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Buying a Property - Minimising the Risks
Published on 1st June 2012 | No Comments
Buying a Property – Minimising the risks
So, you are getting serious about buying a property. It’s exciting, stressful and expensive. It might be your first foray into the market or you might be upgrading, down-sizing or buying an investment property. How you do know the property stacks up?
It’s never been easier to find properties for sale. Just go to www.domain.com.au to find just about all the properties for sale in your area. The major property portals have almost every agent on their books and agents know that most people use the internet as their core source for finding properties for sale.
So finding a property isn’t the problem.
What about finding out about the property? Sure there’s the compulsory glossy marketing (online and offline) that tries to make all properties look “as new”. But it doesn’t tell you what the property’s really like.
How well has it been maintained? Was the last renovation (or the one before that) approved by the local council? When did someone last look into the roof space or under the house?
If it’s an apartment, can the body corporate afford to properly maintain the building? Have they been deferring essential upkeep so the current owners wouldn’t have to pay higher levies?
Most selling agents can’t answer any of these questions. Agents are sales people, not property experts.
But a lot of property buyers go ahead and buy properties without getting answers to any of these questions (or even asking them). Why? Partly, it is human emotions. If we don’t act now we might miss out. We just love the place and can already picture living here.
Partly, it is that buying property is a sales process where agents want to close the transaction as quickly as they can and are trained to play on your emotions to get you over the line.
Part of it is that most people don’t buy property very often and don’t understand the process.
Would you buy a car like that?
I’ll bet you’d want to test drive it, find out about the warranty, compare it with other similar cars and, if it’s a used car, get it inspected to make sure it’s mechanically OK.
I wouldn’t think of buying a house without doing due diligence. What can you do to help reduce the chance of buying a money pit or paying too much? We’ve listed below the information you need to know before you sign a contract to buy a property.
For all properties
· Get a Property Valuation done. If you are borrowing to buy, the bank will want one anyway. If you pay for one, it’s likely that the bank will accept it for their purposes as well and you’ll know before you commit yourself how the price compares with a professional analysis of the market.
· Check Council records to make sure all improvements have been approved. Compare latest plans at council with the current property layout.
· Get a building inspection and timber pest inspection (both can usually be carried out together at a lower cost). The real value of these reports is that an experienced builder has been through the place and has looked in all spaces he could access, like the roof and under the floor – places you can’t see. You can also talk to the inspector about the report and get an overall view of the property – as it compares to other properties of a similar age and type. Some people think that the report is there so there’s someone to sue if there’s an issue that they’ve missed. But that’s the wrong way to look at it. Get the benefit of an expert view before you buy. Use someone based in the area.
· Get a Strata Inspection Report. You must find out some history of the building and be comfortable that the body corporate is being well run. If the building is not being maintained properly, you will be up to your share of repair costs in the future. The value of the property might also suffer if the building is a bit run down. It’s also important to find out about any issues in the building. Living in an apartment block can be a challenge if there are disputes in the building.
· In some cases, like small blocks, a building inspection is also a good idea. But get the strata report first as it will help to focus any inspection. Remember that a building inspection of an apartment building can only cover the unit you are buying and common areas in the building.
There are costs involved in doing due diligence but it’s a pittance compared to the amount you are paying for the property. Please don’t fall for the trap of choosing your due diligence advisors solely on price. Ask friends and family for recommendations or make sure that the business you use has professional indemnity insurance and the inspectors are properly qualified.
If you have any questions please call us at 1300 798 274 or email us.