13 common mistakes home buyers make – and how to avoid them

Buying a home should be exciting, yet it can also feel overwhelming, particularly if you are purchasing for the first time.

For most Australians, it will be the largest financial transaction they ever undertake, but many buyers enter the market without the preparation needed to make a sound decision.

That is understandable because the buying process tends to favour the seller. The selling agent represents the vendor, while buyers are often expected to navigate finance, contracts, inspections, negotiations and auctions largely on their own.

A poor decision could affect your lifestyle and finances for many years, so here are 13 common home-buying mistakes you should avoid.

To help guide you, let’s look at 13 Common Mistakes made by Home Buyers – ones that you should avoid.

1.  Failing to research and prepare properly

Before you start searching for properties, take the time to understand your financial position and what your family really needs from its next home.

Review your income, assets, debts and regular expenses, and arrange finance pre-approval before becoming emotionally involved in a property.

You should also research the neighbourhood because you are buying a location as well as a home.

Look at schools, public transport, shopping, parks, traffic, crime levels and future planning or zoning changes. Remember that even within a good suburb, some streets and pockets will be considerably more desirable than others.

2.  Choosing the wrong mortgage

Having your loan pre-approved, rather than merely pre-qualified, can place you in a much stronger negotiating position.

Online borrowing calculators may provide a rough indication of your capacity, but they can't account for all the criteria lenders use when assessing an application.

There can be a substantial difference between what a calculator suggests you can borrow, what a bank will approve and what you can comfortably afford.

Finance should be selected carefully because the cheapest advertised interest rate may not provide the flexibility or features you need.

An experienced finance broker can compare a range of lenders and loan products rather than limiting you to the options offered by one bank.

3. Allowing “the market” to dictate your decision

Property markets move in cycles, and conditions will sometimes favour buyers and sometimes favour sellers.

However, waiting indefinitely for the perfect time to buy could mean placing your family’s future on hold while prices, interest rates and lending conditions continue to change.

Mixed messages in the media can make buyers hesitant, particularly when commentators offer conflicting forecasts.

If your finances are secure, your budget is realistic, and the home suits your present and future needs, short-term market movements should not determine what is fundamentally a long-term lifestyle decision.

4. Stretching beyond your budget

Most buyers know the feeling. You begin looking within your budget, yet properties costing another $50,000 or $100,000 always seem more appealing.

It is human nature to want a little more than you can comfortably afford, and selling agents are skilled at encouraging buyers to increase their offers.

Spending too much can leave you vulnerable to interest rate rises, unexpected expenses or changes in your income and family circumstances.

Treat your borrowing limit as a ceiling rather than a target. A comfortable buffer gives you greater financial security and makes homeownership considerably less stressful.

5. Falling in love with a property.

Buying a home will always involve emotion, but allowing that emotion to take control can lead to overpaying or overlooking important faults.

If you believe you have found your dream home, avoid revealing how emotionally committed you are to the selling agent. Agents are trained negotiators and will use that information to extract a higher price.

There will usually be another suitable property, even if it does not feel that way at the time.

Set your limit before negotiations begin and be prepared to walk away if the price exceeds what the property is worth or what you can sensibly afford.

6. Focusing too heavily on price

We often say that you make your money in property when you buy, but this does not mean you need to purchase the cheapest home available.

Long-term value comes from buying the right property in the right location at a fair price.

A cheap property on a main road, in an inferior position or with serious compromises may remain cheap relative to better properties for many years.

Once you find a suitable home, base your offer on comparable recent sales rather than the vendor’s asking price. A buyer’s agent can prepare a comparative market analysis and help you determine what the property is genuinely worth.

This knowledge lets you make a competitive offer without paying more than necessary.

7. Failing to protect yourself in the contract

Never sign a contract until your solicitor or conveyancer has reviewed it and confirmed that your interests are protected.

Cooling-off rules and contract conditions vary between states and territories, and cooling-off periods do not apply to properties bought at auction or in certain other circumstances.

Depending on the property and the method of sale, your legal adviser may recommend clauses relating to finance approval, building and pest inspections, settlement timing or other matters.

Don't assume you can renegotiate these protections after signing. The seller may have no obligation to accept changes, which is why you should seek appropriate advice before you commit.

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8. Underestimating the full costs of buying a home

Many home buyers concentrate on the purchase price and the deposit, but overlook the other expenses involved.

Depending on your circumstances and location, these can include stamp duty, conveyancing costs, building and pest inspections, loan fees, mortgage registration, lender’s mortgage insurance, valuation expenses and adjustments for council or water rates.

There are also removal costs and the inevitable expenses that arise after moving in.

Appliances have an irritating habit of breaking soon after settlement, while repairs, furniture and small improvements can quickly consume thousands of dollars.

Then there are the continuing costs of ownership, including council rates, insurance, owners corporation fees where applicable, maintenance and loan repayments.

Allowing for these expenses before buying will help you avoid an unwelcome financial surprise.

9. The “Fed Up” purchase

After months of inspections, unsuccessful offers and disappointing auctions, even patient buyers can become frustrated.

This is when some people purchase a property that is merely acceptable because they are tired of searching and want the process to end.

A compromise may be reasonable when it involves cosmetic features or preferences, but compromising on location, accommodation, structural condition or affordability can lead to regret.

If frustration is affecting your judgement, take a short break from the search.

Or better still, get a buyers' agent on your side to save you time, to look in nooks and crannies you wouldn’t have thought of and find those silent sales for you – those off-market properties.

10. Not organising a professional building inspection

A professional building and pest inspection could save you from buying a property with serious, expensive defects.

The inspector should be appropriately qualified, insured and independent of the selling agent.

Most reports will contain a long list of issues because inspectors are trained to identify faults. Minor maintenance items are common and should not automatically discourage you from buying.

Pay particular attention to major structural problems, water damage, termite activity, roofing defects and issues that may require costly repairs.

If you don't understand the findings, speak directly with the inspector and ask them to explain the seriousness and likely consequences of each major issue.

11. Misunderstanding the real estate agent's role

Selling agents are usually friendly and helpful, and you may spend considerable time speaking with them during your search.

However, the selling agent has been appointed by the vendor and is legally obliged to act in the vendor’s interests.

Their job is to achieve the best possible price and contractual terms for their client. Buyers should therefore be careful about disclosing their urgency, budget or emotional attachment to a property.

An independent buyer’s agent can level the playing field by representing you throughout the search, assessment and negotiation process.

12. Trying to do everything alone

The seller has an experienced professional protecting their interests, yet many buyers enter the transaction without equivalent representation.

You may have researched the market and understand the buying process, but it is difficult to stay objective when you can already imagine your family living there.

The property you choose, the price you pay and the contract you sign can affect your lifestyle and financial position for decades.

A qualified buyer’s agent can provide independent advice, assess a property objectively, negotiate on your behalf and prevent emotion from driving the decision.

13.  Thinking this list is exhaustive

Every home purchase is different, and there may be legal, financial, structural or planning issues specific to the property you are considering.

These 13 mistakes provide a useful starting point, but they cannot replace advice tailored to your circumstances.

The best buyers prepare carefully, remain disciplined and surround themselves with experienced professionals before making an unconditional commitment.

But, hopefully, this will help you avoid a few common mistakes as you contemplate buying your next home.

If you want all your questions answered consider engaging Metropole Property Strategists to help level the playing field and act as your buyers’ agents.