Episode 5 of The First Home Buyers Show - Buying process

Oh, my goodness. Is the property market, like going into battle? I bet you're wondering if you've never purchased a property before, is it worth it? Am I going to come out alive? Well, I've got really good news for you today. We are going to take you step by step through every single thing that you need to know so nothing is forgotten. And without further ado, let's head over.

To the credits show where first home buyers go to watch their wealth grow. And here's your host, Jane Slack Smith Foreign.

Hello, hello. And it is Jane here and it is so good to have you here. Today we are going to be talking about all the things that you need to know when you are actually looking at purchasing a property. Now I have a very special guest that's going to be joining us a little later. But what I want to do today is make sure that you are are fully versed with all the things that you need to know because I've often spoken to people who go into buying their first property or their first investment property or maybe a property that they haven't purchased for five to 10 years and they go in and they forget the things they need to do. Simple things like inspections. My goodness, if you miss termites, there could be over 10, 20, $30,000 in damage that you're missing out and you may have a property for that is falling down around your ears. So there's so many things that I want to cover today. But let's start off with our framework so that we can actually go through this step by step so that we make sure that we have covered everything off. Now, first and foremost, it is so important to see it, understand what you're trying to do. Now often when I speak to people who are thinking about buying a property, they're not too sure where they're going to buy. I have spoken to someone who told me that they found a property whilst walking their dog and thought it was a good idea to buy around the corner because they can check on the property regularly. And I've also spoken to someone who rang up in a little bit of a flap who said he little Tradie in Young apprentice Tradie in Melbourne. He was driving through footscray. He could see an auction going on. He felt a bit sorry for the auctioneer because there was only three people there bidding. So, so he pulled up and he bought a unit for $250,000. Didn't even know that he needed to have the deposit available. So lots and lots of problems. Now let me know if you're here online. Hey, I can see that Sharon's here. Hey, Sharon, it's really great to see you. Sharon, are you looking for a property at the moment? Tell me and if so, where, because we want to cover off all the questions that people have and if you're watching this, let me know. Where are you looking for a property? We'd really love to to know a bit more about you so that we can give you more value now. So here's the thing about seeing and setting your goal. You really need to know what you are after. So obviously this is the first time buyer show. We have a little bit of a different model here which is rather than buying your first home, living it forever and the grandkids come and visit you, you're utilizing all of the first home loan deposit schemes, the grants, the consent sessions, even the lender discounts so that you can actually get into your property sooner with less. Now, in the last couple of weeks, the government with a first home loan deposit scheme has come out with the details on the caps. So for instance, a $700,000 purchase price for major regional areas in New South Wales and Sydney, 600,000 for major regional areas like Geelong and Melbourne and so on and so forth. So knowing the cap is important. But if you could get into a property with just a 5% deposit, no mortgage insurance, which in Melbourne on a $600,000 property with a 5% deposit is $31,000. And if you're buying in Melbourne, the stamp duty concession you can get for a new or established house is $29,000, that's 60 grand less than what you actually need. So there's a lot of things that really allow you to get into the market sooner. So setting that goal and we're talking about buying your all of the benefits that are set up there for you so that you can get in with as little as a 5% deposit, $600,000 purchase price. What does that mean? That means that you could get in with as little as $30,000. And let's throw on $2,000 for inspections and for legal so $32,000 could get you into the market. So. Oh, hi, Susie, great to see you too. Here. Thank you so much for joining us. It's great to see all our regulars and some new people as well. So tell me, where are you looking at buying? Because I might be able to pull up a little bit of information about that for you later too. So setting your goal, very, very important. This is a step a lot of people miss. And here's another thing that a lot of people miss. And that is the goal and the strategy match. So if you actually have a goal of creating an investment property that is going to almost pay for itself or pay for itself, then your strategy might be one that needs to actually generate a higher cash flow. Now that was one of my strategies when I started investing and I turned my first home into an investment property and increased the rent quite considerably by renovating it. So understanding what your strategy is first and your goal is so important so that you can actually link those together. And from then on, what we're looking at is making sure that all of those properties that you're looking at or the suburbs you're looking at, match your strategy, which is going to get you to the goal. And that's all about see it. So the first thing that I really want you to consider is make sure that you get into setting that goal. And don't forget this is an important step and understanding what strategy you want. Now, a lot of people look at really risky strategies because they may have only three or five years to get to retirement. As a first home buyer, I would like to think that you have 10, 15, 20, 30 years ahead of you of this property gaining you equity and wealth. So we're not talking about maybe subdividing or flipping or developing or adding townhouses on or even greening flats or, you know, multi room residences. So there's a lot of things that you can do and a lot of people feel forced into some of those riskiest strategies that they haven't done before, without experience and potentially can lose their nest egg because they're running up against the time of retirement. My ideal here is for first time buyers to buy strategically buy well so that you've got years in the market making you money. So let's have a look at the next phase. And this is some of the things that people often forget. And this is setting it up correctly. Now first and foremost, just make sure you have enough money, your savings that is going to allow you to buy the property. Now the worst thing that can happen is you go and start searching for a property, you overlook the goal, you overlook your strategy, you overlook having as much money and you're at auction. And this does happen. People put their finger up and thinking, Well, I earn 80, 90, $100,000 a year, how hard could it be to get a loan? And they go to the lender after they bought the property, only to find that they don't actually have the ability because there's a Little credit hit maybe or a problem or blemish on their credit file or they don't quite have enough cash or the property they've overpaid for and the lender won't give them money. So we want to make sure that you understand the steps so that you don't get this wrong. So when I'm looking at that is knowing the deposit you have so that you can actually contribute that. Now lenders want a minimum of a 5% genuine savings. Now what does this mean? Some lenders, this means they need to see 5% of the property purchase value in your savings account for three months. So if you're not ready with that, maybe it's time to not go and get a hit on your credit file and apply for a loan to but wait for the three months or work with a mortgage broker who can actually assess this for you and give you a game plan. Because hitting your credit file time and time again and with inquiries when you're not quite ready is a bad thing. So a mortgage broker can work you, work through with you and assist you in doing, you know, assessing what you can do. The next thing that I would look at is just the cost, understand if you're borrowing capacity, what your borrowing capacity is and once again the mortgage broker can assist you with that. But with you knowing your borrowing capacity is one thing, which is the lenders are going to lend you. But if you think that a fifteen hundred dollars a month mortgage is something you can't afford going forward, then it's really important to know that upfront before you get that property and get into trouble. Now the reality is that after six to 12 months, if you take the advantage of the first time buyers schemes concessions and snap duty concessions, then you're going to be moving out of that property, you're going to have rent. But if you've been living at home and you haven't been paying rent before and all of a sudden you have a mortgage that you're paying, it may actually really hit your hip pocket. So number one, make sure you understand your deposit. How much you have, your borrowing capacity is how much you can borrow. Those two things together are going to get you the total purchase price. But on top of that there's other costs that you have to account for as well. Stamp duty and depending on what state you're in, you're going to have maybe the ability to have stamp duty concessions. Now I have here the first home Buyers Guide to grants. Now if you haven't already got a copy of this, which goes through and tells you what the stamp duty concessions are and potentially first home buyers grants in each state. And please verify this with all the links to they update regularly. Go write remind below and if you hit remind below, I'm going to send you a copy of this. And this is, as I said, updated very regularly. So what you need to know is what are the stamp duty concessions that you might be able to get? So New South Wales, no duty for new homes valued up to. So you don't have to pay any duty on homes up to $650,000. And concessions for new and established homes value between 650,000 and 800,000. So this is something that you need to know because these are costs that you'll have to pay if you can't actually get those stamp duty concessions. So the other thing that we want to make sure that you understand is all of the things that you need to do in getting the loan. Now don't wait until you find a property, until you get a loan. It's really important that you're assessed first. Now for a lot of you, as you know, I am also a mortgage broker. I have invested towards mortgages and we've spoken to a lot of first home buyers in the last couple of months and what we're finding time and time again is that the deposit is an issue. So if deposits and getting that deposit together is a problem for you, go back and watch episode four because we covered how you can increase your borrowing capacity, increase your deposit, reduce your costs and increase your income. But it's really important that you understand that you need to get a pre approval. Now a pre approval is essentially when a lender goes through and checks a lot of the information and makes sure that they're happy to give you the loan. But every lender is not created equally. As I mentioned before, you know, most lenders want to see a 5% genuine savings. Some lenders will actually say, well, if you've been paying rent, in actual fact, that is a lot of, you know, money that's going out, we can consider that a part of your savings. Obviously you're going to have to have the cash available at least 5% for when you do actually settle. But it's good to know that different lenders do things differently. So that's why either contact us or contact another broker who can actually walk you through what you need to know and what lender might suit you. And here's a really big mistake that people make and that is not having a finance and strategy match. So if your strategy is to build a granny flat out the back of your property and you've gone to a lender with a 95% loan and you then go, hey, I now want to borrow some money to put on $150,000 granny flat because I'm going to get $300 a week for that as well, then the lender you're with may not allow that to happen. They may not do construction loans. And if that is the case, you may have to change lenders. If you want to keep your strategy and pay another 15, $20,000 in mortgage insurance, or if you're one of the 10,000 that had the access to the first home loan deposit scheme, you might lose access to that completely. So please know that it's really important to have a finance and strategy match. Now another strategy that you might have is that you want to be able to have the property. And let's say you buy a $400,000 property, you've done all the things that we talk about in source it to get into a really good quality area and in two to three years time you want to pull out some of the equity. So let's say you want to pull out 40, $50,000 to maybe buy another property, buy another home, you know, pay off your uni debts, I don't know, whatever it, start a family, have a wedding, whatever that cost might be. But if you're with the lender where you maxed out your, your servicing capability, or you're with a lender that won't let you let get cash out once again, you're going to have to refinance potentially at a high cost to do that. So it's really important that you have a finance to strategy match and then you get your pre approval. Now pre approval usually lasts for three months. So this means that the bank says, look, I've done a few assessments, they're not going to do a full assessment like they used to do because I spoke to someone from CBA the other day and they told me of all the full assessments they do for their home seekers that only 26% ever get a loan. So it's a lot of work that the banks go through in checking everything. And more and more the banks are saying they don't want to do that. So know that a pre approval is not an absolute stamp that they have signed you off, but they've done a cursory look and they make sure your credit file is fine and they've looked at who you are and your credentials and They've said yes in theory. We're going to give you an approval in principle. Now know this, if you're planning on changing your job between getting approval in principle and buying a property, they will go and check your pay slips again. And if you add a lender that requires a three or six month probation period to be up, that could be absolutely a game changer for you. So being with the right lender is so very important. So if anyone has actually had a pre approval experience, I'm interested. Let me know below if you had any issues with pre approval. But make sure you know that when your mortgage broker does submit your loan application in, it does hit your credit file. So we don't want you to be wasting your time if you're not ready to buy. Okay? So get the pre approval in place. Do not go to auction without a pre approval. Do not buy without a pre approval. You need to make sure that the lenders will give you the money. All right, what else do I have on my list? Oh, the. What I wanted to make sure that you knew is before you have anything done that you also know what the costs are going to be post buying the property. So we talked about the additional costs of buying a property. Make sure you know what the costs are going to be. So your mortgage broker will go through and give you a estimate based on the current interest rates of what your repayment center beats. Because you need to know this because if all of a sudden you're going to be short $600 a month, then you're really going to have to be curtailing your lifestyle and that's not what anyone wants to do. Okay, so the next step, once you have your pre approval, you're out there and you are ready to source this property. Now this is the exciting spot. Now let me see where some of these people are from. So Susie's there on the central coast, which is fantastic. Who have we also got here? We've got Jan, we've got Sharon Vu. Tell me guys, where are you at the moment? Because when we're looking at sourcing a property, often where we want to buy and where we can afford to buy as first time buyers does not necessarily fit together. So what you need to know is first of all that borrowing capacity that your mortgage broker is going to assess for you. And once you know that, what we can then do is work out where you can afford to buy. Now what I want to show you here is a really. This is one of the tools that I use with my students in showing Them how and where they can buy. And I just want to take you through this because I want you to see what's really available. So this is my suburb selector software that I've developed over the last 20 years using filters to work out what suburbs outperform the others. This is in my Location Masterclass and my Diamond Investors Choice Mortgage clients get access to this. So let's just say that you wanted to buy in Brisbane. You were looking at a $500,000 price point and obviously you're happy to go below that a little bit. So let's say you're happy to go down to 4, 2020 and you think you can negotiate a bit better so maybe up to 10% and you have, you would like to be within 15Ks the CBD. Now what this does is just comes up with what is within your price point. Now I want to make this clear. I do have a whole methodology of how to get to suburbs with ripple effect and the suburbs that are going to get future growth. But this is just giving you an indication of, you know, how you might be able to use this information. So we've got all of these suburbs here that are within that kilometers from CBD and in that price point. But it gets a little bit more complicated because what we want to do is we want to be able to be reassured that the areas that we're looking at are going to be investor ready. Now I have a minimum of 30% renters, give or take a percentage or two, knowing that there's some areas in every suburb that outperform the suburb and bring up the median. But I'm looking for at least 30% renters and a maximum of 70% renters. So this qualifies here. I'm also making sure that I have enough sales per year, like 46 sales per year. I'm looking at four properties per month coming on the market. I need to make a decision whether I'm willing to waste my time or spend my time looking in that type of market. And I want to make sure that I've got the right kind of yield. So this is when you are going to turn the property into an investment property. Now the next thing you need to do before you get into a whole lot more data is you need to understand what the typical property is. And I'm going to come back to this time and time again. The typical property as you can see here is a house and the typical number of bedrooms is a three bedroom house. Now I want to know the demographics as well. If I'M going to be renting this property in the future. It's mum, dad with kids. So I know exactly that I'm looking for a three bedroom house for mom, dad and kids. I get a feel for here. You know what the average income is. I can see there's not much public housing, so I don't have to do a lot of research and making sure that I'm not near that. I'm looking at vacancy rates. Now for me, the couple of filters that I've just shared with you is I'm looking at the percentage of renters, I'm looking between 30% and 70% vacancy rate. I'm looking below 3%. Vacancy rate is a measure of how many people have their properties on the market compared to how many people are looking for rent. Now it's generally accepted. If it's 3% then what we're going to see is that the 3% is going to mean that there's an equilibrium at 2%. That means that there's more people looking than properties on the market. So we want less than 3%. So look, I have about 15 measures that filters that I use, but just the ones that I want you to concentrate just for the moment because you're having an investment property is this vacancy and percentage rent. Both of these things are going to reduce your risk. And I want you to be able to rent to the majority of the market and I want you to be able to sell when it comes time to sell. So we want the typical property and say why that is, why that is so important. Now one of the other things that is actually also important when we come to look at what we can do with the properties and the information is actually having understanding of the strategy that you're employing as well. Now I've pulled up Kedron here, so another Queensland area. So I can see here when I'm looking at Kedron, I get to have a little bit of an information and understanding of what the suburb looks like. But if your strategy is to renovate, I find this an amazing tool for me to be able to get a quick cursory look whether my strategy is going to fit. So if I say the median price is $730,000, for instance, I want to make sure that if I do a simple renovation that I spend maybe 10% of the value of the property, that there's capacity in the area. That is, there's properties that are renovated that are selling for at least 876,000. So what I've done there is I've said well, what's the median? 733. And then I've said if I spent 10% on a renovation, that would be my cost of the property and the renovation. But I want to make $2 back for every $1. So I want to make $73, 733, $73,000 back. That means that I need to have capacity and proof that there's sales in this top 75 percentile of the market, that is the renovated properties that we're making the assumption of that are actually there for sale. So that means that I'm going to have to buy below 730 if I wanted to buy in the suburb and enact that strategy. Now I'm going to go into this in a whole lot more detail later, but I just wanted you to have an understanding of the fact that there is information out there that allows you to source these properties in the right area and have that strategy match. So just as a real recap where we are at the moment, we've gone through setting the goal, we've gone through having your goal actually match your strategy. We've gone through making sure that you have the deposit that you need. You have you understand your borrowing capacity and how that results into the property price that you need. Once you've done that, you need to have the finance strategy match. So if you have a fancy strategy that you want to put in place like reduce access equity in a certain number of years, you need to be with a finance lender that is going to allow you to do that and obviously mortgage broker will help you on that. Now the other thing that you need to do is then move on to understanding the costs that you're going to have. So all the cost of the purchase and understanding the cost once you purchase the property and the cost once you turn it into an investment property, so all of that's important and then we get to source it and that's when it's beyond actually understanding what suburbs you're buying in. I've just shown you the suburbs selector software that shows you and allows you to understand what suburbs are characteristics. So you can get down to three to five suburbs that you can actually then start doing a whole lot more intensive investigation on because there's so many more things that you need to know and then we get down to actually looking for the typical property in the area. Now, as I said with Investors Choice mortgages, with all my pre approved clients, I give them access to RP data. Now RP data is a, a paid resource. So you can pay $150 a month or for my pre approved clients, what I do is I give them access to this for free for the three months. And what you can do is you can actually go in and create a watch list. So let's just say that you know, you were looking at buying in a particular area. And as you can see here, I've got one of these areas that I'm considering at the moment for some of my clients. So I'm looking in. I want to make sure that when a property comes up in that area that I am absolutely, completely all over it. Now obviously you can actually set up alerts in realestate.com and in domain.com au as well. But I find this really super easy. And one of the things that, one of the reasons that I use this is that it allows me to jump in and say I would like to have three bedroom house on a certain size block. So the typical block size of the area, 500 to 800 square meters. And please tell me when any of these properties come onto the market. So for me it's really important that you define exactly what you're after. And remember we do that also by being looking at the typical property that you're after. And the typical property, let's say a three bedroom house is the property that you're after. And then you go into the next step and set up those alerts so you know very quickly when and what is going to happen. Hey, great, thanks Carolina. I'm glad that you like that too. Okay, so what we have now is we have, we've been looking at, you know, how to actually define the type of property. But then we get into the inspections. So the inspections are also really important. Now this is the inspection of the property itself. So when I go through and do a property inspection, you know, you might be looking at 5 to 10 a day depending on how resilient you are. But it's really important that you actually record everything that you get. Now I'm going to share with you here what I have for my clients. So for my first home buyer clients for investors choice mortgages, I've got this whole course. So if you book a time and complete a inquiry with one of our mortgage brokers who specializes in first home buying, you will get access to this course. And as you can see here, we give you all the information need. But this home house inspection list is the inspection list that I used when I was starting and it really allows you to go through and get all the information that you need. Now why do you need all this information? Well, it just depends, you know, if you can understand, you know, the agents that you go to, for instance, and the agent always over quotes on the price and you're recording the sale date here and the selling date and the reserve price, then you're going to know that whenever you see a property by that agent, then it's possibly going to be overpriced. If the property has some distinctive features such as, you know, it's north facing or view of the sea or it's got, you know, 80s decor or whatever it is, you need to know that as well. This is the quick summary for you. But here is my inspection list that I use so that I can remember things. Now I have always renovated my property. So I'm always looking at things that are going to cost me money. And when I'm looking at these inspections, I'm just making sure that yes, it's there, it's of the standard I'm after. But often what I'll do. So for instance for dishwasher is I'll actually go and I will write down the brand of the dishwasher because and we'll get to this a little bit later when you do your pre settlement inspector inspection. I have often seen that my clients have thought they were getting a melee dishwasher and it's turned out to be a Dishlex and the owners have changed it at the last moment. So this just allows you to go through just other things. You know, is there enough power points in the bedrooms? These are things that can really frustrate you. And if you decide to put in extra PowerPoints, you're ripping off the skirting board, you're damaging the plaster. You know, it's not just to put in a PowerPoint, it's a repainting, replastering and refitting skirting boards. So all these things are going to cost. And the external inspection, now these external inspections is just making sure that you understand maybe the property has gas or it doesn't have gas or you know, you want to see for maybe depreciation purposes how old it is. You want to see, you know, is there anything around the property itself which could create a problem. So are the footings concrete? You know, just understand what is going on, which means that you're prompting you to look under the property and just get an understanding. Also, you know, is there a heritage zone in the area? These questions are things that you can do when you leave the property, but it just gives you a really Quick overview. Now I have used this for years and years and years and these inspection checklists that I've used, I've had plated them into a expander file by suburb usually and then often by unrenovated and renovated. And for every unrenovated property that I've looked at, you know, I might look at my eight, nine of those to purchase, I'll go and have a look at a renovated one to look at the standard of what the renovation is. And I'll also go and have a look at a rental property to see what is on the market for my competition in the future. So these are all important things that you should note down. This inspection checklist or creating one of your own is one really, really important because it's going to get you to the next level of understanding what are the things that you could miss. Because if you miss any of these, you could actually have a whole bigger problem. Now when you do start inspecting the properties, I suggest that what you do is you go through and you create your own little spreadsheet. So I've done this here. You know what the sale price was, what the number and the street number is. And you can see here I've set down, I know that three bedroom houses are the most typical property. So I've set down here three bedroom properties. Now this is a spreadsheet from one of my mentoring students and I'll show you a little bit later how she's used it. But she's gone through all of this sale data. She's number of bathrooms, parking. And you can see here that there's actually, there was actually filters in place that she's then removed. So if I have a look at all the properties that she's gone and had a look at. So these are so all, these are all the properties that have three bedroom properties that have sold. Now she knows that she doesn't want to have a pool and she's not even going to compare anything that has a pool in it. So we're going to say no pool. And we know that she wants to make sure that she gets the typical property which she believes is a brick or a brick rendered property. So we're just going to have a look at those. Now the other thing that she's done here is she's looked at where is it facing, you know, is it east, northwestly, south? Because there's some preferences and sale prices often reflect that. And she's also gone to this extra, this extra detail and you know, I love this detail and this is the kind of things and I'm going to show you when we go into the source it section in a lot more detail. The first home buyer show coming up in the future. But this detail really allows you to look at, you know, let's just say the section of the suburb might be when you start reading the advertisements and they're saying in the blue chip area or in the golden triangle or on the preferred northern side of the freeway, that could be one section. There could also be one section that has like the older style properties. So the prices will reflect that. So this is what she has done and this is what you could do. As you can see here also we've got the roads. So some roads are busier than others and she's just ranked them from one to three and then she's got the sale date. Now this allows you to quickly get all the information and all the sale information that you need. Now as I said before, let me find my screen here. You can actually go through and use RP data. And if you put in a suburb here and had a look at, you know, we talked about Kedron for instance, had a look at Kedron, you can actually pull up all the sales data over time and that's going to give you the data that you can put into the spreadsheet. You don't actually have to go out and do it all yourself. Now remember, we would be looking at just the three bedroom houses that are the typical property for the area. So it's really important that you're comparing like with like. And that's when we come up with here the sales data. So we can see here in the last six months this many properties, 34 properties have sold. I can take that information, I can export, edit all it and provide myself with the basis for this spreadsheet. Now just one other quick thing that I wanted to show you. This is a four bedroom analysis that was done as well. When you have the land size in meters squared and you have the property price, I create a calculation here. So I'm looking at the cost per square meters, which is just the sale price divided by the land size. And what that allows me to do is when I think about, oh, I'm looking at unrenovated properties, so I'm looking at these, I can actually start picking up what would be the median or the average cost per square meter for an unrerogated property. And then if I then start looking at the renovated properties, I could say, well, what's the square meter for the renovated properties, so I can see that the average is higher. So I get a idea of what the unrenovated and renovated costs can be. Or you might want to do the same exercise with, you know, the timber properties versus the brick properties. You know, what is the difference in the median cost. So there's so many things that you can do that are actually going to give you the power to understand very, very quickly what you can do and how you could do it. So that gives you an idea of the information that we have available when we're looking at SourceIt. So you get down to the suburb and the suburb might be defined by the strategy you have. If you don't have the capacity to make money from renovation and that's your strategy you want to employ whilst you're living in the property, then that suburb may not be right for you. You use filters to make sure that you have a low risk approach. So I talked about in this case vacancy rate and I also talked about the percentage of renters and the number of sales things that are going to work for you. And then what we do is, let's say you've gone through, you've done all the analysis, you've found out what you should be paying for the property, you really found a property you like. We then move on to, to the slam stage. Now it is my great pleasure to introduce you to once again Scott Agate from hello House. Hey Scott, how you going?

Hi Jane. I'm well, thanks. How are you?

I am great. Well, if you tuned in to episode three, you know that Scott from hello House is a supreme negotiator and was a real estate agent for over 20 years. He's now working on our side and helping people secure deals. And congratulations. I saw that you were on Channel 7 this week in helping someone getting a property below what they thought they were going to get it for.

Yeah, good saving at 380,000 to save them $55,000. So over the course of the loan it's probably about 100, $110,000 saving, which is. No. Yeah, nothing to sneeze at. Right. Big saving. Worth the effort to negotiate it properly.

And you know what I really like is just before we got onto the show earlier today, you were there negotiating a deal. Have we got any update? How are you going?

Offer and acceptance? Yes, that was a long, worn out negotiation over about three days. But we ended up spending $1,000 more than my low offer and bought it. So I think I saved the client six and a half thousand dollars below their target. Price and we bought it for 4, 483,500.

One of the things, because we're going to lead into negotiation here and understanding negotiation as the next part of what you need to know when understanding the process of buying a property. But what I loved about just hearing you having that negotiation was, I think you said a line, something along the lines of this is it, this is our price. She's not going to be turning up to your auction on sale Saturday. This is final. And we're going to throw in an extra thousand dollars just as goodwill because you've come down a bit. But we're walking and I could hear the person on the other end of the phone still talking. You're like, right, just get back to me hung up.

The only thing they can do in that situation is keep talking to try and push me up on price. I don't want that to happen. So I just try and maintain control. I guess it seems probably to you maybe that's a little bit of arrogance from my perspective. But my goal is to maintain control of those conversations and do it on our terms to get the price as low as possible. So in that instance, it worked. There's times to do that and there's times to know where I've got to bite my tongue and play ball with them as well and let them have a bit of control over it or think they've got control over it. So it is really a suck it. And see, with each different negotiation, all of them are different scenarios as they play out.

And I think this is really important because a lot of people, they might have followed the process that we've just talked about. They've got to the property they really want. And it's almost like they then go, okay, I guess I just have to pay what they want. And negotiation is so important, isn't it?

Yeah, I was. I've been watching with intent actually, because the level of detail that you go into with your buyers is phenomenal. And I've, even as an estate agent for that long, I've never gone into it with that much written detail, probably because a lot of it is in my head and I understand where I'm buying, what I'm looking for, which most people don't have that skill because they're not training to do it. So it's fantastic that you do it. But what I was thinking the whole time watching all those Excel spreadsheets and looking at the level of information that you record is that, well, that's all well and good. You'll find the right property, but then you still got to front up and face the agent and get into that negotiation. So no matter what you do in terms of that take you three months worth of work, you think your job's done. And that's why people feel like I've done it. I've got to that last hurdle. This is the easy part. I'll just negotiate the deal and job done. But really, you've got to look at it and go, okay, we'll start again. Because this is a complete different stage. That's why I love how you've broken it down to these units in terms of you've got to get through the source it, then you've got to get through the slammer stage, because that's the reality. It's almost like, okay, blank canvas. Start again. And what do I need to do here to ensure that I tick all the boxes and get it for the right price?

Well, before we start negotiating, obviously we found the property. We want pest and building inspections. I imagine over the years that you've seen a few doozies. Pest and building inspection, something I find people miss regularly.

Yeah, I still have a lot of clients now for Hullah House, say they don't want to do it. And I keep saying to them, you should do it as part of your due diligence. I had one on in Miami this week, actually, on the Gold coast, where a lady had had me made two offers pre doing a building pest inspection, and they got knocked back both those offers. So rather than leave our unconditional offer there sitting with the agent, I made a point of saying to her, get a building and pest inspection done, and we'll withdraw your unconditional offer. Any future negotiation will be subject to that. The results of that report. And it's important because it looks like there's been some subsidence issues in that house. That can be very hard to tell. Some of the key things that you said. But I definitely go into an open for inspection looking at any damp in the ceilings, any rising damp from the floorboards or from, you know, on the bottom of the skirting boards. You look at the roof line, if there's any dips, there's certain things that you can look out for and try and gauge where you think it might need money spent on it. But you really need an expert to get under the floorboards, to look at the footings, get up in the roof, get in the roof space, and a trained eye, just like you'd hire me in terms of negotiation side of it and you to source it in the first instance. You need a trained eye to work out where those problems are and really what the cost of those can run to.

Look, you know, I've got someone in our community at the moment and, and there was on the inspection of this townhouse, so it's part of a strata group. There was a little bit of, let's just say, dust that the rental manager said, look, I think we should check this out. And they got the handyman in and put the hand through the door and basically pulled apart an entire termite nest. And that entire property has now been vacated and they're up over $100,000 of fixing. And this is not a salubrious, you know, something in the middle of Sydney. And this is a property that's worth 4, $500,000 and there's nothing they can do. And not knowing about that before you even go into a property, you know, this is so important, you know, pest and building inspection. What, 500 bucks? Is that what we're up for? Isn't it?

Yeah. And sometimes the agents have got an independent building and pest inspect inspection that's been done on the property already that they'll make available to you. Some will have buyers that have missed out and they'll say to you, the buyers may load off or they're no longer interested. And this company did the building report. You can contact that company and pay a lot less than what the original buyer did to buy a copy of that because they've already done the report. I find that it's not just important for peace of mind, but it's also important for me as a negotiation tool. So if you give me that report, there's some pain points for me to push with the agent or the vendor to try and get that property at a lower price for you as well. So if there is some work that needs to be done, I can factor that in and really build my strategy in terms of my negotiation around those points. So that will help you? Sure. One thing I had this week in that house that I was talking about is we perceived the. So we, when we were going to the open for inspection to this home, my client couldn't get access to the garage. It was full of, you know, the owner's storage doors weren't open. We couldn't get in there. But the agent had told me that they'd had some previous cracking in the garage and that there was a structural Engineer's report from 2013. They didn't make that available to me. First up when they said it was available. And then the client couldn't get into the garage to view where the cracks were. So there's a. I think there's almost a sign there that the agent's hiding something or withholding some information because there's a concern around it. So it really is important that rather than as a buyer, you try to get into an argument with the agent, you send in a professional and it's their right to get in and get into all those spaces and crawl spaces and find out those answers for you. So, yeah, don't let the agent dictate the terms there. If you want to get it done and you want to be thorough, then just make sure you do it.

And here's an extra tip. Don't let the agent walk through with the pest and building inspector either, because we can use some of the information they find as negotiation tools. So I know we had an offering on three properties in Sydney at once. At one stage, our office were. Had conditions in them and one of the conditions was that it was subject to an acceptable pest and building inspection to us. So when we rang up and we got the deal on one of the other properties and rang up and said, we're not going ahead with this, the agent said, well, what's the problem? So we're pulling out based on pest and building inspection. They said, but I walked through with the guy. There's nothing wrong. Dang it. You weren't supposed to, you know, because the person, builder inspector, is your person. It is not the agent's person. So they have to respectfully ask, in my opinion, for the agent not to accompany them because you can lose some negotiation powers in that respect.

So, yeah, the other thing to remember that on the flip side of that is as well, the building and pest guys want to justify their fee. And I think this is really important because this comes up all the time with buyers. When I'm dealing with it and has done for 20 years. They'll find tons of things wrong with the property because most properties aren't brand new. So there's going to be some form of wear and tear on the property like it is when you buy a secondhand car. So you've got to expect them to come up with something. Some negatives that shouldn't necessarily dictate where you offer your price. So, you know, often I get green. Buyers will come back to me and say, oh, well, there's, you know, there's some movement here.

Evidence of termites in Sydney. Like we've ever seen an Inspection in Sydney that hasn't had evidence of permission past their minds.

Yeah, yeah. And it's a 30 year old house, so. Yeah, well, yeah, of course there's some cracking, there's some movement every house does over time. So you can't use that to say, Well, I want $50,000 off the, off the price because there's some cracking there. So you have to be, you have to, you know, look at these reports and maybe just take it not so much on face value and really think about whether or not you will do the work to rectify those problems at all during your ownership, whether the next buyer potentially will hang you on that in terms of the, the sale price and whether it impacts on your enjoyment of the property while you own it too.

Exactly. Well, okay, so pest and building inspections, one of the first things we need to do. But here's another thing that I often get people skip and that is getting your conveyancer or solicitor to review the contract. Now often in the contract and we're talking, I don't know if you've read one recently, Scott, but you're probably across this bit. I sometimes look through contracts and you're finding these funny little clauses and it might be something around the fact that if you're delayed in settlement by a few days, and let's face it, you know, it often happens with some of the lenders losing documentation, etc. Or it can happen, it doesn't often happen, but you know, they could have you up for like a 10% or 15% kind of cost. So just there's some of these little things that are in the, the contracts that are important to note. I mean, some of them are actually more extravagant than that. If you've seen anything that you've seen come across a contract that has really worried you in the past, look, penalty.

Interest, which is the one you just said to me, is a constant one. So I know in New South Wales, for the standard real estate contracts that most solicitors would put forward on behalf of the seller as a buyer or the buyer, you'd go through and there's probably five or six things you just cross out straight away as a negotiation. So sellers are trying certain things on to get the most favorable terms for their client. And the buyer obviously wants the fairest terms really. So you definitely need a conveyance with a trained eye to go through it, just like the building, a pest inspection and to analyse where those negatives could be or those penalties could be hiding or lurking and then even those out so that you've got a fair contract. I agree that what you said to send the penalty interest is a key one because settlements got delayed very, very often for whatever reason on either side. So, you know, I had one, for example, of my own home when I bought, when I wasn't in a great financial position in terms of I couldn't afford to hold two properties for a long period of time. And I was trading up from a small house, my first property in Sydney, up to a much more expensive apartment. And I committed to a sale and the purchaser had given me a set amount of settlement time. It might have been six or eight weeks, but he was riding the stock market and he had his money in the stock market and his stocks were booming, so he didn't want to settle, so he just kept delaying the settlement. But I was paying high penalty interest, delaying the purchase of my double the price probably. So it's costing me a fortune for him to ride the stock market, but he didn't care less. He was multimillionaire and he was buying his investment property and he was making more money on the stock market. So, you know, I had never, ever thought that that would could possibly happen, but it happened to me and I got stuck out of pocket by probably a couple of thousand dollars.

It's interesting, I had actually. My personal trainer was buying his first home here in Melbourne and he was looking at a property out near Broadmeadows and he was saying, this is our bargain, this is so good. Would you mind doing a deal review for me? Absolutely, no problem. And so I actually pulled up on RP data and I had a look at the property and then I zoomed out and I had a look at all the other sales and in his street within six months have been four other houses. And I was like, there's something going wrong here, let's check out the contract. And we went through the contract and the RTA had actually. So the roads at Transport Authority had actually put in place a compulsory acquisition of a meter and a half of everyone's backyard at a cost that they wanted to pay. And so this was in the contract and it was buried deep and we could actually see that. And that's why everyone was selling. And this is why deal reviews and understanding what's happening in the market is so important. But you know, getting a conveyancer or solicitor to look over some of these things is so important. So don't miss that step either.

Yeah. Also like the building and pest inspection, I've got a good example of that as well. I had some friends that I tried to sell an apartment to which I thought was really good investment stock for them long term. But it was on New South Ed Road in New South Wales and forever, every property on New South Head Road, which is a main road through Sydney in the eastern suburbs, every building that fronts that street has got one of those clauses in it that it could be bought back by RTA or whatever it might be for road widening at any time in the near future. But that's been in those contracts for probably 50 years, 70 years, 100 years. The reality of them doing that, buying back the most expensive property in Australia is not going to happen. When all these apartment blocks were built right on the front, my clients and my friends walked away from it because their sister said, oh, there's this clause in there that you need to be careful about. The reality is though, that's never going to be pulled back. It was never going to happen. So they walked away from a really good opportunity with I think bad advice by just being too cautious. So you have to weigh up all those things and say, okay, that's fair, that's probably a reason to walk or at least put a deduction on it in terms of what I want to pay or hey, I can live with that. There's a low risk strategy there in play and I'm just going to get on and buy because it's a good opportunity.

Now I know we've got quite a few people watching here and you might be watching the replay. What I want you to do is give me a hashtag of a wow, tell me something that you went, I didn't know about getting conveyancer to check this or I didn't know about getting a pre approval only last three months because I want to know some of the things that you don't know because we can go into more detail on those in future shows or jump into the first house buyer Facebook group. And if you put remind down below, what we all do is make sure that you get access to that as well. But it's really important, I find, Scott, is that you're just knowing this process. So we've just talked about things that some people may not know about. Pest and building inspections, getting a conveyancer to check the contract. Now if your strategy is to potentially subdivide in the future the worst thing that you can happen, and I've had this happen to a client that they bought on a 790 meter squared block and to have a dual residence in brisbane, they needed 800 square meters. So they didn't check with council first. So that's just another thing. If you are looking at doing something in the future, please make sure that you understand what the council requirements are. It might mean that you need a 12 meter frontage to be able to put in a. Just to put in a block of units in five years time, which might be your plan and you've only got 10 metres. Or it might mean that it might be that in, you know, Victoria, you can't do granny flats.

It's just a couple of good examples of what I've gone through recently on the Gold coast having moved up here from Sydney. One of them was the council have changed the planning code here recently. So what? Exactly what your point was just then it was 800 meters to subdivide a block into two villas. That's now 900 meters. So it's changed and it's only changed recently. There's no song and dance about that openly in the marketplace. So unless you know if you're going on what you perceive is the right answer, then you're going to be badly misled in that regard. Second thing was I got burnt last year or the year before with buying a property that had a slightly diminished waterfront. Both houses, either side of me had a jetty. I thought I'd be able to put it in there without any problems whatsoever. The agent said to me, yep, shouldn't be any problem getting a jetty. I spoke to the neighbour on the left hand side, he had an old jetty which was illegal now and he said to me, yeah, that's fine, I'll knock mine down and we'll put a joint one on our, on our boundary line. We'll have a finger walk that we share together. The council will be fine with that. I went ahead with confidence and bought the property, did a full renovation, basically knocked down the house and built our dream house there to sell. And I couldn't get it through council, the jetty. So I pushed and pushed and there was no way and it was to do with the fact that the water line at low tide was too low. The one on the left hand side of me was an old illegal one which never would be permitted today and the one on the right of me was illegal. So if I had gone and complained about the one on the right, there may have been a shot that I could have done it, but I would have had to ruin that relationship and made a big song and dance, possibly had gone to court. I had an offer on the first weekend of that property of 2.65 million, subject to getting the jetty approved. I couldn't get it approved. I knew I couldn't. It took me three months and I sold it for 2.15 million. So it cost me 500 grand last year.

And that's by not knowing before you buy. What?

Yeah, not checking. And it's my own mistake, but it's one of those things where I just assumed and I did like three different checks but I didn't do enough. I needed to probably get counsel out there and that may have stopped me from buying the property. In terms of the timing of it, I might have missed it anyway through competition, but I should have still done it. And you just got to do your due diligence. It's very important to get it done.

We've got tips here. So Suzy says that she loves the tip about not knowing, about not getting the agent to go through with the pest inspection. And plus the conveyancer looking at the contract didn't know about that. And hidden clauses and negotiation. So, Scott, does Scott look over the contract? We're negotiating. So, Scott, your role with hello House is a negotiator. Do you want to just give people a little bit? Because we're about to get into offering with causes and negotiation a little bit about what hello House does. But just to remind you, the first home buyers Facebook group if you get over there. So first house buyer. And I'll put the link above. But if you get over there and jump in there, Scott's going to be in there answering questions when you need some questions about negotiation. But Scott, tell us a bit about hello House because I think it's such an innovative technique and a thing that you do that I have never seen anyone else in Australia do.

Cool. Okay. Well, what I do is I allow people like yourself and your customers here to go out and find their own property. They do their own due diligence, so they research what they want to pay. They come to me and hopefully they've done the building and pest inspection or evaluation or even had the contract read at this point already. To answer the question there, I will get involved and read the contract, but I'm not a trained solicitor or conveyancer so I always will refer them back to their own solicitor or conveyancer to do that check. Once you've found the property, I ask you to set me a target price which is your maximum walk away price. I then get involved and I handle all the negotiation with the agent. It's a completely transparent service. So I've got to show you that I've made a saving below that target price that you set me. Otherwise the fee is free. I don't charge anything at all. If I can't save you money, whatever I do save you, I take 15% of the savings made below that target price. So if I save you $50,000 less, then I take 15% of the $50,000. So on average at the moment, across Australia, my average purchase price I worked out Yesterday as well, 1.18 million for my clients. My average saving below the target price that my clients set me is $21,000, which equates to 1.77%. So it costs you absolutely nothing to use the service. And on average I'm saving 1.77%. So it's a hell of a lot of money to risk not using a.

Professional negotiator, I think, and just confirming that you do not have to be buying a property over a million dollars to.

The service works exactly the same at $200,000 as it does at $20 million. It makes absolutely no difference who was.

Buying in Sydney, didn't we one bedroom unit that you helped as well?

Yeah. So it doesn't make any difference. As I said to you, the property I bought for $380,000, I just saved them 55,000, which was just over 14% off the price. So it really is the negotiation that I focus on. I don't even work a huge amount with comparable sales. I get an understanding from the client of what the comparable sales are. But at the end of the day, it becomes just a fight between what the vendors are wanting to sell. At the lowest point, they'll trade at what the buyer is prepared to pay as their maximum. And it really is just my skill set in the middle there to work the agent to get the best possible result for my client. So that's the sort of space that I'm working in, which is quite unique.

Now, in future shows, we're going to go into a little bit more detail about putting clauses into your offer. So some of the clauses that you might include that could become in a negotiation point and it could be something you throw in a few clauses so you can pull them out to be part of negotiation. And Scott could go into a whole lot more detail on that, get into the group and have a chat. But you know, some of the clauses that I've included, an absolute no brainer for me is a pest and building inspection, but also a finance clause that says I would like to find Finance is acceptable to me and I want seven days, working days to be able to do that. Because what needs to happen is once you find that property and you have an indicative, yes, the people are going to accept your price. You've got seven days, if you put that into your clause to then go and get everything else done. Now pest and building inspection. Usually pests and building inspectors are fantastic. They can be there within 24 hours. But the banks then need to organize a valuer and the valuer needs to go out and value that property. Now if there's a tenant currently in the property, the tenant might say, well, I'm not free until next Monday. And this is eating into your 7 days or 10 days or however your days that you've actually allocated. Now it's different in different states. So for instance, in Queensland you might have 21 days but then you only have like seven days to actually, you know, settle the property as well. So you need to understand what you need to have in your clauses. And as I said, there's a whole lot more detail that we're going to. But an absolute no brainer, there's pest and building inspection. And the reason I say finance is acceptable to me is that if I can't get a loan then if the lender comes back and says, hey, I'm happy to lend you money at 10%, technically you've got a loan so you have to accept it. So just understand that once you have a property or that amount that has been kind of assessed and has been, the property's been negotiated, you've got an agreement in theory on the actual price, you're doing all of your inspections, pest and build inspections that cost you about $500, you're going to go through and just check with the council, everything's fine, you're going to go through and get the finance set up. Once you have that all done, you go back to your mortgage broker and you say, here's the contract of sale. So it's signed with the price on it, $365,000 for instance. And then what they're going to do is they're going to get your application and they're going to put the contract or sale or at least the front page on there and they're going to have to have updated pay slips from you. So you then have to go and send all of that information through again. Now the lenders depending on the time of year, so for instance, coming up for Christmas they can take 14 days to pick up an application. So you really need to make sure that you keep in contact with your mortgage broker through this entire process, then the lender is going to send a valuer out. Now, depending on the lender, some lenders allow the mortgage broker to order the valuation up front. So by the time the assessor picks up that loan application, the valuation is there as well. And they can give you what's called a formal approval. Until you have a formal approval, you do not have approval to purchase that property and get the money from the bank. The pre approval that is given to you way up at the beginning of the process is not a formal approval. So you need to make sure you have that understanding that there is a time frame. So don't go in there and agree on a price and sign on the dotted line. Because if you can't get the funds, you could be up to losing your deposit. And it may not be the 5% that you and your mind think that you're putting in. It could be the 10% that's included in the contract, which is another contractual clause that your conveyancer or solicitor would remove. So understand the difference between what a pre approval is and a formal approval and what you need to do now, the next step. Well, I was going to say.

Interrupt you for one second. I was going to say it might be useful for us to put together a little cheat sheet of what you can actually ask in terms of a contract when you're negotiating because it's not written anywhere in terms of what you can expect to move in terms of some of the key items in a contract. So for example, you could ask for, if there's a standard five or seven day finance clause, you could ask for 14 if you need it. You wouldn't know that because the standard is X. But you can ask to move that. You can ask to pay a $50 deposit instead of 10% if you want to. You can ask to have a year settlement if you want to. You can ask to give the vendor the deposit up front and release it to them so they can spend that money and go buy house elsewhere and a much lower price because they've got flexibility to go on and buy their next home. There's so many things that you can make it subject to inclusions, exclusions that we should probably write a long list, a cheat sheet for your students to understand what the parameters are. Because it's endless. Yeah, it's all up to that.

Well, and this is interesting because, you know, some of the things they might. Sometimes you find exclusions in the, in the fine Print that might say and the dishwasher is not included. Or we're taking the chandeliers or we're taking the blinds. Which brings me to the pre settlement inspection. Have you seen any horror stories with pre settlement inspections, Scott?

Yeah, a lot of things that happen in pre settlement inspections. This comes down to the inclusions or the exclusions often in the front page of the contract as well.

Define what that is. This is like the day before the keys and the money's hand over, right? This is just.

Yeah, typically it's done either on the morning of the settlement or the day before as late as possible. Because what you're looking for ideally is that the occupant has moved out. Whether it was owner occupied or if it was tenanted. You want to see the property vacant. Vacant properties always look a lot worse than a fully furnished property because you can see everything for warts and all. Often the vendors haven't cleaned up or the tenants haven't cleaned up. So that's the biggest one. It was very often as the estate agent we were having to apologise to the. The buyer or pay out of my own pocket sometimes for the tight ass vendors that would do it was to clean the property and have it presented nicely for the new purchases to move in. Another key one that we found is all the. This is probably something that's happened in the last 10 years, but everyone puts their TV on the wall now. So you go through TVs would be wired and hardwired into the wall. Well, when you go to purchase a property, when you get the keys, all those TVs are ripped out of the wall and you've just got these giant ugly holes with wires coming out of it or speakers in the ceiling that just got wires coming out of it. So there's thousands of dollars to rectify as soon as you walk in if your equipment doesn't fit those spaces or you don't need it. So you've got to rectify all those problems. And the other key one that I found a lot is vendors that rush out the door and either deliberately leave things might be an old wardrobe that they couldn't get into their van or the back of the ute, or you know, garden equipment, whatever, they'll just leave things or they'll just deliberately leave a whole heap of rubbish like garden clippings, you know, old clothes and stuff living there and you've just got to dispose of it as well. So there's a. That's the reason why you're doing that. Preset inspection, you're going through there to make sure the property is as per what you signed or as per when you sign the contract to purchase it. Nothing's changed. The tenants haven't stolen the light fittings or the, you know, as you said, the dishwasher hasn't been.

Yeah.

We'Ve had problems as well when there's been rugs and things down and you pick up a bed or you pick up a sofa and the new buyer comes in to do the pre sale inspection and there's a giant hole in the carpet or there's a big urine stain or something from a dog or a cat and the carpets are ruined. So you walk in there and you've basically got a 3, $5,000 problem to fix straight away. So you've got to do that inspection and then you report that back to your solicitor and say, hey, this isn't as per what I found. And what will often happen is the settlement won't get delayed. Most goods solicitors will negotiate a deposit to be held on the property and it might be $1,000 until the property has been cleaned by the outgoing owner, or $1,000 until all those items have been removed or they agree a deduction on the sale price, the final price for a share cost of the replacement of the carpet, in that instance, if there was damage done. So that's what you want your sister to do, or if there's nothing wrong, you just give them the thumbs up and you get the keys that afternoon and off you go.

So some of the things that I've seen, I had one Investor's Choice mortgage client who I kept insisting, you need to make sure that you do this pre settlement inspection. And finally, on the day before, he organized to do it and he turned up and although he had a clause in the contract that said vacant possession, the tenant was sitting there in the lounge room and he said, mate, when you're leaving, I've got like three kids and a removal bus turning up tomorrow to move in. He said, I refuse to leave because I'm with the defense and they haven't found me somewhere to move into so completely. You know, they could have turned up there, left their entire house behind ready to move in, big problems. And I've also had people turn up and find, you know, the beautiful gates that were there have gone, the entire garden has been pulled out and all of the window furnishings have gone as well, all the blinds, etc. So you know, these pre settlement inspections are so important. So this is just before you go through and say, yes, we are about to purchase. So I just want to come back a little bit here Scott, because I wanted to make sure you understand when the money gets handed over as well. Because often when we get to inspections we find, we get to settlement, we find that a lot of our clients are not particularly ready. So we go through a very long checklist of what you have to do when, but still some people miss it. So let's just explain when you are putting in an offer on a property, often as Scott said, you might put in $50,000 to hold the property whilst you actually doing your 7, 10, 14 day inspections. But at the time time that you then exchange on the property, you need to give them the deposit. Now typically in the contract or say 10%, your conveyancer can slash that and say 5% but you have to get the old buyers so your sellers to agree to that. But at that stage you are going to have to hand over a check and if you're at auction, you have to have this agreed to beforehand that they'll accept 5% when the hammer falls at auction. So you, you have to have the 5% available. Now if you are in auction, you're not going to be hanging around with $25,000 in your pocket. So often what you can do is write a check and you know, say that you're going to make good on Monday or you turn up with the bank check on the Monday, but you know, you need to make sure that you understand when the number when the dollars have to be handed over. So 5% will be about, will be needed for let's say the deposit for the exchange now typically six weeks later, is when you settle the property. Now often what I find is your solicitor or your conveyancer about a day out from settlement will go, oh by the way, I need a bank check for the remaining 10% or whatever it is that you were fronting up with that the bank is it. So if you get a 90% loan and you've agreed to put down a 5% deposit, you need to put down another 5% to put in your potion and you might need to put in a few extra other costs, cover the solicitor, cover exchanges, stamp dues, etc. So all of that often what we find is the conveyancer solicitor will tell you in an inconvenient period of time beforehand. So that's why we want to make sure five days out. With our clients, we're always talking to them about the fact that they need to make sure that they know that the money has to be ready and they should be checking how much the money is. So often we go back to the solicitor, we try to get from them the exact amount of money so they can get a bank check. Because getting a bank check A, can be expensive, but B, inconvenient if you're traveling or if you're working. So just know that that's when the numbers come up with the exchange. A lot of exchanges these days are electronic. It just means all the number all the banks go through, all the funds go through at once. But it's important, important to understand when you need to put your cash in. So make sure that settlement doesn't fall over, because that's the last thing that we want, isn't it?

Yeah. I mean, there's a couple of things to pick up on there. The first one is when you're exchanging contracts in New South Wales, for example, it's different in different states, but you can pay a 5% or whatever you negotiate in terms of the deposit size and you can pay it by EFT transfer or you can do it, however, you can transfer the money straight to their account or you can do it by bank check or private check. But what you pay or what you agree to exchange on, if it goes unconditional, if you don't complete that sale and you withdraw for whatever reason, not only are you liable for the deposit that you've paid, you've agreed to pay, which you'll lose, but you're also liable for it to be topped up to the full 10%. In addition to that, they can sue you for all of their costs incurred in terms of reselling that property, plus the difference in the sale price between what they had contracted, agreed to sell to you versus what they sell it to the next person for. So even though you do negotiate a smaller deposit size in certain states, just be wary that you're going to be responsible for the full 10%. And that's key to understand. You can't enter into these contracts thinking it's only cost me $100 or it's only cost me two grand. If you sign a line and it goes unconditional, then it's going to cost you a hell of a lot more and possibly some huge, you know, legal risks beyond that, the other one. Another little good tip, just a fun tip for you that we used to love on auction days as an estate agent is when you're bidding at auction, so many of our clients would turn up with a bank check with the number, or they tell you the number via their solicitor as to what they were prepared to spend 10% of. So let's say it was going to auction and it was $500,000. They'd turn up with a check for 55,000 or whatever and you'd know that, okay, well, you're going to bid up to 55,000. So if you, if you, if you're going to turn up to auction, don't tell the agents what the amount is by doing that. Ask your solicitor to agree terms to a set figure. So if it's, let's say they're quoting 500,000 plus, agree to a $45,000 check and you'll top up any balance that's required, plus or minus that can be refunded or that they on Monday. Or it's just agreed that whatever the final sale price is, the $45,000 check covers, the deposit is good enough for it. So that's a key one and that's.

Another clause that would go into your contract. So, so important to make sure you get that solicitor involved right up front and make sure those go in. Well, I think we've covered so many things, Scott. I really appreciate you coming on and helping us get through that. As I said over in the first house buyer Facebook page, Scott's there to answer any questions. We'll get our heads together, Scott, and come up with some clauses and things that people might want to include. And I'm sure we'll be talking to you again real soon.

Thanks very much for having me. Have a nice day.

Okay, see you later. Well, guys, that is the first home buyer show for the week. I am going to do now a really speedy recap of the first home buyer show so that you can know exactly the process that you need to follow. So the speedy recap of the first time buyer show about the process of buying a property. First of all, number one thing you cannot miss is actually understand what your goal is. What are you trying to achieve? And then understand what your strategy is. Because if you don't know your strategy and you come up with it midway through the process, you could be looking in the wrong suburb or buying the wrong property. And then understand when we get to set it exactly what you need to have available to you. So the deposit available to you. And then have a mortgage broker go through and do your borrowing capacity so you understand what your purchase price is, then it's really important that if you are ready, you get a pre approval. Now, pre approval typically lasts for three months. This is a cursory look by a lender over your situation. It is not a formal approval. And when you get an find the property, the value is sent out from the bank and it's only then that you get a formal approval and a formal agreement that the lender will give you the money. So they will require at that stage new pay slips as well. So make sure you don't change your job between your pre approval and when you actually find the property. Now the other thing is understand what the first home buyer grants and concessions. And even if you're eligible for the first home loan deposit scheme. Now as a mortgage broker, we make sure that we can facilitate all that paperwork for you. But if you don't know what you're looking for, find someone who can assist you to do it because you don't want to miss out on those concessions and grants. And the other thing is then you get the fun part of actually sourcing the property and finding it. But wait, it's not about going around the corner and finding the property around the corner. Remember, this is a battle you are after the best possible conquest so that you can create wealth for yourself, the future. So it's about understanding the strategy. Suburb match so for instance, if renovation is part of the strategy that you have to push your rent up, when you move out and rent the property and push your equity up, then you have to make sure that the suburb has capacity to do that. Now I demonstrated that in the full first home buyer show. So jump over there and check it out because there are reports that allow you to do that. And then also you need to understand what the typical type of property is because you don't want to have an atypical property because when it comes time to rent it or sell it, you're not going to have the biggest part of the market that's after you. So this is easy information that you can find. Once again, I demonstrated the suburb selector software that we've developed to assist our clients in being able to find those kind of information. But this is stuff that you can go and research online yourself. Go to the census, you can go to different research hubs and we'll share that with you in future episodes where you can go and find all the information for free. Now the other thing is just choose three to five suburbs, get to know the intimately and get to understand that market. And then make sure you concentrate on the typical property and set alerts up. So get into domain.com realestate.com or you know, if you're one of our clients, when You've got pre approval. We actually pay the $150 a month for RP Data CoreLogic for you. So you can get in and not just do the searches, but you can also create valuation documents on any property in Australia. Check out what your neighbor paid. But it's always important to understand that you want to be able to know what properties are available when. And getting an alert for when the three bedroom typical property on 6 to 800 square meters in the suburb you're after comes on the market. You can jump in really quickly. Now it's always important when you're doing inspections. Use an inspection checklist. I demonstrated one that we give to through our first home buyers course. But you know you can create this yourself. Just make sure that you're aware of what's going on with the property, track it through its campaign and see what it sells for as well. And it gives you a feel for the market and then store that information. Staple the pretty picture sales picture that the agent gives you to the top of that inspection so that you know exactly what that property spot was sold for and what it like looks looked at. And I've used that time and time again and gone back and had a look at properties that have resold in a year or two later and potentially had a renovation done just to check out what the people had made on the properties. But it's really good way for you to track a property and all the properties you're looking at because you're probably going to be looking at 5 to 10 every single Saturday. Now the inspections are important but I've also Jen, I also shared with you maybe a spreadsheet of all the past sales so you can do a bit of analysis on working out, you know, what renovated unrenovated properties are or selling for what the typical brick property versus the timber property is selling for. Get an idea of what the price is that you should be buying because when you actually find the property then you're going to have to negotiate and knowing where to start that is really important with comparable sales. But when you find the property there's a few things that you can't forget. Pest and building inspection. Do not forget this. You do not want to find out years later that you have termites that are eating through all the timber and property is not habitable. You want to make sure that you have a conveyance or solicitor review the contract before you actually put in an offer and they can actually help you put in clauses as well. So things that they may change might be Reducing the penalty interest in case you settle late. They might reduce the amount of deposit you need to need to include. They might increase the settlement time frame. You know there's so many things that could be included here but absolute no brainers are making sure you have subject to a pest and building inspection that is acceptable to you and subject to a finance being acceptable to you being approved. And you need 7, 10, 14 working days to achieve that. Because what happens is once you have that contract in principle signed, you need to then get that contract with your updated payslips to your mortgage broker so that we can then process that and get a formal approval and it can take 3, 4, 5, 6 days for valuers to get through a property. Then they write up the report, then they have the supervisor review it, then they get it to the bank and then the bank assessor checks it out and says yes Jo, you need at least seven working days to make sure that you have enough time so that you aren't settling on a property without a loan. Because as you will check out in the first home buyer show, Scott from hello House shared with us, that there's actually an opportunity for you to actually lose your entire deposit. If you work so hard at getting it, you don't want that to happen. So getting those clauses right is important. And then there's the negotiation as I said, you know, Scott joined us from hello House and shared with us some of the experiences that he's had in negotiating down prices for some of his clients. It's a no brainer getting a professional negotiator on your side. I really encourage you to get into the first house via Facebook group, have a chat to Scott and some of the other professionals we have in there to answer your questions. But you know, being able to negotiate and actually maybe cutting 10, 20, 30, $40,000 off the property price, this is money for jam and it's something you shouldn't miss. And then let's go through and make sure that there's one other thing that you should include and that is making sure the property is insured. The bank's going to tell you what the value of the property is and you have to get that insurance set up for settlement date. And before settlement, the day before or the morning of, you need to do a pre settlement inspection. Make sure the dishwasher is still a mealy, hasn't been replaced with a dish flex. Make sure that all the things that you believe the property would have in place are there and make sure you still, you know, there might be a vacant, a tenant that is still there that's refusing to move out, which happened to a client of mine. So you need to be doing that pre settlement inspection before you know confidently that it's time for you to hand over the money. And three to five days out your solicitor or conveyancer will be asking you for a bank check for all the funds that you need to contribute. They'll also be getting the funds on the day from the bank and you need to make sure that you're prepared and ready to put in those funds to complete the purchase. So all of these things are part of the process that you need to know, making sure that you know exactly what to do when. So don't go to auction without a pre approval, don't buy a property without an inspection and don't just settle on the price that the agent is saying the property is worth. Go in and negotiate. There are so many things that you need to know when you're processing or going through the process of buying. It can feel like a battle, but hey, we are here on your side to answer any questions questions and make sure that you are always victorious. So as always, here is to your property success and I hope that your next property purchase is not a battle. Bye for now.