too much.

Trust me, it’s just as scary on whichever side of the fence you’re sitting.

So where do you start?

1. Get your funding position

If you’re lucky you’d be buying cash. The reality is most first home buyers do not.

Whether the perfect property is selling by auction or private treaty, a finance pre-approval is a must!

Remember that if you will be bidding at auction, you will not have the benefit of a finance condition to pull out of the contract if you cannot obtain finance later down the track.

Make sure you contact your broker or lender and let them know of your intention and crunch your numbers.

Your contract deposit payable

If you bid at auction you have to be prepared to pay the deposit of usually 10% of the price upon the fall of the hammer (unless you make other arrangements with the agent prior to the auction).

For private sales you can negotiate a contract deposit up to 10% of the price.

So now you know where you stand finance wise. Here comes the hard bit.

2. Find out everything you can about the property you’re interested in

If your perfect property is selling by auction as mine was, you won’t have the benefit of the contract being conditional upon your satisfactory inspections or reports, meaning you need to do your due diligence before the auction.

Here are some tips and tools you can use to find out about the property you’re interested in:

Reports and property enquiries

It is becoming more popular for properties sold by auction to have some standard reports available to review prior to registering to bid at auction. They are sometimes provided by the agent.

Some properties sold by private treaty might have reports available to you but it’s not as common.

You have to move quickly and make sure you make sufficient inquiries and check all reports available.

What are you looking for?

You’d be looking to make sure any structures and improvements are compliant (i.e. have authority approval and final inspections). Use the tools available.

If the property is old, you’re looking for anything major that may cost you a lot of money down the track. However, stay reasonable, know that an old property will not be perfect.

Make those calls to the report authors and ask your questions.

If you benefit of a good relationship with a tradie, friendly agent or inspector - it’s time to call in those favours!

Get that legal advice from your conveyancer or lawyer. You can never know too much about the property you’re wanting to bid on.

So the property you love has some issues.

Know that all properties will have some issues as (almost) no property is perfect. So be reasonable. Some issues will be bigger, some will be smaller and some would be your deal-breakers.

Use those as a bargaining tool!

If you found an issue that might cost you possibly $50,000 down the track and is not your deal- breaker - use that to set the spending limit for the property. Remember, the seller will be aware of this too.

Here comes the tricky bit. What is the property worth?

If you are anything like me you’d know that property price cycles are as reliable and predictable as buying a ticket for powerball every Thursday.

On a daily basis, I speak to investors, agents and first home buyers and see their contracts arriving for my review. But how do you know what price you’d like to offer on the property you love? There’s an emotional element in it now for you.

Here’s some steps you can make to help you with this:

• Rely on those friendly agents, brokers and industry specialists to give you an idea;

• Know that if you’re buying at auction, the property will have a reserve price which will not be disclosed. This is the sellers minimum price of sale.

• Do some property value reports to establish comparative sales in the area - CoreLogic and the like are useful tools.

• Finally, understand that a property holds most value in land and not in the improvements. The area you’re buying in is a critical consideration.

Go out and look at other properties in the price range or in similar areas. Make your pros and cons list and allow that to give you perspective.

So you’ve set your max limit and have an idea as to where you’d stop…

You’ve registered to bid and here comes auction day.

Here are some tips to get through auction:

Know your competition.

Ask the selling agent how many registered bidders they have for the property. Ask them whether they’re mostly families, first home buyers or investors. This may be a tool to gauge where the psychological element sits. At the end of the day you’re bidding against people.

Auction days can be nerve-wracking whether you are an introvert or extrovert.

At this point you’re nervous about winning and you’re nervous about losing at auction.

If you’ve followed the steps above you should be pretty confident in your position….well somewhat…some doubt required - it’s the nature of it all.

The advice I got from industry specialist is that you can allow the auction to go two ways:

1. Start low and go hard. Make it known to the other bidders that you’re in. Open the bid…And go up by $10k increments.
2. Wait it out. Let them set the bar and start it up. Cons for this though is that you do not have control….
   In any event you’d be finding yourself in one of these situations.

If you’re buying in Darwin you’d be first of all sweaty and nervous half way through. Bring a bottle of water (Yeti seems to be the preference).

1. You’re out of the bidding.

This means that the property has gone well above what you wanted to spend.

If you find yourself in this situation, know that you gave it a shot. This will give you experience and perspective - this is invaluable for your future property negotiations.

I know I’ve been watching auctions live that I thought would end up well out of my price range and they didn’t and I ended up missing out.

2. You’re in but the property doesn’t reach reserve

2 things might happen now….

The agent will try and come to some sort of an agreement between the highest bidder and the seller. Be ready for some pressure coming your way.

What are you going to do? Stay firm or let that emotional purchase get the best of you.

Whatever you do, don’t go out of your spending range.

If you haven’t reached an acceptable compromise then the seller might choose to pass the property in and wait for the next opportunity….

Other things to consider:

Depending on your pre auction investigations consider putting an offer in prior to auction.

Unlikely to be accepted if you’re putting an offer in with too much leverage on your side - a conditional contract on reports especially.

If you’re wondering what happened next in my experience….. (Teaser alert!)

Well, it wasn’t as easy as I thought.

The property report provided upfront revealed that most renovations conducted at the property were not done under a permit.

So to date, I am assessing my pros and cons list and I have engaged a professional to ensure that the renovations have not affected the structural integrity of the property. This would be my definite deal-breaker.

Wherever you are at the moment in the journey, I hope you enjoyed reading my experience in getting in the property market for the first time.

For all of you out there still looking for the perfect property – good luck!

Ruxandra Gregory

Legal Advisor