What To Ask When Buying A Home: Part Two
Now that your first questions have been answered, we're continuing our list of essential questions, this time centring around correctly assessing your potential property worth. As mentioned in the previous post, agreeing to an overinflated purchasing cost can have dire consequences when it comes to getting that final approval from your bank, as well as long term stress and anxiety about getting a worthwhile price for your home later on. If down the track you need to sell your home to upgrade or relocate, your options of what type of new home is available to you as well as location may be hampered if you have to carry a large amount of your existing loan overdue to a lower sale price, the actual sale price verses your inflated one.
The most important thing you can do to assess the correct price of a property is research, research, research.
Start by questioning the real estate agent about the property as well as doing your own digging. Thankfully, internet searches can help gather a large amount of home sale data as well, which can help to draft a clear picture of what you can expect to pay.
What have similar properties sold for in this area recently?
Real estate agents will have a recorded history of their sales and previous property listings which will make it easy for them to pull up the information that led to them assigning a price to the property. Don't take the agent's word alone on what the property is worth. Do your research, ask an independent expert, or get a property evaluation completed. The consequences of getting it wrong can be high. If a bank valuation doesn't agree on the property's worth, your financial loan may be declined, meaning, that any deposit you have made is lost, possibly setting back your home purchase by years.
What is the reason for the sale?
This question seems like innocent curiosity, but it's far more valuable than that, and a real estate agent will know it's worth as well. They also must reveal the reason for a sale by law, so you can feel relatively secure that the answer they give will be an honest one.
How will the answer benefit you?
If they are moving into a new property that has been very recently purchased they will want to move quickly so they can transfer the funds from this sale into the new property, they might even be looking to complete both the sale and purchase in the same transaction, which is possible with PEXA online conveyancing.
If so, it will leave quite a bit of wiggle room on price negotiations, if you can match their urgency and agree to close the sale quickly and be flexible about settlement periods. It can potentially save you thousands of dollars on the listed property price.
If they are still browsing for their next home then they might be on the lookout for a slower sale and request a longer settlement period. If you can match this and be patient with negotiations and not rush, you may be rewarded.
It's also good to note that emergency sales, like divorce or deceased estates, usually go to auction, in which case you'll need to get to work becoming familiar with auction sales and be ready to pay your deposit on the day of sale.
How long has the property been on the market for?
In Australia, the property is usually on the market for four weeks. If it has been listed for longer than six weeks, it's a good sign that either the price is too high, or there is a significant fault that is putting other buyers off. Ask the agent why the sale is taking longer than usual and proceed with caution and negotiate hard.
If a property went to auction and failed to sell it's within your rights to know what happened, including knowing what the pass-in price was and who placed the pass-in bid (vendor or buyer?).
Are there any known issues with the land, property or neighbours' property?
Issues that can affect the value of the property are not always obvious. It pays to ask questions that will uncover anything lurking below the surface. You have a right to ask the sale representative about any known issues, not just with the property you are looking to buy, but the flanking properties as well.
Homeowners through their agents are required by law to announce any known issues that could impact a property's value.
For example, noisy neighbours who have been reported to the police, or a newly approved complex build behind the property that will not only mean noisy works through the day for months to come but also less privacy and less sun once the building is completed. You can also spend time investigating the neighbourhood at various times of day and days of the week to see if you notice anything that would prevent you from living peacefully in your future home, or a deterrent for tenants if the property is an investment.
Aside from these two posts on what questions to speak up on to help understand the ins and outs of your new home before purchase, we also think it's important to cover the steps you'll go through between agreeing to buy and the settle end. Be sure to keep an eye out for the next post - The 5 Steps to Settling On a Home.