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9 min read

22 Mistakes nearly all first home buyers make

Learn from my mistakes, one step at a time.
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Are you a first-time homebuyer? Welcome to the bottom of the “property market food chain”. I have been there before, and it is tough!

Whenever you go to an inspection or auction, you’re competing against hundreds of experienced investors, buyers and agents! So, it’s easy to get overwhelmed and frustrated as you see houses disappearing almost the second they are listed.

You might even be wondering if you are ever going to own a home of your own? The answer is a resounding YES!

How? By avoiding these common mistakes, nearly all first home buyers make, and the ones I made myself that cost me thousands of dollars!

So, I’ve compiled a list of the 22 essential lessons I wish I had known before I bought my first home; to hopefully save you a bit of stress – and money – in your home buying journey!

1. Not getting a pre-approval

Pre-approval is something that we really recommend buyers set up if they’re serious about buying a home. If you don’t have a pre-approval before you start looking for a home, then you could miss out on your dream house while you’re trying to sort out your home loan with the banks.

Pre-approval is when a lender/bank agrees, in principle, to lend you money towards the purchase of your home. Many first-home buyers make the mistake of putting down a deposit or worse, signing a contract of sale before getting pre-approved.

Don’t make this mistake!

If you don’t have pre-approval, you put yourself at risk of not only losing your deposit, but also the home of your dreams if you fail to get a loan approved before settlement. 

 2. Stop thinking you need a 20 per cent deposit
 
Don’t get me wrong, having a 20% (or more) deposit is great because you will have lower repayments and better rates. But let’s be real. 

 

Say the property you are buying is $500,000. That means you will need a deposit of at least $100,000. That’s a very steep hill to climb, and most people spend years trying to get there, until they eventually give up.

What if I told you: You could get a place with a deposit of between 8-10%? Sounds too good to be true right? 

There is more good news! There are a couple of lenders that even do 5% deposits. But you have to keep in mind the Lenders Mortgage Insurance costs that come with it. 

If you don’t know what Lenders Mortgage Insurance (LMI) is, LMI is a one-off fee payable by you, the borrower, to cover the bank – it’s insurance that covers the bank. For more information, click here.

Solution: 

So if you can’t quite achieve the 20%, don’t despair. Aim for 8 to 10% if that’s a more achievable goal for you. Check out our Deposit Calculator to see how your deposit translates to your home price and monthly payment.

3. Waiting (and waiting, and waiting) to have genuine savings

Genuine savings is a term used by the banks to describe a specific savings pattern. 

In recent times most lenders have introduced mandatory genuine savings policy. Genuine savings show the bank that the applicant has a bit of skin in the game, a bit of hurt money that you have saved up yourself.

Generally, they want to see you hold at least 5% of the property’s purchase price in one of your bank accounts for at least a 3 month period (they see this as a good character trait and an easy way to show you’re good with managing money and can in-turn pay back the mortgage you’re signing up for). 

So, although you might have been gifted your deposit, got a big tax refund, or a bonus from work – but the bank DOES NOT consider this as genuine savings

What is considered Genuine Savings?
✅ Savings held or accumulated over 3 months

✅ Shares or managed funds held for 3 months or greater 

✅ Equity in real estate or property

✅ Term deposits held for 3 months or greater

✅ First Home Super Saver Scheme (FHSSS)

✅ Some lenders allow exceptions if rent has been paid for the last 3 months or greater

Fortunately, not all banks need to see genuine savings. Some banks are perfectly happy with just the following elements:

  • Rental History. You can show the bank your past 6-12 months rental history, either via a rental ledger or letter from a licensed real estate agent to prove you’re a good risk.
  • 10% Deposit. With some banks, if you have a 10% deposit or more, they don’t need to see genuine savings.

For more information on genuine savings, see our article here.

4. Thinking rent money, is dead money

“Rent money is dead money.” You might have heard this old adage from friends or family. This is simply not true!

With median property prices in Melbourne and Sydney surpassing the $1M mark, and rents at a relatively low point, renting instead of buying could make more sense.

Let’s do some maths.

Say you earn a salary of $70,000 per year and are paying rent of $400 per week in a desirable location like Hamilton in Brisbane. That means you would spend $20,800 per year on rent.

If you decided to buy that same property at $600,000 and 4.50% interest, you would be paying $24,300 per year in just interest payments. Add the mortgage repayments to that, and you could be paying closer to $36,000 per year.

We haven’t even started talking about other costs of owning a property like council and water rates, insurance, maintenance and strata fees if you own a unit. These costs alone can add another $4 – $5k per year. So in effect, buying the property rather than renting it would cost you an extra $10 – $20k without any tax offsets or advantages.

In this case, it would be better to rent and then invest the $10 – $20k in property elsewhere or in other assets. This allows you to get the best of both worlds—lifestyle and smart investing. Taking this approach is known as Rentvesting, and it’s becoming increasingly popular.

For more information, watch the video below.

Of course, financial gain isn’t the only reason people buy property. There are emotional and family reasons which we’ll talk more about shortly.

But right now, we are just keeping in mind that it’s important to look at the numbers to understand that Rent Money Is Not Always Dead Money.

5. Relying on Online Calculators

Jumping online and playing with the bank’s repayment, home cost, and borrowing power calculators are a pretty logical first step for home buyers. Seeing how much you can afford and different variations of what the mortgage will cost per month can help give you a better idea of what’s possible.

The problem is these calculators are grossly inaccurate and in some cases, they are hundreds of thousands of dollars out!

This is because the online calculators need to make lots of assumptions around your living expenses and actual repayment amounts of existing credit cards. These are things the banks take into consideration when you make an application.

For example, let’s say you are a couple applying for a loan with a combined income of $140,000 and no credit cards.

online-mortgage-calculator

 Online Mortgage Calculators like the one with CBA can give you inaccurate figures.

CBA’s online calculator says you can borrow $620,000. But their own broker calculator, assuming $4,000 in monthly expenses, gives a maximum borrowing limit of $740,000 — that’s a $120,000 difference!

Solution: 

To get the most accurate idea, you need to speak with a mortgage broker, who will go through your information in detail and give you the right figures.

Our Borrowing Power Calculator is here.

Or I’d recommend that get us to create a Free Housing Affordability Report.

6. Looking for your forever home

Whenever, wherever Forever, Forever We’re meant to be together I’ll be there and you’ll be near And that’s the deal my dear – Shakira

Looking for a home can be exciting as well as very emotional, and most people get caught up in trying to buy their happily-ever-after palace with their first purchase.

My property wish list when starting off: I want a spa, a sauna, a guest house, an outhouse, pool, butlers pantry, boat… kinda everything

These days this is rarely the case. Situations change all the time. If you aren’t married yet, you may need to move when you get married. If you don’t have kids yet, being near schools might become important enough to make you move when you do have kids.

In fact, according to the Australian Census in 2016, One-third of people aged between 20 and 29 in the Census and almost a quarter of those aged between 30 and 39 lived at a different address in 2016 than in 2015.

One-third of people aged between 20 and 29 in the Census and almost a quarter of those aged between 30 and 39 lived at a different address in 2016 than in 2015.

Looking for your forever home may cause you to fall in love with a certain property and make you think you have to have it at all costs.

If you do find that “must-have” property, make sure you don’t let the real estate agent know how you feel. Here are our tips on why agents are NOT YOUR FRIEND!

Agents are good at reading emotions and negotiating the last cent out of prospective purchasers.

If they figure out that you’re emotionally attached to the house, I can guarantee they will use that against you during the negotiation.

And even if the house feels like “the one”, you still need to cover your fundamentals. Make sure you cover these questions before deciding to go ahead with the purchase:

  • Is the house big enough for your needs?
  • Is it close to schools, playgrounds and recreation?
  • Are there shopping centres and public transport nearby?
  • How far is your commute going to be?
  • Is it a nice neighbourhood?
  • And does the house have potential to grow in value?

Your first purchase might not be your forever home but think of it as a stepping stone towards buying your forever home. And at the end of the day, if it isn’t the right property there is literally another one next door – so don’t be too disheartened.

7. Not knowing who the real estate agent is working for

Overextending means getting a loan bigger than what you can actually afford.

Real estate agents are, in general, very friendly people but always remember that the real estate agent is working for the seller of the property and not the buyer!

Now I don’t want to sound cynical against the real estate agent industry. I have friends who are agents, but the fact is that a selling real estate agent is legally (and I suppose morally) obligated to work for their client and not you.

thought I was going to make a mint from my renovator’s delight..

I’ve made this mistake before and trusted the real estate agent by sharing a little bit too much information. On one occasion, I told the agent that I only had a small 5% deposit. While I could never confirm that’s the specific reason I missed out on purchasing that property, the fact that the real estate agent knew that could allow them to prioritise an offer with a larger deposit—larger deposit means a higher chance of getting the loan approved—over mine.

So always remember who is working for who…

With all that being said, it’s worth remembering that real estate agents can still be a good source of information. Be sure to ask them the following questions:

  • Why are the vendors selling the property
  • How long has the property been for sale
  • What was the original saying price
  • Are the sellers ready to negotiate on price?
first-home-buyer-offer

 Making an offer on a property can be this simple, try not to over complicate things.

As a starting point, We’ve got a guide on dealing with real estate agents.

8. Champagne taste, beer budget. Knowing your budget

That was me when I tried to purchase a home for the first time. I was looking for a home that fit my budget but that much (much) more expensive property just looked soooo appealing and the temptation was real.

Your first home doesn’t need to be your forever home.

But don’t be tempted – the bank has offered you a borrowing limit for good reasons based on your ability to repay the loan.

There’s always a real estate agent who will talk you into buying that expensive home, but doing that could well derail your finances in the future. Also remember that circumstances can change at any time.

Solution: 

So what’s the solution?

If you can’t afford the suburb you want, have a look at the next suburb along.

Realestate.com.au has some good tools to help find a slightly cheaper, next suburb along

For example, if you really wanted to live in Paddington but couldn’t afford the price of houses in there look at the next suburb along using the tools on Realestate.com.au.

You could look at Herston or Fairfield which has a median house price almost $300,000 less than that in Paddington!

Google maps can help you identify cheaper suburbs around the area where you might want to live.

In the past I just used Google maps and looked at the other houses in the surrounding suburbs.

Suburb
Postcode
Median Property Price
4064
$1,145,000
4006
$744,500
4103
$700,000
4059
$860,000
4060
$1,000,000
4065
$970,000
4059
$805,000
4064
$890,000
4000
$870,000
4000
No data

Approaching it from this way might help find more affordable suburbs like Kelvin Grove or Herston, which means you could get better value for buying.

But remember median house price isn’t always a super accurate calculation. The median house price is the halfway point of all the houses or potentially units sold, using the sold price over a set amount of time, like each month, year or decade.

Median house prices in Paddington are higher than neighbouring suburbs

Same with median house rental prices in Paddington are higher than neighbouring suburbs

This is different to mean house price which is the average house price sold. In short, this means if there are a bunch of sales at the high end, which is common in suburbs like Paddington where there could be $5m or $6m sales, it can distort the median house price.

So just use this process as a bit of a guide, but it isn’t going to be as accurate as looking through the listings on RealEstate.com.au or Domain to see what is available.

Another tool you can use is Property Value, by Corelogic. This gives you lots of valuable data about the suburb you’re looking at buying in, including:

  • Properties currently for sale in Brisbane.
  • Recently sold properties around Brisbane.
  • Houses for rent.
  • Auction clearance rates.
  • Local schools & catchment areas.
  • Neighbourhood information in your suburb.
  • Marketing Trends for Brisbane.

In addition, we have also created the below interactive map to help people with this search. Click here to access it now!

 
 

If you’re still looking for more information and an easy way to keep updated about the property market across Australia, I’d recommend you subscribe to our ‘Finance In Five’ email where we break this down each week. Click here to subscribe.

9. Not sticking to your budget

 

It may seem simple, but you need to be crystal clear about your budget. Take a look at your max borrowing capacity, and expected repayments. Then choose a figure that you would be comfortable with spending. That’s your initial budget.

Next, choose a figure that is the absolute maximum you’d ever want to spend. That’s your ‘walk-away price’. Basically, if you need to spend more than your walk-away price, then walk away and move on to the next property. In a hot market, you’re going to feel pressured to overspend, so set your budget well before you start making any offers or going to auctions. If you don’t, you may also run the risk of overpaying — which is the next mistake.

10. Overpaying

In a hot market, real estate agents will play one buyer against the other to make sure they get the highest possible price. Don’t hate them for it—it’s their job to make as much money as possible for their client.

But don’t let yourself be pressured into spending more than you’re comfortable with, or worse, more than the property is really worth.

Don’t use every last penny you have

Solution: 

The bank will do a valuation on your property as part of the home loan application process. If it doesn’t think the property is worth what you paid for it, it won’t lend you the full amount. This means that you are either going to have to scrounge up some extra cash to cover the deficit, or risk losing the deal completely. And if you’ve bought your property at auction—which means you don’t have a finance clause—that can cost you thousands of dollars.

Give us a call here at Hunter Galloway and we can help you.

11. Overextending and getting the wrong home loan

When it comes to property, everyone has an opinion – from your Uber driver to your parents to your friends and work colleagues.

Overextending means getting a loan bigger than what you can actually afford.
While the interest rates are low, you might be able to borrow much more than you could have done a few years ago when they were higher, but is this a wise thing to do?

The best way to answer this question is to tell you my story…

Waaaaayyy back in 2009 I was on my way to becoming a property mogul (in my own head). I had bought my second property, a small unit on Newton Street in Alexandria which I was planning on renovating and flipping for a massive profit—or so I thought…

I thought I was going to make a mint from my renovator’s delight…

 

It was around this time that the Reserve Bank of Australia (RBA) started increasing interest rates, and in the space of 6 months, my interest rate went from a barely manageable 6% to 7.50%.

This doesn’t seem like much, except for the fact that my monthly interest repayments went up from $3,500, which I could only just afford, to $4,375 per month—a jump of $875 per month! Finding that extra $875 was literally impossible and I was in deep deep mortgage stress.

first-home-purchase-brisbaneThe unit I nearly lost from overextending myself.

I was earning around $70,000 at the time, and I had over $700,000 in debt! My debt to income ratio was way over 10 times which is WAY too high.

I used borrowed money and cash advance on my credit card to maintain my repayments. But ultimately, I had to sell my second property quickly to stop myself from getting into more and more debt. Not only did I make zero profit from this purchase but I risked losing my other property as well.

What I learnt: overextending is bad, and interest rates won’t always stay low.

Solution: 

Fortunately, now the banks have dialed back how much they will lend to stop people from getting into the same mess I had found myself in. Always remember that Home loan repayments can change in the future.

So how much should I borrow?

As a general rule of thumb, 5 to 6 times or up to 30-40% of your income. For more details on this check out our First Home Buyers guide.

12. Getting your home loan declined

Finding the first property that is right for you is like the moment you met your first love.

Getting your loan rejected is much more common today than it was a few years ago when I was getting a home. 

In fact, it’s been reported that in 2019 4 in 10 home loans were being rejected by the banks. The reasons for this vary from the banks tightening their credit criteria to an increase in loan applications – but the fact is, you need to be more vigilant than ever to make sure your loan doesn’t get declined.

The banks look towards the fundamentals when lending and this includes what they call the “Five Cs of credit”. This is the most basic test of the creditworthiness of potential home buyers and includes:

  • Character. This refers to your reputation, or track record and ability to repay debts. This is usually judged by your credit report.
  • Capacity. This measures your ability to repay the loan based on your current income, and also around your job stability. Our brokers can find a lender to suit your situation.
  • Capital. Capital refers to your contribution or the deposit you are providing towards the purchase or refinance. In general the more capital, or deposit you contribute, the lower the risk the bank sees you as.
  • Collateral. Collateral is what secures the loan, in the case of a home loan this is your property. Again different lenders have different criteria, some love lending on smaller units, some will not lend on units at all as an example. If you aren’t sure about a specific property chat to our brokers to double check.
  • Conditions. Conditions means the particulars of the loan, like interest rate, loan amount, loan term (which is generally 25 or 30 years in Australia) and loan purpose. In recent times owner-occupied loans (a home loan to buy a house for you to live in) are more desirable for the lenders compared to an investment property loan, so they have offered larger home loan discounts for owner-occupied homes.
Solution: 
What I would recommend here is that you do the below 3x key steps: 
 
  1. Check your Credit File. At Hunter Galloway we provide a free credit file check to our clients. This report shows all active (and closed) credit cards and loans to make sure this is covered on the loan application.
  2. Double Check any outstanding credit cards limits. We use a service called BankStatments that will connect with your existing Internet Banking and provide up to date credit limits, again making sure no information is lost and maximising your chances of approval.
  3. Clean up your bank accounts. Unfortunately, this is something only you can do, if you are paid into multiple bank accounts or have a bunch of different credit cards, try to consolidate using a balance transfer, or simply close them down.
For more information, I’d recommend you speak to your mortgage broker today!
 

13. Walking away from a bad bank valuation

A bad bank valuation happens when the bank values the property for an amount less than you’re paying. Let’s say for example you are buying a place for $500,000 but the bank values it at $480,000. This means the bank will only lend against the $480,000 value and you need to put in more deposit!

Why does this happen? 

bank valuation merely reflects what the bank can reasonably expect to receive to cover their losses.The biggest thing the bank is concerned about is how long the particular property would take to sell. They want to be able to sell fast, generally within 3-6 months.

If the property is unique or has a specific market appeal, the banks can and will reduce the amount they’re willing to lend against that specific property. So what are your options? Watch the video below to find out more!

For example, apartments under 50m2 have a limited market of people interested e.g single people. Because of this, the bank may reduce their valuation to be in line with the bank’s risk assessment.

Solution: 

How do you solve it?

Generally, there are 3 ways to solve a bad bank valuation:

  • Challenge the bank valuation with the original valuer, by providing recent sales to prove the value should be higher.
  • Get your broker to arrange a second bank valuation through another lender, we’ve seen this make over $130,000 in difference.
  • Try to renegotiate the purchase price to be the same as the bank valuation price.

If you need help with a bad bank valuation, get in touch with our brokers.

If you’ve received a bad bank valuation, don’t walk away until you’ve tried to challenge it.

14. Underestimating the costs of buying a house in Brisbane

Buying a home isn’t cheap. The cost of the home itself is expensive enough. And on top of that, there are a lot of hidden fees which you need to pay for.

You may have heard that you can buy a home with as little as 5% deposit. And that’s true, You can get a home loan with a 95% LVR (Loan-to-Value-Ratio), which means that you give the bank a 5% deposit on the home loan.

But , you also need money for additional costs like:

  1. Lenders Mortgage Insurance.
  2. Costs of Borrowing (Home Loans).
  3. Government Fees in Brisbane.
  4. Stamp Duty in Brisbane.
  5. Council & Water Rates.
  6. Strata (Body corporate) Fees.
  7. Home & Contents Insurance.
  8. Legal Costs (Solicitor/Conveyancer Fees).
  9. Building & Pest Reports.
  10. Moving + Connection Costs.
  11. Home Loan Deposit need in Brisbane.
  12. BONUS TIP: Changes to monthly repayments.

Here is an example of the costs when buying a home in Brisbane for over $500,000.

Meet Simon…

Simon isn’t a first home buyer, so he only gets a partial stamp duty concession on his home purchase and finds the perfect unit on Margaret Street in Brisbane for $555,000. He has around $75,000 in savings, so a little bit over 10%.

Simon wants to capitalise or add the Lenders Mortgage Insurance to the loan amount so he doesn’t need to pay this up front. Here is a calculation of his costs.

Property
New Home in Brisbane
Purchase Price
$555,000
Loan Amount
$499,500
$9,080
Total Loan Amount
$508,580
$10,825
$1,517
$187
$187
$400
$1,500
Discharge Costs (if applicable)
$300
Other/Sundries:
$2,000
Total Costs
$16,729
 
The total deposit amount required is the total costs, plus his 10% deposit
 
Total Costs$16,729
10% home loan deposit$55,500
Total Amount Required$72,229

In this example, while Simon paid a 10% deposit or $55,500 once you factor in the stamp duty and other costs his deposit is actually closer 12-13% meaning you need your bank deposit + around 3%. So if you are paying a 5% bank deposit, with stamp duty and other costs you will need closer to a minimum of 8%.

Solution: 

There are so many hidden costs when buying a home. As a first home buyer it can be so hard to keep up, but what I’d recommend you do is read through the article here which outlines all 16 hidden costs you’ll likely face as a new homebuyer. For a comprehensive guide on the true cost of buying your first home, then see the video below as well as our guide here.

15. First Home Buyers Fears – Is now the wrong time to buy? 

When it comes to property, everyone has an opinion – from parents to your friends and work colleagues.

But having an opinion doesn’t make anyone right. The same goes for market commentators on deciding on the right or the wrong time to buy.

At the end of the day it’s not timing, but time in the market.

Like any investment market, property moves in cycles: sometimes suiting buyers and sometimes suiting sellers. However, when these cycles shift is as good as anyone’s guess. So trying to wait for the ‘right time’ when property prices drop will leave you gambling with your future.

Rather than getting confusing messages from the media about the market BOOMING, or it being on the verge of collapse, just focus on your own long-term goals and do not be derailed by short-term market conditions.

Australian Bureau of Statistics (ABS)

As you can see from this graph which has recorded Brisbane House Price growth since 1986, in the short term there were some drops in value or the market went sideways – but overall it has continued to increase over this 30 year period.

If you do want to maintain an idea on the market movements, I recommend checking out Herron Todd White’s Monthly Property Review.

The Brisbane property clock shows how the market is travelling compared to the rest of Australia.

This includes the National Property Clock, which details at what stage a property market is at from Peak of the Market to Bottom of the Market and everything in between.

As you can see Brisbane is currently located in the Rising Market, but again if you take the 10, or 20 year view these short-term movements shouldn’t affect your long-term plans.

But you shouldn’t ignore the market completely.

While you can’t time the market, you still need to keep an eye on it.

Knowing what the market is doing is super important for your negotiation strategy. When you’re in a hot market you need to be super aggressive and put your best foot forward right off the bat. When you’re in a slow market, you can take your time, and throw in a low bid at the start just to test the waters.

Note that market conditions are not Australia-wide, or even city-wide. Brisbane could be in a property boom, but an individual suburb or area could be going in the opposite direction.

So you need to do your research.

16. Getting desperate or fed up

I know how you feel, I’ve been there.

When my (now) wife and I moved back to Brisbane from Sydney we were desperate to buy. I had spent a few months looking for properties to buy in Brisbane before we moved up, but once we had boots on the ground up here, I felt like there was a gun to my head to buy because the alternative was living with my in-laws.

I would have bought a tin shed behind a rubbish tip if it had been for sale. I was at panic stations.

It’s easy to get frustrated in the current market, but don’t let it rule your decisions.

And that was back when the property market wasn’t exploding. At least back then I could take my time—houses would be on the market for a few weeks at least.

In the current market, you don’t have that luxury. It can be frustrating to see home after home disappear before you get a chance to even see it. It can be even more frustrating to get “pipped at the post” by someone who ever-so-slightly outbids you. There’s only so much you can take.

And after a while, desperation leads to disillusionment. You get ‘fed up’.

If you’ve missed out on a few properties, you might be tempted to throw caution to the wind, and just jump on the next available property that looks vaguely like it might be a good fit. After all, any home is better than no home, right?

Wrong.

As we covered above, buying property in Brisbane isn’t cheap, and acting out of desperation or frustration has no place in a home-buying transaction.

You’re spending hundreds of thousands of dollars on this home and you should be planning on living in it for at least 5 to 10 years. This is not a time to just buy something for the sake of buying it.

Take a few weeks off or, better yet, chat with a buyers agent who can help save time and do the looking for you. Buyers agents can help from sourcing a property, all the way to negotiating and purchasing on your behalf at auction.

Buyers agents represent you as the buyer, here are a few questions you can ask a buyers agent in Brisbane.

Buyers agents in Brisbane range in cost from a few thousand dollars, to a percentage of the purchase price but can save you weeks of running around (plus a lifetime of stress)!

17. Hesitating too much

Things move quickly in a hot property market. If you hesitate, someone else will swoop down and take that property right out of your hand.

Hesitate too much and you risk losing out on your property

At this point you might be thinking, “Hang on – didn’t you just tell me not to be impulsive?” Yes, I did.

Acting out of desperation and acting without hesitation are two completely different things.

Acting without hesitation means that you are crystal clear about what you want, how much you’re willing (and able) to pay for it and you have a pre-approval. Once you have all of this, then you’re ready to pounce. You’re not buying out of impulse, you’re making a quick decision to take action once you find the right place.

If you’re not quite ready, then we can help with that. We have made a worksheet which will help you to build a “buyer brief”—a document that spells out exactly what you want in a property.

18. Not having the right clauses in your contract of sale

Fortunate for us in Brisbane, we have standardised property contracts of sale which allows you to sign a contract subject to finance, and building & pest inspections.

While the standard contract of sale to buy in Brisbane will generally give you a cooling off period, you can request additional clauses to be added to protect your individual interests.

contract-of-sale-fhogAn example of a standard Contract of sale in Queensland.

Your solicitor or conveyancer will take you through this but just remember to NEVER SIGN anything until you are sure your interests are protected.

Never be fooled by an agent who says you can sign, and ask for changes later – once a contract is signed its done.

The only way you can change details like the purchaser’s name once the contract is signed, is to sign a completely new contract and risk having to renegotiate your property – the seller doesn’t have to agree to your requests.

So make sure you have all the right clauses in your contract BEFORE you sign.

19. Insurance. Insurance. Insurance

If you are going to remember one word from this whole article, let it be ‘Insurance’.

The homebuying process can be summarised like this: 

Once the price has been agreed upon between all parties involved, you’ll then need to wait for the settlement period. 

This can take up to 30 days and once it is over you will be able to then pick up the keys and move in.

However, something that a lot of first home buyers don’t realise is that from the minute you have signed the contract you’ll need to take out insurance on the property.

This will protect the property against any damage that could occur over the settlement period.

Once you sign that contract, the property is your responsibility, even if you technically haven’t got the keys yet.

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Depending on where in Australia you’re taking out a home insurance policy will vary across all states and territories. Below we have the breakdown by state/territory:

  • In Queensland, once the contracts are signed and exchanged, the buyer is responsible for the property from 5pm on the next business day.
  • In Victoria and New South Wales, the buyer is responsible for any damage to the property from the settlement date.
  • In the Australian Capital Territory, Tasmania, and South Australia the buyer is responsible for any damage to the property during the settlement period
  • In Western Australia and the Northern Territory the buyer is responsible for insurance on the property in one of two ways: 1) On the date the buyer is entitled or given possession (e.g. inheritance or a divorce settlement) Or 2) on the date that the full purchase price is paid as part of a settlement; whichever comes first.

Regardless of where you live across Australia, it is important that you know when you need to insure your home from. 

We’ve heard so many horror stories where people have been handed the keys the day before and then the very next day something has gone wrong… so DON’T MAKE THE SAME MISTAKE.

However in some circumstances it is even recommended that the buyer is covered with insurance before settlement occurs. So be sure to research the rules in your particular state and speak to your solicitor or conveyancer to learn more about what is best to do.

Remember: Insurance from when you sign the contract is a must (in Queensland anyway)!

20. Being too cheap and cutting corners

At the risk of sounding like a broken record, I am going to say this again: property in Brisbane costs quite a lot. Property is expensive, expensive, expensive.

This is definitely true about reports, in particular Building & Pest Reports.

Termites are surprisingly common in Brisbane homes.

I can say without a shadow of a doubt that on 5 occasions, Building & Pest reports have saved me from buying complete dumps of properties.

In one year I actually spent over $2,000 on Building & Pest reports. At that time it really stung and felt like a complete waste—until it saved me from buying a property that would have cost me (yes me!) over $9,000 to fix if I had gone ahead with the purchase.

When looking for a Building & Pest inspector check out reviews on Google or ask your friends. It is critical not to use the one recommended by the selling agent.

You want to maintain your independence and get your own team to look after this.
Make sure you use a certified Building & Pest Inspector. If there are a few small issues in the report that are fixable – that’s great, you can use this to negotiate discounts from the seller!

You should also pay attention to flood and council reports.

The good news on this one is that you don’t need to pay for these reports – they’re free!

Remember knowledge is (negotiating) power, so finding things out like your properties council zoning can help you with getting a better deal!

Click here to read more about getting your Free Flood Check

21. Not shopping around (and) skipping property inspections

Finding the first property that is right for you can feel like the moment you met your first love.

It’s electricity—pure unbridled excitement.

You see yourself wandering down the long hallways, going to sleep in that majestic bedroom or lounging around in the cozy TV room…..

But it is so important not to let your emotions take over.

Take a step back, and slow things down. Don’t make a decision without thinking through all options. You are about to spend a few hundred thousand dollars so you need to know if there is any hidden damage behind those beautiful kitchen walls. Being blinded by love could end badly financially for you, especially if you cut corners.

On your first inspection, take along our property checklist to make sure you don’t miss any small details that could help you with negotiating a price and/or stop you from making costly mistakes in the future.

22. Not realising auctions are completely different

If you’re heading to auction to buy your dream home, make sure you’re aware of the differences between buying a house under standard procedures as opposed to buying at auction.

If you buy at auction its final: No finance clause is possible, no get out of jail free card. The house is yours which means you need to have your building and pest reports finalised, and finance secured BEFORE going to auction!

A word of warning: I applied for three different homes before I found mine and each one came back with issues regarding the building and pest report, as a result, I didn’t go ahead with any. So don’t underestimate how important this report is. It can be a complete deal breaker.

In a standard buying process, you can add a requirement that if your finances don’t get approved or the building has issues in the report you can actually stop the buying process. However, at auction, if the reserve price is met and you are the winner you have no choice but to purchase the property. So make sure you’ve done your research and even attend a few auctions before you go out with guns blazing.

Make sure you’re fully aware of how auctions work if you’re going to purchase at an auction. Do your research on the property if you’re a serious buyer and get building and pest reports done prior as well as pre-approval.

Before you even go to auction, I’d recommend you read through the below

BONUS TIPS

Now that you know what mistakes to avoid, here are some bonus tips

Bonus #1: Knowing The Details of the First Home Owners Grant in Brisbane

Most first home buyers would have heard of the First Home Owners Grant, but do you know the specifics and if you are eligible? It could be possible for you to buy with no deposit at all, only using the first home buyers grant. For more info, check out our guide to the first home buyers grant.

Click here to find out if you are eligible for the first home buyers grant in Queensland?

Bonus #2: Knowing The Demographics of the area you are buying

The demographics of the area where you plan to buy a house matters a lot. I’d suggest checking out Property Value’s suburb profile, which details the schools and amenities in the area as well as WalkScore which lets you put specific addresses to find out what is nearby.

Still have questions? Click here for our Frequently Asked Questions by first time home buyers

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