13 Questions to Ask When Buying a House
When planning to buy a house in Australia, there are several essential considerations to account for in your budget. These include:
- Council Rates: Local government taxes that vary by location.
- Stamp Duty: This is a tax on property transactions, and the rate differs across states.
- Lenders Mortgage Insurance (LMI): If your deposit is less than 20% of the property price, you may need to pay for LMI.
- Additional Insurances: Home, contents, and landlords insurance may also be necessary.
- Loan Fees: These are charges by the lender for the services provided during the loan process.
- Conveyancing: Legal fees involved in transferring the property title.
- Building and Pest Inspections: These are crucial for identifying potential issues with the property. Ensure you account for these costs to prevent financial surprises during your home buying journey.
In researching this topic, there were many other things that cropped up as must-knows before buying a house. Some common sense, some more abstract. We’ve found the top 13 questions you should ask yourself before and during your home purchase journey, that seem pretty consistent across several forums, and from our own experience of buying houses, are the must-ask questions.
One quote that stood out as something that should always be remembered when you are buying is: ‘Buy only the home you need, not the house you can afford‘.
Understanding your needs vs your wants, really should be step one of the process, and that is exactly where we start…
Before you start looking...
1. What do you really need vs want in a home?
You should already have an idea of what neighbourhoods are most convenient in terms of proximity to work, schools and social activities (if you don’t, do this exercise first). So now make a list of amenities that are must haves and stick to them. And remember, even if you don’t plan on children, the quality of the school district can affect resale values. You can also create a list of nice-to-haves but this list is not to distract you from sticking to your budget and must-haves. It is simply there to help guide you when you come across multiple homes that tick all your must-have boxes.
This exercise helps ensure that you buy without too much emotion. Buying a house based on emotions is just going to break your heart. If you fall in love with something, you might end up making some pretty bad financial decisions. There’s a big difference between your emotions and your instincts. Going with your instincts means that you recognise that you’re getting a great house for a good value. Going with your emotions is being obsessed with the paint colour or the backyard. It’s an investment, so stay calm and be wise.
2. Do you need pre-approval before you start looking?
There’s a big difference between a buyer being pre-qualified and a buyer who has a pre-approved mortgage. Anybody can get pre-qualified for a loan. Getting pre-approved means a lender has looked at all of your financial information and they’ve let you know how much you can afford and how much they will lend you. Being pre-approved will save you a lot of time and energy so you are not running around looking at houses you can’t afford. It also gives you the opportunity to shop around for the best deal and the best interest rates. Do your research: Learn about stamp duty, conveyancing and legal fees, processing fees as well as the agent and bank fees. Make sure there aren’t any hidden costs in the loan.
Also make sure you double-check your property assessment. The lender may not approve the purchase price offered on a home if they think it is too high against the value they have recorded on the house. Have a clear understanding with your lender as to the process required to follow to be able to place an approved offer.
3. How do you get pre-approval?
It’s not wise to make any huge purchases or move your money around three to six months before buying a new home. You don’t want to take any big chances with your credit profile. Lenders need to see that you’re reliable and they want a complete paper trail so that they can get you the best loan possible. If you open new credit cards, amass too much debt or buy a lot of big-ticket items, you’re going to have a hard time getting a loan.
4. What is the actual cost of buying a house?
In addition to the sales price, ask about any additional fees such as association fees and rates. These monthly, quarterly or annual payments need to be factored into your potential overall monthly payment. Also consider the utilities costs. Granted, your usage will be different, depending on your family size and usage. But calling ahead to the utility companies (and even identifying which utilities you will need to pay–gas or electric? both?) will give you a great starting point to use when creating your budget, to make sure you can afford the property and all the things that go into moving into a new or larger home. There are tons of expenses you don’t even realize up front that you’ll need to pay when you move into a new house, but if you can nail down the utilities, you’re one step closer to making a wise decision.
5. When is the best time to buy?
Don’t obsess with trying to time the market and figure out when is the best time to buy. Trying to anticipate the housing market is impossible. The best time to buy is when you find your perfect house and you can afford it. Real estate is cyclical, it goes up and it goes down and it goes back up again. So, if you try to wait for the perfect time, you’re probably going to miss out.
6. How long has the home been on the market?
Find out how long a potential home has been on the market. A home that has been listed for six months or more is more likely to have an owner flexible on the asking price. But find out why it has been on the market for so long. Were there other offers that fell through? If so, find out why. It could be that the previous buyer had financing problems, but it could also be that something turned up in the builder’s report, indicating a problem you might not want to deal with either.
7. What is the neighbourhood (and the neighbours) like?
Before you buy, get the lay of the land – drop by morning, noon and night. Many home-buyers have become completely distraught because they thought they found the perfect home, only to find out the neighbourhood wasn’t for them. Drive by the house at all hours of the day to see what’s happening in the neighbourhood. Do your regular commute from the house to make sure it is something you can deal with on a daily basis. Find out how far it is to the nearest grocery store and other services. Even if you don’t have kids, research the schools because it affects the value of your home in a very big way. If you buy a house in a good school district versus bad school district even in the same town, the value can be affected as much as 20 percent.
Don’t be afraid to knock on the doors of the nearby neighbours and tell them you’re planning to make an offer on the house next door or across the street. See what they say. Are they nice? Are they gossiping about the other neighbours that are moving out? What does their yard look like? Be sure to talk to as many as you can.
The more you know about your future home, the more likely you are to have a haven that truly suits your lifestyle and your future plans.
Also, don’t be shy about visiting and revisiting the house Look as many times as you need. This is the place you’ll call home, after all.
8. What is the home’s condition?
How old is the home, and what condition is it in? Remember that most sellers have done everything they can reasonably do to spruce up their home for sale. If you can see wear and tear on the house, it could be a red flag. Other red flags include signs of rust, mould or water leaks.
No house is going to be perfectly upgraded, especially if it’s a steal in price. But maybe you’re mesmerised by the beauty of the bay window, or the lovely wood floors, or how nice the house could be after you’ve gotten your DIY hands on it. Sometimes a home’s potential is its selling feature, along with the price and the promise of its beauty. But you must take a hard look at how outdated the house really is. How much will it cost to upgrade your new home?
How much time will be involved if you attempt some DIY projects yourself? Are you being realistic regarding what you can accomplish, in time and budget? If you have kids, consider if you’ll have enough time away from the kids to get these projects done. Otherwise, you may end up years later with rooms still donning the hideous wallpaper because there just isn’t enough time to get the house “done.”
9. How new are the essentials?
How new are some of the critical working parts of the home? If you aren’t buying new, it’s a good idea to find out how old the pipes are and what they are made of. You should also find out the age of the water heater (they typically only last about 10 years). If the appliances are being sold with the home, their age could be a factor as well.
10. Does the ground slope AWAY from the house?
Does the house sit at the top or bottom of a hill? Where does the water flow around the house? Grading is probably one of the few things people check when they go house-hunting. Don’t make this mistake! Grading that is poor and allows rain and water to sit at the home’s foundation is a recipe for flooding and water damage. Grading isn’t cheap to fix. Expect to pay upwards of $2,500 to have a professional landscaper or grading professional to regrade the entire perimeter of your home.
Ready to place a bid...
11. Do you need a builder’s report?
If there hasn’t been a builder’s report done, that you know of, and you are seriously considering purchasing a particular home, get it done. It’ll cost about $300 but could end up saving you thousands. A builder’s report has the sole responsibility of providing you with information so that you can make a decision as to whether or not to buy. It’s really the only way to get an unbiased third-party opinion. If the inspector does find any issues with the home, you can use it as a bargaining tool for lowering the price of the home – or make the sound decision to walk away from it, if the findings are not worth the repair costs. It’s better to spend the money up front on an inspector than to find out later you have to spend a fortune.
12. Does anyone else have access?
Zoning and easement issues are often initially overlooked. Find out if there are any easements on the property, giving a third-party certain rights. You’ll want to know before you buy if a neighbour has the right to access a section of your property or if a utility company can place structures on your land. Knowing precisely where your property lines are may also save you from a potential dispute with your neighbours.
13. What is the best way to place a bid?
Your opening bid should be based on two things: what you can afford (because you don’t want to outbid yourself), and what you really believe the property is worth. Make your opening bid something that’s fair and reasonable and isn’t going to totally offend the seller. A lot of people think they should go lower the first time they make a bid. It all depends on what the market is doing at the time. You need to look at what other homes have gone for in that neighbourhood and you want to get an average price per square metre. Sizing up a house on a price-per-square-metre basis is a great equalizer. Also, see if the neighbours have plans to put up a new addition or a basketball court or tennis court, something that might detract from the property’s value down the road.
Tip: Sellers respect a bid that is an oddball number and are more likely to take it more seriously. A nice round number sounds like every other bid out there. When you get more specific the sellers will think you’ve given the offer careful thought.
Buying a house is likely one of the biggest purchases you’ll make, both financially and mentally. If the market is a seller’s market, it can add to the stress. But just stick to your needs list, budget and do your due diligence to ensure that when that right house that ticks all your boxes does come along, you are confident in your purchase knowing you haven’t missed any crucial detail.
Happy house hunting!