Real Estate

Real estate professionals get that consumers, by and large, ignore housing statistics and the market until they become involved in the purchase or sale of a home. It’s only natural then that what impacts the market is a bit of a mystery to many. What determines a buyers’ or sellers’ market? What factors influence home prices?

Of course the answers to these questions and more may be multi-faceted, but it’s important to pay attention to them if you hope to keep more of your money when it’s time to buy or sell real estate.

Believe it or not, even in what seems like the gloomiest of real estate markets, there will be a glimmer of light for some.

Pay Attention to Interest Rates

It certainly is no secret that obtaining a lower interest rate for a mortgage typically allows for a lower payment. Naturally then, low interest rates make home-buying an attractive venture—and, even whispers of a rate hike can spur folks to get out into the market.

For instance, by the end of 2015, the U.S. saw 5.26 million home sales, which was the most robust housing market since 2006. Lawrence Yun, chief economist for the National Association of REALTORS® (NAR), attributed the robust market, in part, to the mere “prospect of higher mortgage rates in coming months.”

And, rise they did, throughout the following year. In fact, late in 2016, mortgage interest rates rose eight times in nine weeks, according to bankrate.com. Sounds rather gloomy until one recognizes that, post-hike, rates were still at historic lows.

The bottom line is that if you’re in the market for a home and interest rates decrease or remain attractively low, it’s time to get excited about the housing market.

The Economy

The current economy is a key factor affecting the real estate market. “Broadly speaking, when the economy is sluggish, so is real estate,” claims Joseph Nguyen at Investopedia. Rather than look at the glass half-full, however, we choose to take the opposite tack—when the economy is humming along, the housing market is at its most attractive.

When job growth is robust, consumer confidence rises and we’re more apt to spend money on high-ticket items, such as cars, appliances, vacations and, yes, homes.

Exciting Markets for Sellers

There’s an old saying in the real estate industry that counsels homeowners that the best time to sell a home is when you need to sell your home. Yes, we understand that isn’t very helpful. If you’re one of the fortunate who has no compelling reason to sell (such as a job offer in a different town or divorce), you have the luxury of choosing when to put the home on the market.

Get excited if real estate professionals mention the words “sellers’ market.” This is a period in which there are few homes for sale but buyer demand is high. During sellers’ markets prices typically increase rapidly and homes sell at or above list price.

One of the biggest mistakes we see in sellers’ markets is the homeowner who feels that the market itself will bring top dollar for the home, regardless of condition. Be aware that it’s the homes in good condition that sell the quickest and for the most amount of money. Regardless if market conditions favor sellers, if your home isn’t in move-in condition, it may be passed over by home buyers.

Buying a Home This Year?

A buyers’ market—when there is a large selection of homes for sale and few other buyers in the market—is a great time to purchase a home. Unlike a sellers’ market, prices aren’t rapidly escalating and you won’t be competing against a slew of other buyers. These markets are more relaxed so homebuyers can take their time deciding.

In a sellers’ market, however, it’s more important than ever to have all your ducks in a row before making an offer on a property. Ensure you know exactly how much you can spend and that you’ve obtained a preapproval letter from your lender. Make your offer stand out from others by keeping it lean and mean, with the shortest time periods for contingencies as possible. Finally, come in with your highest and best offer. A sellers’ market moves too quickly to assume the homeowner will negotiate over price.

While the type of market may determine when to jump in, as mentioned earlier, interest rates can also cause excitement in the housing market. Low rates and relaxed lending guidelines, such as we saw in 2015 and 2016, presented a prime opportunity for many would-be buyers who previously couldn’t afford to purchase.

Lower mortgage rates mean a lower monthly payment, which means you have more purchasing power, and that additional power can “mean the difference between buying a 2-bedroom home versus a 3-bedroom one; between buying a home with large closets versus small closets; and, between buying an upgraded home versus a dated one,” according to Dan Green at The Mortgage Reports.

Regardless of the media’s perception of the housing market, there is always a mix of good and bad news, depending on whether you are in the market to buy or to sell. Arm yourself with a professional real estate agent who can supply you with current and local market information (too often what you read in the news is stale and based on nationwide statistics), follow his or her advice and buying or selling a home in any market will be an exciting process.

If you’ve found a property you’re keen to buy, you need to complete a thorough due diligence check before you sign the contract or pay a holding fee. Taking a business-like approach, using qualified experts where needed and checking the facts carefully can ensure you understand the advantages and risks of the proposed transaction.

Here is a look at the key due diligence steps to take before buying a house or an apartment.

• Review the Contract of Sale – The whole process of buying your home is governed by the Contract of Sale. This is a legal document that dictates exactly what you get, when you get it and how much you have to pay. With so much of your money at stake, it’s imperative you get your conveyancer or solicitor to review the contract before committing yourself to anything.
• Building and pest inspections – A qualified building and pest inspector can inspect the property for structural or foundation issues, pest of rodent infestations and other issues not visible to the naked eye.
• Get a survey report – If a recent report has not been completed, you may need to get one done. This will show you the details of the block boundaries, easements etc. Your conveyancer or solicitor can help you here.
• Recent sales data review – Collate recent sales data to help you determine the value of the property you are looking at. If you have done your research carefully, you should have a good idea of a home’s value.

For an in-depth look at this step read our article buying a house or unit how to do your due diligence.

Sign contracts and pay the deposit

If you have successfully negotiated the purchase of a property, or you are the successful bidder at the auction, you will be required to sign the Contract of Sale and pay a deposit to legalise the transaction.

There will be two copies of the sale contract, one for you and one for the buyer. You each sign one copy before they are swapped or as it is called in a few states ‘exchanged’. This process can be facilitated by your real estate agent, your solicitor or conveyancer. At the time the contracts are exchanged, the buyer will be required to pay a deposit, which is normally 10%, and this will be held in trust by the real estate agent or your conveyancer.

This step is important for a number of reasons:

• The buyer and seller are not legally bound until signed copies of the contract are exchange
• If you bought a property at auction, there is no cooling off period and you are legally bound to buy the property once the contract is exchanged
• If you bought by private treaty, there is normally a five-day cooling off period during which time you can withdraw from the sale. This may have been waived, extended or reduced in your contract so it’s important to be aware of this
• Generally, a seller does not have a cooling off period, once the contracts are exchanged, they are normally bound to complete the agreement.

Pre-settlement inspection

As settlement day approaches, the new buyer will have the opportunity to inspect the property to check nothing untoward has happened since they signed the contract. It also enables the buyer to check all outstanding jobs stipulated in the contract have been completed.

Property settlement

On the agreed settlement day, the respective settlement teams will ensure all conditions of the contract have been fulfilled. The buyer’s lender will authorise to pay the balance of the purchase amount and the conveyancer, solicitor or sales agent will transfer the deposit that has been held in trust.

The seller’s legal team will make sure that all necessary property taxes, land transfer duty and water rates are paid. Once everything is settled, the transfer documents will be completed and lodged with the land registration office in the relevant state or territory. Assuming all goes to plan, you assume legal ownership of the property and the keys can be handed over.

A final word

Buying a house or an apartment is one of life’s biggest and most rewarding decisions. As it is undoubtedly one of your largest investment, it is a process filled with emotion and excitement. However, the vision of owning your own four walls is still the ultimate Australian dream. We hope that this guide has helped clarify the process of buying a house or apartment and helps you on your home buying journey.