What to consider when buying your first home
So you have decided you are ready to buy a house, but the whole process seems a bit daunting?
Firstly, CONGRATULATIONS on getting this far!
I have put together a 'first home buyers guide' regarding purchasing property in Dunedin, and ‘lessons learned’. I’ve listened to my purchasers over my years in Real Estate, and I hope this helps you as a Dunedin first home buyer
Prior to looking at houses
1. Location! Location! Location!
What areas would you consider - don’t just look in the areas which are considered popular. Have a think about where you will be spending your time on a weekly basis.
If your work, school, and sports activities are on the opposite side of town, is it worth all the travel?
TIP: If you are moving into a new town, perhaps travel for a weekend/day, have a look at parks, schools, and the area of your work. Sometimes what looks far on a map is not, and vice versa.
2. The Property
What size property are you looking for? If you don’t have the time/enjoyment for gardening is a large backyard important to you?
TIP: Use your current backyard as a guideline. Is it perfect, too much, or not enough?
3. The Home
What will work for your lifestyle/family? What will work for you in the long run?
If you have young children, sharing now might work well, but will it work in the next 5 years?
TIP: Create a wish list in order of importance. It is very unlikely you will find your dream home, and as you view houses you may start to reshuffle your priority of things on a wishlist.
4. Online calculators
Are good as a beginning guideline, however as most only collate basic information from you, they can be inaccurate.
TIP: Sorted.org.nz have a more in-depth one, and are a great help to helping to save your deposit.
5. Finance
I always recommend purchases going through the process of getting a home loan pre-approved. This will mean you can look with certainty, instead of finding a house you really want to buy, and then not being able to get finance.
I have found that many first home buyers get a lot of value speaking with a mortgage broker.
“A mortgage broker is a person, or company, who can help you to find a mortgage. A mortgage broker acts independently of banks or other financial institutions. They Liaise between people seeking mortgages (you) and potential lenders (banks, finance companies, etc) with the aim of obtaining mortgage finance (a home loan) that is acceptable to you.”
TIP: Mortgage brokers also are up to date with rules and regulations around deposits, Kiwisaver, FirstHome buyers grant and Welcome Home Loans
You are more than welcome to send me an email for a list of recommended brokers
6. Stick to your budget
Sit down and go through all your expenses, and create a budget based on owning a house.
- consider costs such as Insurances, Rates, and in Dunedin, there is also Otago Regional Rates
TIP: You may get offered a higher amount to lend than will fit into your budget, the higher you go the more of your lifestyle you will have to give up.
7. Costs with buying a house
The cost of buying a house is not just the repayments of your mortgage. Other things to consider are
- Lawyer: should be able to give a fixed price, some even give you a Will FREE of charge (can’t hurt to ask)
- Electrical and building report: some banks/insurance companies may require this.
- Land Information Memorandum (LIM): price depends on how quickly you need this
You are more than welcome to send me an email for a list of recommended Lawyers:
8. What financial ‘bonuses’ can you get as a first home buyer
There are a few bonuses/grants first home buyers/ homeowners can get, and here are some links to a couple of common ones. There may be others in your region, you are best to speak to your council
Tip: This is where a mortgage broker is a huge asset, as they are up to date with all of the rules/conditions that go along with them
9. If you are renting
If you are currently renting, consider going on a month by month rental contract. That way, when you buy a house you don’t have to be paying for both a mortgage AND rental over a long period.
10. Advice from family/friends
As soon as your friends and family know you are looking for a house, you will find everyone wants to give you a lot of advice. Although they mean well, current rules and regulations in Real Estate are changing so fast, even if they only purchased 2 years ago their information could be out of date.
TIP: Take their information as a starting point, and then get it backed up by a professional.
Starting to look at houses
1. Sale Method
There are a few different methods a house can be up for sale:
- Fixed Price: The property is listed at a price decided by the Vendor (seller)
- By Negotiation: Those who are interested in the property put their best price forward, and the Vendor will negotiate
- Deadline sale: Similar to ‘by negotiation’ but there is a set date for offers to be submitted by
- Auction: Buyers bid against each other at a preset time and date
TIP: A common misconception is a deadline/negotiation sales means it’s going to be expensive, and this discourages potential purchasers to submit an offer. I always encourage purchasers to put your best offer forward.
2. Look past the paint and décor.
When buying a first home, often you will find a house in your price bracket which has some ‘interesting’ decoration. You need to look past the paint and wallpaper and look at the bones of the home.
TIP: Redecoration is something which you can easily change, however, the bones are a bit harder to change and can be costly
3. Lengthy process
Buying a home can be a lengthy process, which is hard when it’s your first home, and you just want to move in ‘Yesterday’.
If you are lucky, and you have an offer accepted the very first weekend you are looking, the process from there can still take a bit of time, and patience is key.
The contract can potentially go back and forward in the negotiation process, and then there are time frames should you have conditions. Adding to that are 2 sets of lawyers (1 for the purchaser, 1 for the vendor) some who are very prompt, others not so much.
TIP: It wouldn’t be strange to have a 6-8 week time frame on purchasing your home, dependent on when the Vendor needs possession dates to be. Which is why financial pre-approval is important prior to contracts
4. Do your research
Licensed Real Estate Agents must give you all the information the Vendor has told them, but that does not mean we have all the information about the property.
It is always strongly recommended to get professional advice on a home you go to purchase. Some lenders and insurance companies do require some information.
TIP: Some of these reports can cost you a few hundred dollars, but could save you thousands!
5. Arrange private viewings
I encourage people to book a one-on-one appointment to see the house, so they can fit it into their schedule, and they then don’t feel rushed when viewing the property.
I also create walkthrough videos so you can get a feel of the house, and then come and see the layout of the home.
Tip: you can read my article about the benefits of private viewings here
6. Take pictures when you are looking
If you are viewing more than one home in a day, I strongly recommend taking photos of all the things you love about the property. That way, you don’t mix up the features.
Putting an offer in
1. Legal Advice
It is always recommended to seek legal advice before signing an agreement!
TIP: Legal advice is not just about the contract you are submitting your offer on, but also, if you are buying with someone who you are not married to - what are the implications should there be a parting of the relationship.
2. Look at the Title Information and Council Rates
By understanding everything about the property, it will mean you get full enjoyment from your home.
TIP: I provide both of these as part of my information packs, on all properties I have for sale. These are downloaded from my website free of charge
3. Get a quote for Insurance
Some Dunedin homes have scrim, but they are becoming fewer as the new Insurance guidelines are put in place.
There are insurance companies that will insure for scrim, but give you a certain time frame to have it removed from the house (likewise roof, electrical, etc).
Some banks also offer insurance, this has its pros and cons.
TIP: It pays to ring around! Do not be disheartened because the first company says no.
4. Meet timelines
Make sure you keep an eye on the key dates once your offer is accepted! Some dates (like deposit date) can be quite costly if it’s not paid in the right time frame.
Keep in touch with your lawyer, regarding the working days. Call them if necessary, to make sure they are communicating with the other lawyer, or if you are unsure about the sale process.
TIP: Ensure you account for public holidays, or dates lawyer offices are closed, i.e. over Christmas, or if they go on holiday
Before Settlement day
- Find where the water/valve meters are
- Ask Vendor if any fixtures need special treatments, i.e. kitchen counters, wooden floors, tile roofs
- Get any manuals/warranties for electrical items staying with the house
- Ask for any spare tiles, paints, etc which may be left over, or where did they buy them from?
- If gas water/heating, when was it last filled and who with
- Speak with Vendor about you being allowed to get carpets cleaned if the house is vacant
Setting up power, internet, etc
Book these in advance from any date after settlement.
If the property is empty, some Vendors may allow you to do this prior, but this would need to be agreed by both parties.
TIP: Some power companies do a 'move house' deal, where they can have an overlap of a couple of days at the houses. This will save you the setup fee
MOVING DAY!
If you rent, I have found a few first home buyers I have sold property to highly recommend having an overlap of the rental agreement and settlement date. This means they can move out over a couple of weeks, so less time needs to be taken off work, and both properties can have a good clean.
TIP: You don’t want to be doing this over one weekend!