Home I Own

Posted By Chris in Buying a house | on October 31st, 2008 1 Comment

Section 32 - what the heck is it? (part 1)

Short version: One boring, awfully long, barely readable document that you get with the house contract. You can’t sign the contract if you haven’t received Section 32 for the house.

Long version: The real name of this document is Section 32 Vendor’s Statement - but we all call it just Section 32. You better read it and pay attention to the details, because it is the most accurate description of your future home you will ever get. This is a sample of a real Section 32, have a look here.

Posted By Chris in Buying a house | on October 29th, 2008 3 Comments

Is changing my contract to get FHOG increase a crime?

In one word - YES.

If you have missed on the new increased FHOG (First Home Owners Grant) because your contract was dated a couple of days before they announced the boosted FHOG, it sure is annoying. It may also seem perfectly natural to just change the date on the contract and collect the extra money. But make no mistake - it’s definitely illegal and anyone who has made a contract before 14 October, 2008, or after 30 June, 2009 is not entitled to the boosted FHOG.

So why changing a date is such a crime? According to the real estate lawyer Peter Mericka it falls in the category called “obtaining a property by deception” and can easily get you up to 10 years in prison! And if the idea of changing the date came from a real estate agent or a conveyancer – they could be charged with a criminal offence as well for assisting you. Another scary consequence of this change can be that your contract becomes invalid and your bank could withdraw the mortgage approval. In that case you wouldn’t be able to proceed to the settlement and would loose your deposit.

Posted By Chris in Buying a house | on October 27th, 2008 Add Comment

How to find a great house for a good price by asking the right questions (part 2)

In my previous article for first home buyers I started this list of questions - and reasons to ask them, to make sure you are buying a great house for a good price. As I promised, this is the rest of them:

Questions about the house:

Ask: What is the size of the block?
Why: If the house is built on a bigger block of land, expect to pay more - even if you don’t need as much land. When I say “bigger”, I mean in that specific area you’re looking because obviously in different areas the average size varies. That would be a good moment to ask yourself - how much land do I need and willing to pay for.

Check: What is the shape of the land?
Why: The rectangular shape is the most convenient and allows maximal usage of the land, whereas all the other shapes may create a situation where you pay for land that you can not use.

Ask: Is the house built on a slope?
Why: If you are going to extend the house or even build a carport it is more difficult and expensive on a slope. The same applies to the garden, it would need retaining walls, etc.

Ask: What are the facing directions?
Why: North facing garden is considered to be the best

Ask: What is the size of the bedrooms and of all living areas?
Why: Some people don’t mind small bedrooms, others do. The size of living areas will let you compare 2 houses, which is bigger and which is smaller.

Ask: Were there any pre-purchase inspections (building or pest) done, if so - what were the results?
Why: If they have found a major problem, the agent must tell you and it would save you the money for having the house inspected yourself. Then you can either negotiate the price further down or just walk away from this house.

Questions about the vendor’s situation

Ask: What is the reason for sale?
Why: If the answer is honest you will understand more about the vendor’s situation. That will give you an idea how willing they will be to negotiate. For example if they must sell quickly - they might be willing to drop the price, etc.

Ask: What settlement (how much time they’ve got to move out) would the vendors prefer - 30, 60 or 90 days, how flexible are they?
Why: If you know what they want, it allows you to offer them more convenient terms and then if they like your offer better - you’ve got the house. The money is not the only thing that counts, the length of the settlement is also important.

Ask: How long was the property on the market?
Why: If the property was just listed, the vendors will be less flexible with the price. The longer the property is on the market, the more willing they are to compromise on the price.

Ask: Were there other offers that the vendor has rejected? How much?
Why: If the property is on the market for over a month and no offers were made, the vendor should be willing to negotiate and accept a lower offer than his asking price. If he rejected an offer of X it would mean than your offer should be definitely higher than that.

If, having asked these questions and digested the information, you still want to go and inspect that house - you surely won’t be wasting your time.

Did you like this article? More are coming on a regular bases - subscribe and get them seconds after they have been published.

Posted By Chris in Buying a house | on October 23rd, 2008 Add Comment

How to find a great house for a good price by asking the right questions (part 1)

Many guides and articles will tell you what questions to ask when you are buying a house. None of them explain WHY you need to ask those questions - and many reasons are not obvious. So here is a list of questions you should ask before buying a house - and the reasons why you should ask them.

Asking the right questions does a great job of narrowing down your list of houses to inspect. During the first conversation with the real estate agent you can learn if that house is what you’re looking for or not - and then it’s off your list.

Questions about the house:

Ask: How old is the house?
Why: To know what style and standards to expect. Here is the list of housing types with descriptions and pictures.

Ask: What is the property type (Double brick, Brick-veneer, Weatherboard)?
Why: Other than the looks, one of the characteristics of weather-board and brick-veneer houses is that they are not sound proof - some people find that annoying.

Ask: What is the ceiling height (2.4 meters, 2.7 meters or 3 meters)?
Why: Some people prefer higher ceilings, others don’t care. There was a research that proved that ceiling height can affect how a person thinks, feels and acts.

Ask: Was the house updated/renovated lately?
Why: If it’s an old house (15-20-25 years old) and it wasn’t renovated lately, you’ll probably have to do it yourself, which will cost you extra and take some time. On the other hand, if it was renovated lately then you can just move in and enjoy but the price will be higher for such house.

Ask: How many owners were there?
Why: If there were many owners and they changed frequently (every 2-3 years), then chances are the house wasn’t maintained properly. If people had no intention of living in the house for a longer period, they wouldn’t care about keeping it in a good condition.

Ask: Was it rented out? If yes, (A) for how long and (B) how much was the rent?
Why:
(A) If it was rented out for a long time the chances are you’re in for some renovations and maintenance because normally the tenants don’t do anything about the maintenance of the house and the landlords don’t fix anything that isn’t broken :).

(B)Weekly rent can give you an idea what is the value of that property - annual rent should be 4 to 5 percent of it. So to work out a fair price of that house let’s take the weekly rent (say, $300), multiply it by 52 (weeks in one year) and by 20 (100/5 percent). In this example you will get $312,000 - that would be a good price for such house.

Stay tuned, I’ve got more questions coming - subscribe to make sure you don’t miss them.

Posted By Chris in Buying a house | on October 20th, 2008 5 Comments

First Home Owners Grant Tripled? Not really!

Let’s get one thing straight - First Home Owners Grant didn’t triple. The media got many people thinking that it did, but if you’re going to let this buzz pressure you into buying a house sooner - better get your facts straight.

Here is what happened: from 14th of October 2008 and till 30 of June 2009 the FHOG (First Home Owners Grant) goes up. People buying their first established home now get extra $7000 (on top of previously offered $7000 FHOG plus 3000 First Home Owner Bonus). So together it makes $17000 instead of $10000, which means that it didn’t even double. Another thing to notice is that the Bonus is only given on purchase of house that doesn’t exceed $500,000

Posted By Chris in Building a house, Buying a house | on October 17th, 2008 2 Comments

How to buy a house - Part 5

In the part four of “How to buy a house” I have covered the stage seven, which is all about inspecting the houses you’ve selected, finding out all the necessary information about them and making your offer to the vendor via his agent.

Stage eight (final): inspections, deposit, settlement - and you’re home!

Once you’ve made your offer, it will be either accepted or rejected and it usually takes a couple of days to get the answer. If the offer is rejected you can try and submit a better offer on that house and see what happens. If the offer is accepted - congratulations, you’ve made some serious progress.

If the contract you have signed was subject to inspections - now is the time to make the arrangements. The contract specifies how much time you have to get them done and the best way would be to start looking for pest and building inspectors the very next day after the contract was signed, just to be sure you don’t miss the deadline.

Here is another reason for you to hurry up with the inspections: if you find out about some problems with the house and your 3 days cooling off period hasn’t expired yet it will be easier to end the contract because you won’t have to give a specific reason or to prove anything.

Once the inspections were done and reports arrived, read carefully and, if needed, speak to the inspectors to make sure you understand everything they say. If you are not happy with the results - there are two options. If there are many things that need to be fixed in the house, you can re-negotiate the price and get additional discount from the vendor (and don’t let them tell you that inspection reports are not bargaining tools!). The other option is to cancel the contract and concentrate on other houses.

If you’re happy with the results - you can go ahead and give your conveyancer “green light” to start the paperwork, speak to the bank, and make the necessary arrangements to pay the deposit. Usually the deposit is paid not to the vendors but to the real estate agent’s trust account. The next stage is the settlement (click here to read everything you need to know about the settlement process). Once that was finished - you will get THE KEYS. Congratulations, you have a home now!

Posted By Chris in Buying a house | on October 11th, 2008 1 Comment

How to buy a house - Part 4

In the part three of “How to buy a house” series I covered stage 6 – how to find out what houses are sold in your target suburb and for what price. Knowing that will make your negotiation with the estate agents much easier because it will show them that you know what’s going on and understand the real value and price of the house.

Stage seven – “Action!”

So once you’ve searched the property listings and chosen houses that look suitable to you, it’s time for action – start calling the estate agents to find out the details about those houses, go and inspect them. Don’t worry about having too many on your list – some will get filtered away by inspection, some might be under contract, some vendors won’t like your offer. It’s important to not “lock on” just one house because once you get emotional – you will be in a weaker negotiating position.

A word of advice – when you’re inspecting houses, have a piece of paper with you and make notes about every house. If you want to remember anything at all after you’ve inspected more than 3 houses, making notes is a must, otherwise all the properties and their features will create a terrible mix in your head. Later on when it’s time to compare two houses you’ve inspected 2 weeks ago, you’ll be happy you had that little piece of paper.

Next step is to get Section 32 for the houses you liked – call or email the agent and ask for it. By law you must read this document before you can sign any offer on that property. If you don’t know what Section 32 is – it’s a document listing very important details about the house, such as vendor’s details, title details, what building permits were issued for the house in the last 7 years, what mortgages or debts exist on the property, what covenants/easements are on title to the property, are there connections to gas/electricity/phone line, etc. Section 32 doesn’t make a very interesting reading, so the alternative is to have a lawyer check it (and the contract) and make sure there are no pitfalls (this service is called a “pre-purchase advice”).

After you’re finished with the Section 32 and know everything about the house – it’s time for negotiation (you didn’t think of just paying the asking price, did you?). The asking price is always higher than a fair price and if you’ve done your homework , you know what similar houses sell for in that area. Call or meet the agent, make your offer and wait for the vendor’s decision.

Remember, when buying a house – everything is negotiable, even if the agent wants you to think that your only option is to accept the vendor’s terms. They want to sell just as badly as you want to buy, so negotiate not only the price – but also the terms: how much is the deposit, how long is the settlement, subject to what conditions the contract will be (pest, building inspections, finance, etc).

Posted By Chris in Buying a house | on October 7th, 2008 2 Comments

How to buy a house - Part 3

In the part two of “How to buy a house” series I covered stages four and five, deciding what kind of house you need and what amenities you’d like to be close by. Coming to the stage six, you should have only one or two suburbs left on your list - those you will be examining very closely.

Stage six: Do your homework

This is the time to start looking at the property listings of your target suburb in domain.com.au or realestate.com.au and also to start gathering some statistics. Here is what you will need to find and save, week after week, until you find your home:

A. Gathering property sales data for the suburb, such as

checking weekly sales results and noticing how many houses were sold and for what prices,
how many private sales there were and how many auctions,
in the auctions how many houses were passed in (that means the house wasn’t sold because of lack of interest),
what was the reserve price and what was the vendor bid.

B. Gathering detailed sales data

Any suburb is divided into areas and the prices in every area will be different. Usually the price range for each area is affected by the amenities it offers. At this point it is a good idea to visit a real estate agency in your target suburb and ask the agents about the areas and their names - it will make your job much easier. Ask them to circle and name the areas on the map and get familiar with them. Then use the recent sales data to see what the price range for each area is - this way you will quickly understand what areas are in your budget and what are beyond. The goal of this little research is to narrow down your search inside the suburb - to save as much of your time as possible.

Let’s talk about A - general data for the suburb.
Why do you need to get into those details? For several reasons:

Reason 1. If you track the number of sold houses in your target suburb over time it will tell you if the market is going up, down or sideways. If every week they sell less and less houses - it means that your bargaining position will be better because the vendors get restless, desperate and maybe willing to drop the price to sell faster. On the other hand if there are more and more houses are selling every week - then you shouldn’t expect to negotiate the price down much because properties in your suburb are in demand.

Reason 2. If there are more auctions than private sales - it indicates the popularity of the suburb and implies that you are more likely to buy your house in an auction than in private sale - so you should start going to auctions to see how they work and start getting used to the idea of buying via auction. Being psychologically prepared to bid in an auction is important because many factors will affect you, the stress, the tension, etc. Also the contracts of private sale and auction are different, for example private sale has a cooling off period - and auctions hasn’t. One more thing - all the inspections have to be done prior to the auction, when private sale doesn’t has such condition.

Reason 3. Houses being passed in are interesting for 2 reasons - first, if there are any of those it can be a sign of weakening market and second, it can be your opportunity to get in touch with the agent, negotiate the price down and buy it via private sale.

Reason 4. The reserve price gives you an idea what no one was willing to pay for that house - or in other words what price is too high for that property and vendor bid will tell you how much the vendor wants to sell for. Take is as the upper limit and negotiate the price down.

Posted By Chris in Buying a house | on October 3rd, 2008 1 Comment