How can you buy your home in Melbourne? Top 10 Tips for the First Home Buyer in Melbourne

How do you buy your first home in Melbourne Australia?

Buying your first home is an exciting phase in your life. After decades of staying with parents and renting, you can finally look forward to staying in a place called "My Home". It is exciting, but it can also be very daunting, especially if it is going to be your first home.

Buying a property used to be as simple as looking through the listings, attending the open for inspections, and making an offer for the property. It was simple. Thanks to modern day marketing, it is unfortunately full of complexities now. Given that it is possibly the single largest commitment you make in your life. Doing it wrong, and it will become your biggest liability in life.

As Melbourne based Buyers Advocates, we have been buying properties for over 20 years. Our experience working with our home buying clients shows that many home buyers are not properly prepared to stop themselves from buying a lemon or a dud property.

While it is usually not the home buyers fault for being ill prepared, some buyers had ignorantly believed Dr Google and Prof Facebook are fantastic sources of information. Many believed they had instantly become property experts simply by googling for answers and seeking advice from free property communities. You would not believe the hard time we have, trying to correct the client's misinformation.

Every home buyer should know, the whole real estate buying process is stacked against the typical buyer.

In this article, we have compiled the top 10 tips for a home buyer. We will also give you some facts which you must know, and some buying advice on how you can avoid problems later. As most people do not buy more than 3 properties in their lifetime, these mistakes are applicable to both first home buyers and home buyers as well.

1. What is doing Due Diligence?

Due diligence? What's that? Home buyers (especially in Victoria) would have heard of the term called "due diligence". But what exactly is this "due diligence" thingy? What should due diligence include? How should you do it?

As you would expect, due diligence is just a generic term. It is unique to each buyer. It is different for different buyers, simply because no 2 properties are exactly the same (even if they are right next to each other), and no 2 buyers have the same requirements. It is a topic on its own, which we will cover in the coming weeks. Essentially, just like any thing you buy, it is all about ensuring the property is fit for purpose. Fit for YOUR PURPOSE, not what the real estate vendor agent tells you. Check-in into our blogs in coming weeks for tips on how to do this.

2. How do I do my Property Research and Preparation?

Judging by the fact that most well staged properties can easily be sold for over $50k more than non-staged ones, most buyers are usually attracted by the staged photos in real estate websites and glossy brochures. But do you know what isn't mentioned in these sales materials? Do you know what the location is really like? What is around the property? What is the crime rates? Where are the public transport and schools? Will the property be acquired for road expansion or any public works? No two houses are the same, even if they look the same and are right next to each other. Throughout our 20+ years of property buying experience, we've seen countless instances where one property is affected by issues such as flood, contaminated soil, poor quality soil, while the property next door isn't. Do make sure you include these checks in your research, if you are concerned with them.

3. How do I determine my Budget, and Stick to my Budget?

What is your budget? How much deposit do you have for the purchase? How much will a bank or lender lend you? Will any lender even lend you? How much can you spend on the property? How much are you prepared to pay for the property? How much is the property really worth? Have you factored in other necessary expenses? What is your buffer? We've come across many home buyers who do not have a good idea of what expenses they have to budget for, in a property purchase.

It is common to see home buyers start their house search without any idea of their serviceability. Serviceability is how much a bank or lender will lend you. Everyone is different, and your serviceability depends on your income, expenses, assets and liabilities. A good mortgage broker will give you a good idea of what you can borrow, and organise for a lender to pre-approve your lending.

When you know your serviceability, you will have a better idea of what types of property you should be looking for. But, do you have a good idea of what the property is worth? Many have no idea if the "Statement of Information" (price guide) provided in the listing is fair, underquoted, or in some cases, over-estimated.

This is where it gets complex. One thing which you need to understand, is that, it is the real estate selling agent's job to hype up demand and interest for the property, in order to sell the property at the highest possible price. Their commission is, afterall, pegged to the sold price of the property. The higher they can sell the property for, the higher their commission is.

So, if you are easily influenced by the market hype (#5 below), you will more likely than not, believe the selling agents, and you will usually be led into an "invisible, closed auction" over the phone, between 'another interested buyer, after you put in your offer'. Most buyers will end up paying top dollar for the property.

Buyers without the right property market insight and advice will often over pay for the property, and some may find themselves unable to service the mortgage in the long run. So, instead of enjoying the new home which they had fought so hard for, they were struggling to afford it.

4. How do I Knowing the Full Cost of Buying a House?

What other expenses do you need to be aware of? Stamp duties, conveyancing fees, buyer's agent fees (if you're using a buyer's advocate to help with your purchase), building and pest inspection fees, mortgage related costs, moving costs, setting up cost, repair or renovation costs, etc. Every property is different, and the individual buyer's needs and wants often dictate what expenses are required.

As a guide, these expenses can cost between 5-15% of the property price. The buyer's advocates at Concierge Buyers Advocates can provide you with an idea of costs, if you need one, Make sure you include the relevant ones in your budget and due diligence studies.

5. How do I prevent myself from being Influenced by the Market?

In times like these where the media is hyping up the Fear Of Missing Out (FOMO) mentality of property buyers, are you getting frustrated when you keep missing out on properties you like? Were you scared into not buying a property in 2020, because news and 'experts' were predicting 40-60% falls in house prices due to the Coronavirus pandemic? If you do, like most people, you are easily affected by market and media hype and scare campaigns.

Read any economics textbooks, and you will know, prices of anything (properties included) are affected by supply and demand. But do you know what cause these supply and demand shifts? Do you know, in the age of internet, supply and demand can be easily influenced by media reports and the fake news on social media? And did you know, social media such as Facebook, WhatsApp, Instagram, etc, are the biggest disseminator of fake news? - Forbes

How do you differentiate facts from fakes? How do you know if a fake news will eventually affect property prices (positively or negatively). Unless you are on the ground and in touch with the happenings in the real estate industry, like a true independent buyer's advocate, you would not know, and would not be able to predict when and how the property market will turn.

News from official news outlets are reliable, however, reliable news only report facts. ie, they only report things after they had happened.

This means, if you are waiting to read about the next property hotspots from news media, it has already happened. It is already too late. Take for example, in recent weeks, you would have read about properties in regional areas growing by up to 20%. Most people will now start searching for regional properties AFTER they read the news, but it is already too late. Will the regional areas keep rising? Where is the demand and economy to support the continued growth?

As truly independent buyer's agents, we buy all around Victoria, regional areas included. We had seen increased demand in regional areas from 2019, prior to the pandemic. So, back in 2019, we forecasted the growth in regional properties. No one believed our predictions. The so-called 'experts' all proclaimed regional properties will NEVER grow more than CPI. But we had bought 12 regional properties from late 2019 to 2020 for our clients. Every single one of them have grown at least 20% in value. One performed beyond our expectation, and had actually grown a massive 55%. This is the example. Buyers who are just preparing to buy into regional areas after reading recent media, will be disappointed. They have missed the boat. Most regional areas have peaked. It is not going to grow too much from here, for the foreseeable future.

6. How do I read the Contract of Sales and Know it can do what I it to do?

A contract of sale is often over 100 pages long. It contains an set of important information which every property buyer should know, as it will affect your purchase decision. But do you ever read everything and understood everything? Do you know what the implications of these legal documents are? How will they affect you and what you intend to do with the property? Do you know what to look for?

Buyers Advocates like us read an average of 3 to 5 contract of sales every week. We've seen contracts so convoluted that it rewrites almost every clause of the standard contract.

Unless you are in the property or real estate industry, over 80% of the buyers do not understand how they or their decision to purchase can be affected by information contained in these contracts of sales.

It is always good to spend a few hundred dollars to have a good lawyer review the contract before you make your decision. Having said that, not all lawyers are the same. A good property lawyer will try to understand what you intend to do with the property, and review the contract with your intent in mind. His/her feedback will be tailored to your needs.

7. What if I am Frustrated with Property Search?

So, you've been searching for months, attended hundreds of disappointing open for inspections, and failed to secure your dream home again and again... The selling agents are misleading you, you've been tricked into a good property that seems cheap, but were out-bidded by someone else who had a fatter budget.

You're disappointed. You're disheartened. You wanted to give up. You are fed up!

At this stage, almost all home buyers tend to commit their biggest sin. They put 'all-in' to buy the next property that come along. This can usually end up as one of their biggest mistake, but they can justify it with their "frustration". It is a mistake that can bite them for years to come.

Instead of buying when you're frustrated, rest. Take some time off. If you have been missing on good properties, you are probably looking at the wrong place or have the wrong expectations. Take some time off, do a post-mortem study of your failures, review your criteria, and tweak them to suit the market. Remember, in a hot market, market conditions change every month. Prices would have moved. There could be more (or less) stock available in the market. There could be new regulatory changes, which can affect property prices.

It is also probably time to consider engaging a buyer's advocate to help speed up your purchase. In a hot market, each month of delay can mean the property prices would have increased by another 2-5%. Good Buyer's Advocates who knows the market well, will help with your review. They will look at what you want, what you had been looking for, and work with you to tweak your expectations, and help you find your home. They are realistic with their expectations and will also search in places where most people would never have looked at. They have the connections into the genuine off-market properties, to help improve your chances of buying the right property.

They do charge a fee of between 2-3% though, but, hey... remember, every month you save in your acquisition is saving you between 2-5% in a hot market. The faster you buy, the more you save. It's a no brainer. If you can just buy your home 1 month faster, you would have recovered the cost of the Buyer's Agent fees.

8. Do I need a professional inspection during an Open for Inspection?

Most buyers are not aware of what you need to do during an open for inspection. Many believed the inspection is just for you to have a look and appreciate the property. They are partly correct. It is to the vendor agent's benefit that you visit and appreciate the property.

But you should really look pass the pretty furnitures, beautifully staged beds, dining sets, etc. Furnitures are usually not included in the purchase, in case you're wondering. Picture yourself in the bare house. Do you know what you should be looking for? Do you know what you need in the house?

Unless you have been inspecting properties day in and day out, most buyers are there to appreciate the staged presentation during the inspection. They are impressed with how well and glamorous the property is presented. Do you know what's lurking under the carpet? What's in the roof? Do you know what is really underneath the perfectly painted walls?

How do you tell if there is an issue with the property in the short 10 mins inspection? Always have the property professionally inspected. And yes, inspections are also recommended for brand new buildings. You'll be surprised how many corners are cut to complete the build. We've seen brand new homes with over 30 pages of defects.

At Concierge Buyers Advocates, we are trained builders, and on average we inspect between 50-80 properties a month, and read hundreds of building inspection reports a year. We know what to look for, and we should be looking, during the 10 minutes inspection. At the end of each open for inspection, our experienced buyer's advocate, will usually have a good idea of the condition of the building, and whether the building is worth presenting to our clients.

9. What is the Role of the Real Estate Selling Agent?

Successful real estate agents are usually the friendliest agent who always seem to understand what you want. But do they really care what you want? Or are they just trying to convince you that you should want the property?

Remember, their job is to sell the property. Their commissions are directly proportional to how much they can sell the house for. The more you pay for it, they bigger their commission is.

Most home buyers do not realise the selling agents are working for the VENDOR. They work for the SELLER, not you.

Unless you have entered into an exclusive Buyer's Agent Agreement with the agent, all agents are working for the sellers. They are legally required to protect the interest of their client, the Mr/Mrs Seller.

Smart buyers have started to realise this, and, they have started engaging buyer's agents under exclusive agreements, to outsmart the market, level the playing field, and to ensure they have an agent who understands the game, and who is protecting their buying interest.

10. Should I Doing it Yourself (DIY), buy my own house?

You've realised that the sellers have agents to protect them in the sales transaction. And you might still decide to save the small 2-3% fee, and chose to rely on information and 'experts' in the faceless world of internet, for buying advice. While some advice are relevant to you, over 98% of the advice are generic. You'll need to know what's fact, what's fake, and how the advice is relevant to your situation. And, if anything goes wrong, will they have your back? No one from these free sources are obliged to help you get out of trouble.

We've many clients who came to us after they received the wrong advice from these free resources. One bought a land with 5 different overlays and issues. He would have bought a $250k lemon, if he had contacted us 2 days later. So, be wary of such free advice.

Let's look at this analogy. Buying a house is probably your biggest commitment. It is as significant as fronting up to a judge in court. Will you attend court without a solicitor on your side? Will you choose to represent yourself, or do you prefer to save a few thousand dollars and have your faith and trust in the experts' advice sourced from the internet and social media?

Bonus #11. How reliable is Dr Google and Prof Facebook?

As mentioned at the start of this blog, the amount of fake new and disinformation in Google and Facebook is shocking! You wouldn't believe how many clients came to us to help them, because they have no idea what they are doing, and simply follow instructions from the faceless people providing these misinformation. Sure, some of these information may work for 1 or 2 situations for a particular buyer in a particular area, but you will not know if it works for you, without understand the situation and concept.

Most people following the instructions of the faceless people in Google and Facebook ended up in trouble. Afterall, they have no legal obligations to give you the right information. You have no recourse if you are naive enough to follow their instructions blindly. Sometimes, the bad situation can be corrected. But most times, they are in deep trouble and there isn't any way to help them other than helping them find the best lawyer or builder to fix their problems.

So, if you are seriously considering buying properties, get proper advice. It may cost you 2 to 3% of the property price, but the savings in time, frustration when you get the right property for yourself, is priceless.

The 2021-2023 Property Market

2021-2023 is going to be another interesting year. The 40-60% property price crash of 2020 did not eventuate. No one expected the property market not to collapse, when we publish our advice. But because we are on the ground, and in sync with the property market, we believed our observation. Our predictions back in July 2020 believed the prices will be stable, and could even rise by end of 2020. It did.

What's going to happen in 2021-2023? As at Aug 2021, we've already seen prices of property grow between 20-25%, since 2021. That's a grow of between 1 to 2 % EVERY month! We're expecting the price boom to continue, right into 2023. The pace is likely to slow, as government wind back the incentives. But in most areas, prices will easily grow 10%. But there is a catch. Not all areas will grow at the same rate. Not all types of properties will grow at the same rate. Some will even continue to consolidate. Do you know where to buy, what to buy? Where should your avoid and what should your avoid?

If you are looking to buy you next home, here is how we can help:

1. Tailored Advice - We find out what you want, your budget, and tailor our advice to your needs and wants. We will help ensure you buy the right property, at the right price. Buy with confidence and buy with the right property insight, based on facts and data. No more wasted weekends, no more guesswork, no more over-paying for your home.

2. Buyer's Agency working FOR YOU - As Melbourne's fastest growing buyer's agency, we've been involved in over $25million of property purchase in 2020 alone! Yes, while everyone is predicting a property glut, and NOT buying and waiting to grab a good bargain, our property insight, understanding and accurate forecast of the property market had given us the confidence to help our buying clients buy over $15million worth of properties in the first 7 months of 2021. Now, see who had really grabbed a bargain?

3. Low Fees - We believe in helping our clients secure good properties and stop our clients spending too much and wasting too much time on endless house search. We believe in reducing our operating costs, and we believe in returning these savings to our clients, by way of low fees. As such, we have one of the lowest buyer's agent fees in Melbourne. Found a lower fee? Ask about our low fees guarantee.

Have a chat with us, let us discuss your property purchase journey and explore how we can work together on your purchase.