As we all know, the rampant market of the last year or two has been kind to homeowners, many of whom have accrued considerable financial gains simply because they happened to own a property during these unprecedented times. The Sunday Star times on 1st August quoted examples of huge capital gains that had fallen in the lap of homeowners, with some higher priced properties showing market value gains of millions of dollars. Homes in more affordable price ranges have also provided significant gains in market value and most homeowners can claim to be worth considerably more now than what they were a couple of years ago. Asset rich perhaps, but not necessarily cash rich! But spare a thought for first home buyers during this time.
Historically, first home buyers have been an important cog in the real estate wheel. They purchase at the lower end of the price spectrum and free up buyers to purchase more expensive homes. In doing so they are following the Kiwi tradition of striving to achieve the goal of homeownership; a tradition that once focused on a quarter acre section for gardening and recreation, but now the emphasis is often on less ground to maintain, or perhaps an inner-city apartment for convenience. Irrespective of individual needs and desires, homeownership is what most of us aspire to. Achieving this objective however has become ever so much more difficult!
At the risk of stating the obvious, we will endeavour to offer some tips that may help first home buyers to achieve their dream of homeownership: –
YOUR MAIN OBSTACLES:
- Saving the required deposit funds to meet current lending criteria for mortgage finance is first and foremost. As if saving is not difficult enough, rentals are at an all time high and any additional government intervention that works against landlords is likely to see a further reduction in the availability of private sector rental accommodation. Shortage of accommodation inevitably means higher rental costs. Perhaps moving back home for a period of concerted saving is an option? Alternatively, family assistance with financing a property is quite common these days. This can be in the form of a loan or by joint ownership. However, irrespective of how good the relationship between the involved parties is, the arrangement needs to be legally documented.
- Still on the subject of finance, align yourself with a reputable mortgage broker. Know your limits and ensure that you are getting a competitive offer when a proposal is placed before you. Having pre-approved finance will be your strongest negotiating tool. Make sure you fully understand your buying limitations as this can be important in the negotiating cauldron and particularly in an auction situation where instant decisions are necessary. Don’t get carried away in the heat of the battle!
- Allow some further funds for purchasing costs. For example, you will need some funds for solicitor’s costs and perhaps a valuation report or a building report when you locate a suitable property.
- Be active and do your own homework. Attending open homes is the best way to assess market value. You will be surprised how quickly you can formulate your own opinion on the value of a property. Whilst your assessment may not always be correct, talk to agents at open homes and develop a relationship with someone you feel you can work comfortably with. An agent who is active in your area of interest will provide you with details of recent sales and guide you through the negotiation process when the time comes. Attend auctions to get a feel for this process which can be intimidating to the uninitiated.
- Have an open mind on locations of interest. Everyone has their preferences for where they would like to live. However, this may not always be possible so be flexible on your attitude to location. Look for the house that suits your requirements and budget but also look at the property through the eyes of a subsequent owner and satisfy yourself that the usual amenities – shops, transport and schools – are easily accessible.
- It’s time to negotiate. So, you have found a home that meets your criteria in most respects. Remember the perfect house has never been built so some compromise will inevitably be necessary. In most instances it is prudent to obtain a builder’s report or other specialist reports to avoid inheriting someone else’s problems. In a competitive situation you may be encouraged to forgo some purchaser’s conditions to make your offer more appealing. A word of warning! Take care when doing this and don’t take risks or shortcuts that you may regret later.
- Talk to your agent to find out what level of interest there is from other potential buyers. The vendor’s agent has an obligation to inform you of any other interest in the property. You are entitled to know the number of other buyers showing genuine interest in the property and also if this level of interest has increased or perhaps diminished at negotiating time. That information should be conveyed to you by the vendor’s agent. If you are in a competitive situation, make the best possible offer you can within the financial restraints imposed by your mortgagee. Don’t go out on a limb by over committing, and if you miss this property, take a philosophical attitude and seek out an alternative one.
Tommy’s has an enormous degree of empathy with first home buyers in this highly competitive market. In a real estate market where demand exceeds supply, we don’t see the situation changing significantly in the near future and there is little that we can do about this. What we can do though is offer buyers our maximum support and encouragement. We are here to help and invite you to speak with our sales team at any time that you are seeking information, advice or market data that will assist you in achieving that important and elusive goal of homeownership.