Do your homework before buying

It's tough being a homebuyer in this market. On the one hand, everyone is telling you that you have the upper hand although it often doesn't feel that way. On the other hand, some people will be quick to tell you that you're a fool for buying because house prices are falling and the world as we know it is coming to an end.

Buying a home isn't easy at the best of times. There are a lot of overpriced houses out there, poorly maintained homes and 90s leakers. Many of our homebuyers have been to upward of 60 open homes before they find something they like, and then they're competing with others for that same property.

There are some bargains around but to secure one requires patience, detachment and clarity of purpose.

I had clients buy in Onehunga for $385,000 for a house on a full site. It was an amazing deal, but those guys knew exactly what they wanted, and had negotiated on a number of properties before securing one.

If you're buying in this market, then it's important to do your homework more than ever. So I've complied some tips that should resonate quite strongly with you.

1. Go hard and fast. In your first few weeks get out and see as many properties as you can. The faster you get an understanding of the market, the faster you'll appreciate what a good property looks like and what you're prepared to pay for it. Even in this market you need to move quickly if you stumble on a great buy.

2. Be realistic. A number of first -home buyers start their hunt looking at properties (and going to auctions) well above what they can afford. Eventually they get buyer fatigue and start looking in the right price range.

3. Be inquisitive. If a place is cheap (and looks good) it's usually because something is wrong with it. Do some basic checks yourself before paying to get a building inspection.

4. Check that everything works. A building inspection will throw up structural issues with a house but will miss the small stuff such as heated towel rails, spa pool, dishwasher, dryer, drains, hot water, central heating, fans and oven.

5. Consciously appoint your advisers. (Broker/banker, lawyer and building inspector).

6. Make sure you can afford the mortgage. Banks will approve you for more than you can afford. It's important to have a realistic budget and to plan on higher interest rates.

7. Plan your mortgage properly. If you're going to have kids, travel overseas, go back to study, or join a hippie commune work out what that means in advance.

8. Get independent advice. There are a large number of packages out in the market, low equity fees to watch out for and different lending criteria across banks. A mortgage broker can look at all of the options to make sure you get the best possible outcome. That may end up being your own bank, but at least they could present you with different options.

9. Pay more than the minimum. If you pay the minimum you will not get ahead and your mortgage costs will increase when rates go up. Getting mortgage-free in 10 or 15 years is easy if you are disciplined about it.

10. Avoid consumer finance. Although a hire purchase may be interest-free, at some point it needs to be repaid and will then impact on how easy it is to live with your mortgage.

11. Bonus tip: A home and income property can be a good way of leveraging yourself into a better suburb. It can lift your borrowing power by $150,000-$200,000. It feels great to earn income off your house.

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Posted: 26 Oct 2010