Adrian Reed - Australia's Fastest Growing Real Estate Agent

Before you buy a property, it’s essential you do your homework. Take a businesslike approach and invest the money required for legal advice on the contract, a pest and building inspection and, if you’re buying an apartment, a strata report. It’s better to spend a few hundred now than find 10 million termites later. It’s called due diligence and it’s a no-brainer.

Due diligence is like an insurance policy. Don’t rely solely on the agent’s information – you’re the one buying the property and you’ve got to assess its value and condition for yourself. After years in real estate, it still amazes me that less than 20 per cent of buyers get an expert’s opinion before buying the most expensive asset of their lives!

Now, don’t expect a perfect scorecard. Most properties have a few issues and this isn’t a reason to walk away. As long as you’re aware of its defects and can afford to fix them, it’s not a deal breaker. And don’t forget, you can also use them as a bargaining chip to lower the price.

You’ll need some help with your due diligence from a solicitor or conveyancer, a pest and building inspector and, possibly, a valuer. Source your support team before you start looking and get legal advice before signing anything whatsoever.

Below is a checklist that I strongly recommend you follow on every property transaction.

Due diligence checklist • Contract of sale – ask the agent for a copy and take it straight to your solicitor or conveyancer. Attempting to decipher a property contract without specialist knowledge will make your head spin. Get some expert advice.

• Building and pest inspections – The building report is designed to pick up everything that is ‘wrong’ with the property. On paper, defects can look scarier than they actually are so meet the inspector onsite to discuss any necessary repairs. Even if a property is new, a building inspection is still worth doing. It will pick up any shoddy workmanship, inappropriate materials or work done without council approval.

• Strata report (relevant only to apartments) – You can check the body corporate records yourself or get your solicitor to do it. In some states, the body corporate is called the owners’ corporation. Either way, the building’s strata management company will have these records. Check for adequacy of book-keeping; the amount of money in the sinking and administration funds; the historical frequency of special levies; the by-laws; any restrictions on usage of common property; any disputes between residents and any history of structural defects and repairs.

• What’s it worth? The toughest question of all and one you should answer for yourself, independent of the agent’s advice. The best thing to do is buy sales data from property data houses such as RP Data. For a small sum of money, you can buy a report showing all the sales in your suburb over the past year. Alternatively, a good buyer’s agent will provide you with this report at no cost as they have access to these property data houses. Firstly, look for properties with the same number of bedrooms, car spaces and similar-sized blocks of land. Then narrow your comparisons down to condition, location, aspect and views. For example, a property in a quiet suburban street is worth more than a similar property on a main road. A property with a north aspect is generally more valuable than one facing west. Adjust for differences and if you’re still not sure get a professional valuation.

Emotional appeal

As part of your due diligence process, make a checklist of all the features you love and the reasons why you want to buy the property. On the other side of the ledger, consider any downsides of the home, features you’re not so keen about and the money you’ll have to spend to make it just right. When you tally up all the pluses and minuses, you can get a feeling for the emotional appeal of the home. It’s the ‘how much do you want it?’ factor.

Many buyers add a margin onto their estimated value for the emotional appeal of a home. I’d suggest considering this before the auction, rather than in the heat of the moment as the hammer is about to fall. Go over your finances one more time and talk it over with your family – the last thing you want to experience is buyer’s remorse.

Buyer demand this spring season is incredibly high with thousands of Australians currently devoting every one of their Saturdays to looking for a new home.

It’s not uncommon for motivated buyers to inspect 10 or 15 properties a day. Depending on your mindset, this can be fun and exciting or a real chore. Either way, taking in that much information in just one day is also going to be mentally exhausting. You’ll get home after several hours scouring the marketplace and find it difficult to remember which one had the great backyard and which one had the rising damp.

At most inspections, agents will hand you a brochure to take away with you. These are very handy especially as they’ll contain photos of the property to jog your memory later. But in terms of detail, they only provide a general overview, so it’s important to take a notebook and assess each property with your own checklist.

Every property is different but they all have common elements for you to compare, such as aspect and land size.

The basics

1. Full address

2. Agency name

3. Individual agent’s name and contact number

4. Asking price

5. Number of bedrooms, bathrooms, parking spaces

The details

1. Does the property fit your lifestyle? If you have children, consider whether parks are nearby. If you catch public transport to work, find out where the nearest bus stop or train station is.

2. Is the property in a convenient location? It’s desirable to be close to shops and cafes but not so close that you are impacted by noise and pollution.

3. When assessing views, sit down. Views look great from windows but that’s not where you’ll be spending most of your time if you buy the home. So sit down in the dining or lounge areas and lie on the bed to get a realistic perspective.

4. Does the property have a flowing, workable layout? A good layout creates easy living, convenience and privacy. For example, bathrooms should ideally be situated close to bedrooms.

5. Is there enough room for your family and possessions?

6. Is there potential to extend or reconfigure the layout?

7. What is the general condition of the interior and exterior?

8. Are any repairs or renovations necessary – pay careful attention to the kitchen and bathroom as these are the most expensive rooms to upgrade.

9. Does the home admit enough natural light? Be aware it is customary to turn all the lights on for inspections and to time the inspection when the home is at its lightest and brightest.

10. What is the aspect? Take a compass with you – a north-east or north-facing aspect is ideal particularly in relation to gardens, balconies and living areas.

11. What fittings are included?

12. If you’re buying a fixer-upper, note down the dimensions of the rooms. You’ll then be able to estimate the amount and cost of materials (floor coverings, paint, etc.) you’ll need to buy.

13. What do you really like about the property?

14. What do you really dislike about the property?

Identifying defects

Before you exchange contracts, I strongly recommend you get a professional building and pest inspection done. However, during inspections, you should look out for any signs of obvious defects. If you identify any major problems, it may be best to give that property a miss. At the very least, you’ll save yourself the cost of a building report.

1. Check the power board in the electricity box. If the board is in original condition, it could indicate that the home is due for rewiring.

2. Sagging floors (check near fireplaces) or moving floorboards can indicate problems with the stumps or bearers.

3. Are the walls flat, straight and free of cracks? If not, the foundations may be shifting.

4. Dark stains around the skirting boards can indicate rising damp (this isn’t necessarily a deal breaker).

5. Turn on a tap and check the water pressure (hot and cold). If it’s weak, there may be problems with the plumbing.

6. Is the roofline sagging? The trusses or the entire roof may need replacing.

7. Stains on the ceilings or rafters indicate there’s a leak in the roof.

8. Is the underfloor area well-ventilated and free of signs of termites?

9. Are the foundations free of cracks? Cracked foundations can lead to uneven floors and cracks in walls.

10. Is recent painting covering up a few defects?

Don’t be afraid to ask questions – the agent is there to help you. It’s better to feel silly asking lots of questions than be saddled with a home with a whole lot of problems.

Also, keep an ear out for what other buyers are saying about the property at the inspection. They may have seen something you’ve missed.

1. Speak with your financier or your McGrath Oxygen Home Loans consultant to arrange the best loan to suit your needs.

2. Prepare a short list of preferred areas that suit your lifestyle. Keep in mind affordability and accommodation requirements.

3. Research sales in those preferred areas using Sydney Morning Herald Price Guide & McGrath Recent Sales. Inspect every property in your preferred area so you have a feel for the price. Attend all auctions in the area.

4. Develop a relationship with a McGrath Sales Agent specialising in your preferred area. The agent will be able to offer additional advice and also alert you to new listings before they reach the media.

5. When you find a property that suits your requirements, ask your agent to send a copy of the sale contract to your solicitor or conveyancer.

6. We recommend that you arrange a building and pest inspection to make you aware of any major defects and pest concerns eg: white ant, termites.

7. Following your solicitors or conveyancers advice on the sale contract and taking into consideration the building and pest reports, you are now able to make an informed decision to proceed with an offer on the property through the agent.

8. If you are bidding at an auction, we recommend you read the Office of Fair Trading’s “Bidder’s Guide” before you attend the auction. You can find a copy of the Bidder’s Guide at: www.fairtrading.nsw.gov.au/pdfs/secondarymenus/publications/ftr31.pdf

9. Once negotiations have been finalised, you will be required to sign the sale contract and pay a 10% deposit. Your deposit will be held in trust in an interest bearing account until settlement.

Interest is normally equally divided between you and the vendor. The vendor will sign their sale contract and the solicitor/conveyancer or agent will exchange the contracts.

10. On settlement day, your solicitor or conveyancer may request that you have a pre-settlement inspection before settlement takes place. This is to ensure that the property is in the same condition as when you last inspected it and that all the inclusions are as per the contract you signed.