Buying Property For Dummies Read online

  Buying Property For Dummies®, 2nd Edition

  Table of Contents

  Introduction

  About This Book

  How to Use This Book

  Foolish Assumptions

  How This Book Is Organised

  Part I: The Great Australian Dream

  Part II: Finding Your Dream Home

  Part III: Borrowing For, Buying and Protecting Your Home

  Part IV: The Part of Tens

  Icons Used in This Book

  Where to Go from Here

  Part I: The Great Australian Dream

  Chapter 1: Assessing the Dream: Buying Property

  Looking at Whether You’re Ready to Buy a Home

  Renting versus Buying

  Liking the advantages of renting

  Disliking the disadvantages of renting

  Understanding How Your Home Is an Investment

  Owning Your Home Is Tax-Friendly

  The Government’s Leg-Up — the First Home Owner Grant

  Getting Ready to Scrimp and Save

  Agonising Over the Time to Buy

  Searching for Your Ideal Home

  Smartening Up Your Home

  Chapter 2: Squeezing Your Foot onto the Property Ladder

  The Costs of Buying a Home

  Drumming up the deposit

  Begging to borrow

  Government slugs and sweeteners

  Paying off the lawyers

  Counting every last bit and bob

  Calculating Your Monthly Outgoings

  Home maintenance costs

  Rates, fees and insurance

  Regular living costs

  Plans for the future

  Looking at Funding Strategies

  First Home Savers Accounts

  Staying with the parents

  Doing it solo

  Getting together with friends

  Asking the parents to help out

  Investing in shares and managed funds

  Chapter 3: The Position or the Property

  Dreaming Up Your Perfect Home

  Must Haves, Like to Haves and Mustn’t Haves

  Trading Off Location against the Perfect Home

  Spotting up-and-coming suburbs

  Moving to the fringes

  Escaping to the country

  Going high rise

  Chapter 4: Dealing with Property Professionals

  Working with Real Estate Agents

  Understanding a real estate agent’s motivation

  Getting to the truth on property value

  Getting a real estate agent to help you find a property

  Putting In an Offer

  Dealing with Buyers’ Agents

  Finding a competent buyers’ agent — avoiding the pitfalls

  Counting the costs of using a buyers’ agent

  Negotiating a purchase on your behalf

  Understanding What (Selling or Buyers’) Agents Can and Can’t Do

  Part II: Finding Your Dream Home

  Chapter 5: The Search Is On

  Setting Up Your Search Strategy

  Keeping track of all the information

  Doing the research

  Narrowing Down the Search

  Paring down the properties

  Understanding real-estate speak

  Doing the drive-by

  Checking out trains, trams and buses

  Strolling to the corner shops

  Assessing the Properties on the Short List

  Attending an Open for Inspection

  Working out a schedule of visits

  What to look for during an inspection

  Taking a Critical Look at a Property

  Getting a Pre-Purchase Building Inspection Done

  Chapter 6: Buying a Piece of History

  The Pros and Cons of Buying a Period Home

  Impressive pros

  Not-so-impressive cons

  Living with the idiosyncrasies of a period home

  Dealing with Heritage Restrictions

  Renovating your period home

  Restoring original features

  Architectural Periods and Styles

  Colonial style: 1788–1830s

  Georgian period: 1810s–1840s

  Victorian styles

  Federation or Edwardian style: 1901–16

  Queenslander: 1880s–1940

  Californian bungalow: 1916–1940s

  Early modern: 1915–1940s

  Modernist: 1945–70

  Chapter 7: Renovator’s Dream (or Nightmare)

  Tackling a Renovator’s Delight

  Making the place livable

  Progressing from livable to lovable

  Planning the Job

  Obtaining the necessary permits

  Getting the work done

  Doing It Yourself

  Deciding whether you’re up to the job

  Becoming an owner–builder

  Taking out home warranty insurance

  Calling in qualified tradespeople

  Acting as project manager

  Hiring Designers and Project Managers

  Resolving complex renovation situations

  Handing over the project management

  Hiring a Builder

  Getting a quote

  Signing the contract

  Living Through the Building Process

  Moving out until the dust settles

  Staying put during renovations

  Funding Your Renovation

  Chapter 8: Nice and New

  Buying Into a Housing Estate

  Checking out an estate

  Studying the developer

  The House First or the Land?

  Getting the land first, then the house

  Taking the package

  Looking Behind the Facade of the Display Home

  Knowing about inclusions

  Deciding on some optional extras

  Upgrading to a better model

  Getting finance through the developer

  Your Dream Home: From Plans to Completion

  Project Building

  Buying ‘Off the Plan’

  Imagining your home from a glossy brochure

  Finding out everything you can

  Chapter 9: Building from Scratch

  Starting with a Block of Land

  Assessing a block of land

  Working with a less-than-great block of land

  Designing Your Dream Home

  Finding someone to turn your vision into reality

  Harnessing an architect’s vision

  Deciding on a building designer

  Getting a draftsperson to draw your design

  Choosing an architect or building designer

  Moving from Concept to Contract

  Drawing up the concept plans

  Developing the design

  Finalising the plans

  Signing contracts and project managing

  Building a Home of Your Own

  The responsibilities of the owner–builder

  Looking at your options

  Taking a course for owner–builders

  Getting council approval

  Getting on with tradespeople

  Part III: Borrowing For, Buying and Protecting Your Home

  Chapter 10: Climbing Aboard the Mortgage Merry-Go-Round

  Understanding How a Mortgage Works

  Qualifying for a Loan

  Lending criteria

  Providing documents to your lender

  Choosing the Home Loan That Suits You and Your Hip Pocket

  To fix or not to fix

  Splitting the difference

  Introductory illusions

  No-frills variable

 
Standard variable vanilla

  Line of credit loans

  Going professional

  Shopping Around for Your Lender

  Stand-alone mortgage

  The mortgage as the core of your finances

  Who’s who of mortgage lenders

  Choosing the right mortgage broker for you

  Deciding to change your mortgage lender

  When You’re Not the Standard Mould

  Accessing no-doc and low-doc loans

  Looking around when your credit is impaired

  Understanding Your Credit File and What to Do about a Bad One

  Bypassing the Banks Altogether

  Chapter 11: Going, Going, Gone: Buying at Auction

  Assessing the Pros and Cons of Auctions

  Estimated Selling Prices and Other Half Truths

  Understanding Auction Day

  Introducing the property

  The bidding war

  Vendor bids

  Bidding rules and regulations

  On the market

  Passed in

  Tactics to beat the auctioneers at their own game

  You make the winning bid — now what?

  Making an Offer after a Property Is Passed In

  Making a Pre-Auction Offer

  Signing (After Reading) the Contract

  Chapter 12: Making an Offer: Buying Through a Private Treaty Sale

  Checking Out a Private Treaty Sale

  Negotiating a price

  Beating down the price

  Making an offer

  Putting conditions on your offer

  Understanding what happens after the vendor agrees to your offer

  Avoiding being ‘gazumped’

  Looking at Other Selling Methods

  Set sales

  Expressions of interest

  Chapter 13: Sold to the Highest Bidder! Now What?

  Signing on the Dotted Line

  Knowing what to look for in a contract of sale

  Making special conditions on the contract

  Exchanging contracts and handing over the deposit

  Argh! We made a mistake: Enter, the cooling-off period

  Waiving your cooling-off period

  Securing Your Final Loan Approval

  Getting a Valuation Done

  Settling on Your Property

  Insuring Your Biggest Asset

  Insuring the building

  Calculating the costs of rebuilding your home

  Insuring your possessions

  Calculating the value of your possessions

  Part IV: The Part of Tens

  Chapter 14: Ten Things to Remember as a First Home Buyer

  Buy When You’re Ready to Buy

  Think Outside the Square

  Look at Your First Purchase as a Springboard

  Borrow No More Than You Can Afford

  Another Property Is Always around the Corner

  Don’t Pay Too Much for a Property

  Keep Your Emotions in Check When Looking at a Home

  Be Sceptical of Selling Agents

  Renovating Can Wait

  The Mortgage Does Go Down — Eventually

  Chapter 15: Ten Areas (Almost!) to Check at Open Homes

  Kitchen

  Bathroom

  Lounge

  Dining Room

  Bedrooms

  Laundry

  Garage

  Backyard or Balcony

  Street Appeal

  Buying Property For Dummies®, 2nd Edition

  by Karin Derkley

  THE INFORMATION IN THIS REFERENCE IS INTENDED TO OFFER GENERAL INFORMATION ON THE TOPIC OF BUYING, SELLING AND INVESTING IN REAL ESTATE. ALTHOUGH THE GENERAL INFORMATION ON BUYING, SELLING AND INVESTING IN REAL ESTATE CONTAINED IN THIS BOOK HAS BEEN REVIEWED BY SOURCES BELIEVED TO BE RELIABLE, SOME MATERIAL MAY NOT BE SUITED FOR EVERY READER OR THEIR INDIVIDUAL CIRCUMSTANCES. READERS ARE STRONGLY ENCOURAGED TO CONSULT WITH APPROPRIATELY QUALIFIED PROFESSIONAL ADVISERS BEFORE ACTING ON ANY ADVICE CONTAINED IN THIS REFERENCE.

  Buying Property For Dummies®, 2nd Edition

  Published by

  Wiley Publishing Australia Pty Ltd

  42 McDougall Street

  Milton, Qld 4064

  www.dummies.com

  Copyright © 2011 Wiley Publishing Australia Pty Ltd

  The moral rights of the author have been asserted.

  National Library of Australia Cataloguing-in-Publication data:

  Author: Derkley, Karin

  Title: Buying Property For Dummies / Karin Derkley

  Edition: 2nd Australian ed.

  ISBN: 978 0 7303 7556 2 (pbk.)

  Series: For Dummies

  Notes: Includes index

  Subjects: House buying — Australia

  Real estate business — Australia

  Dewey Number: 643.120994

  All rights reserved. No part of this book, including interior design, cover design and icons, may be reproduced or transmitted in any form, by any means (electronic, photocopying, recording or otherwise) without the prior written permission of the Publisher. Requests to the Publisher for permission should be addressed to the Contracts & Licensing section of John Wiley & Sons Australia, Ltd, 42 McDougall Street, Milton, Qld 4064, or email [email protected].

  Cover image: © Photoroller, 2010, Used under license from Shutterstock.com

  Typeset by diacriTech, Chennai, India

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  About the Author

  Karin Derkley began as a journalist in 1992 writing up the property listings for local paper The Melbourne Times. She went on to write for various sections of The Age, The Sunday Age and several other magazines. For five years she worked as a senior writer and then as deputy editor at Personal Investor magazine. She is now a regular contributor to the ‘Domain’ section of The Age, and writes on property investment for AFR Smart Investor magazine. Karin writes extensively about the ups and downs of the property market; about the art of unearthing the perfect home; about negotiating through the mortgage maze; about the ordeal — and occasional delights — of renovating; and about how to present your house to sell in a difficult market. Living through the experience of purchasing and renovating her own home, and being regularly solicited for advice by friends and family on the purchase and sale of their pro
perties, she is all too familiar with the pitfalls and pleasures of home ownership and investing.

  Dedication

  To my friend Lisa who has been a constant personal and professional support.

  Author’s Acknowledgements

  Thanks first to acquisition editors Lesley Beaumont and Anthony Stone who drummed up my enthusiasm for the project in the first place. Also, to Charlotte Duff who carried out the perhaps more difficult task of sustaining that enthusiasm right to the very end. My biggest thanks must go to my editor Robi van Nooten who tirelessly and cheerfully worked with me to turn my prose into a style worthy of a For Dummies book.

  I must also acknowledge the assistance of Mal James of James Buyer Advocates, who was always happy to help with his insights into the real estate industry. Shane Oliver, chief economist of AMP Capital Investors, assisted greatly with his timely responses to requests for data. And thanks to Alison Verhoeven from REIA, for supplying helpful data.

  The input and support of many friends has been invaluable, both in volunteering their own experiences and in providing encouragement throughout the process. Special thanks to Jan and Julien, through whose first-home-buying eyes I have been able to relive the excitement and anxiety of buying one’s first property; to Shannon who shared her experience of becoming the owner of a house-and-land package; and to Jenny M who so generously volunteered her insights into the selling process. I also acknowledge the many people I have interviewed in my years as a property writer, who have given me their personal perspectives on buying, selling or investing in property.