Impulsive Property Buying – What Can Go Wrong?
Impulsive Property Buying – What Can Go Wrong?
If you’re in the market for a property or just have an interest in real estate you’ve probably been to an auction. Tensions are high, adrenaline is pumping, serious bidders are eyeing off their competition and vendors are nervously lurking about in anticipation. Auctions are dramatic spectacles for everyone involved. Keen buyers have probably invested significant time in researching the property they’ve fallen in love with. After all, it’s serious money that’s on the line. So, when out of nowhere comes a buyer who’s only just stumbled upon the property that day, he or she swoops in at auction and wins, you have to wonder… what was that?!?! Where did that come from ?!?! Did someone just purchase a property on impulse?!? Do people do that?!?! Yes they do!
Buying and selling property is expensive even when you “get it right”. It’s really expensive if you “get it wrong”.
As buyer’s agents who are out in the field every Saturday, going to auctions, we see this happen from time to time and it still surprises us when it happens. How can someone just come out on a Saturday and buy a house without conducting thorough research on what they are buying? It’s so risky. Are these people adrenaline junkies? Do they have money to burn?
When you purchase a property, besides the 10% deposit, you’ll have stamp duty fees, solicitor fees, bank fees, etc. It can cost 7 to 8% of the property price or more on top of your deposit. So, on a $750,000 the additional financial outlay could be between $43,000 and possibly more after purchase. That’s not loose change. Not to mention the cost of selling which can be expensive as well. We recently helped a Vendor with our Vendor Advocacy service to sell for $1 million dollars. As her Buyers Agent we calculated her maximum budget to buy back into the market. She was a down-sizer. Would you believe that after all the expenses of selling and buying, her maximum purchase price was $905,000.
So apart from the cost of acquisition and disposal, what can go wrong?
A house can look appealing at face value, but there can be a lot wrong. A buyer can’t see everything a house has to offer during a 30-minute inspection. Thorough due diligence is a must when so much money is at stake. Consumer Affairs Victoria, the real estate regulatory body has a comprehensive checklist which you can find here.
Some of the most important issues to look into include:
Quality of the property – Thorough building inspections are a must. You can’t always see termites or bad electrical wiring. There is a laundry list of faults a house can have that you can’t see without an expert eye. 
Buying into an Owners Corporation – Does the property share common property? Is there an active Owners Corporation? What are the ongoing fees? How’s the upkeep?
Zoning- Is the property in a General Residential Zone, a Growth Zone or heritage listed? Do you know what this means and how it will affect your property?
Bushfire Zone or Flood Risk Zone – Will the property be affected? What kind of insurance costs will be applied? Is it worth the risk?
Contamination – Is the soil on the property contaminated due to past activity? Is the water safe? Are there factories nearby which can affect the safety of your water?
Land size and boundaries – The land size listed on the sales brochure may not be the actual land size. Are fences erected in the right spot? Is the land you think you’re buying really on title?
Planning schemes, overlays and easements, caveats – Schemes, overlays and easements determine how a property can be used. Without understanding these you can’t know what applies to the property. If you want to subdivide or redevelop you need to know everything that applies. More here.
Pending or approved permits – What permits have been applied for by the neighbours and how will their plans affect your property. Will you have a new Woolworths or Coles in your backyard in 6 months time?
Insurance and warranties – The property looks great because it’s just been upgraded or modernised, but that’s not always a good thing. Are the works legal and do they have the appropriate council permits? Has the renovation been done well? Are the works covered by warranty?
Amenity Connections – What services are connected and what’s available at the property? Electricity, gas, water, phone, internet, NBN etc.?
Flammable Cladding – Has part of the property been built using flammable cladding materials? Will these be removed and at what cost? Who will pay for that?
Extensions and Conversions – Has the property got a Granny Flat or has the original home been extended or does it have a garage conversion. Was a permit issued by the local council for these works? If not, it may need to be knocked down.
There is a lot of work that needs to be done prior to purchasing a property. Buying without having the right support team made up of a buyer’s agent, solicitor or conveyancer, building and pest inspector etc., on your side can be very risky. The right team of people will ensure you buy a high quality property and you won’t have regrets. We’re sure many impulse property buyers have kicked themselves for not doing their homework before buying real estate.
https://www.consumer.vic.gov.au/duediligencechecklist
At Buyer Solutions, we get told after the fact about many poor outcomes from lack of pre-purchase research. Our Assisted Buying Service is in demand. A buyer can find a property they want to buy and ask Buyer Solutions team to take care of the due diligence or property evaluation, advise on what to pay and why and then bid at auction or handle all negotiations. Buying property is a huge investment of time to “buy well” and Buyer Solutions will eliminate the stress and do it all for you, ensuring mistakes are not made and you buy well and prudently.
For independent advice on buying or selling real estate, contact Janet Spencer at Buyer Solutions +61 3 9816 8555 or email jspencer@buyersolutions.com.au
Buyers Agent, Buying property, Home buying, Investment property
+61 39816 8555