28/09/2017
https://www.facebook.com/MalaysiaRealEstateInvestorClub/posts/1844461689028677
The 3 Stages of Buying a New Home
As a first time property buyer, you might not know what to expect when purchasing a home. What do you do first? How do you start? What happens next? This article will explain and provide a rough guide to the 3 key stages of buying your very own chunk of real estate.
Stages 1 Research & Preparation
This may sound obvious, but that’s because it’s imperative. Thorough research in the early stages will make things much more manageable for you later. If you don’t already have specific areas of interest in mind, start thinking about it. Look at multiple different listings for property in those areas and be mindful of the different selling prices, so that when you’re faced with the house you are interested in, you’ll have something to compare the price to.
Examine your financials to see what you can realistically afford without over-extending yourself. In most cases, a good price for a house is not more than 3-5 times your annual income. This is a very general rule, however; it can vary from person to person, depending on lifestyle and circumstances.
For example:
– Do you have existing debts like student loans or car payments?
– Do you have children or plan to in the future?
– Any medical bills to bear in mind?
All of these factors will play a role in deciding what price range your future home should fall in.
Furthermore, if you’re like the majority of the population, you’ll need to take out a home loan to be able to afford a house. Shop around for banks first and ensure that you’re actually eligible to take out a loan. Comparing different packages will help in letting you know how much you can afford to spend on not just the house itself, but on the monthly instalments you’ll have to pay back to the bank. A tool like this mortgage affordability calculator will aid you in figuring this out, too. It will also make it easier for you to get pre-approved for a housing loan and minimize the risk of rejection later. Remember, again, not to over-extend yourself. Always have extra money available for emergencies.
Lastly, find yourself a good lawyer. Many legal documents will pass through your hands during this process and you want someone who is equipped to make sense of it all with your best interests at heart. And while it is not necessary to have one, you might want to look into a reputable real estate agent as well. Do take note, though, that agents get paid a commission of 2-3% of the property’s value and may therefore intentionally only show you pricier listings.
Stages 2 House-hunting & Making an Offer
This is probably the most fun part of buying a home — shopping for it! In this stage you will be visiting house after house, and all the minute details about them might get confused in your head; to be fair, you probably do have a lot of things on your mind at this point. This is why it’s important to take down physical notes as well as pictures or videos of each of the houses you check out.
As you might check the zippers on a bag that you want to purchase, you should also do the same with the houses you tour. Check all the doors and windows, the lights and the plumbing. You’ll also want to take note of the home’s surroundings. Is the noise level of the neighbourhood acceptable to you? Are there shops, restaurants and public transportation nearby? If you have a family in mind, are there parks and schools in the area? Is there sufficient parking for you and the people who might be living with you? How about visitors? Be patient at this stage and thinking through every possibility and scenario carefully.
Once you’ve zeroed in on a house you want and have negotiated a price with the seller, you should get the property professionally inspected for any damages or other things that need fixing. If it turns out that there are significant issues with the house, you are able to either renegotiate the price or else withdraw with no repercussion to yourself. On the other hand, if the inspection report reveals little to no concerns, you may use this window to ask the seller to repair the relevant damages before the deal is closed.
Stages 3 Paperwork & Payment(s)
So you’ve checked out all those houses and have finally settled on the one you want. Here is, roughly, what happens next:
1) You sign Letter of Offer which states your intent to purchase
2) Pay an earnest deposit which is usually 3% of the purchase price (the remaining 7% will be paid at a later date)
3) Owner/Seller signs the Letter of Offer
4) Your lawyer/solicitor will draft the Sales & Purchase Agreement (SPA)
5) You sign the SPA
6) Pay remainder of the deposit amount
7) If required, this is when you apply for your home loan
8) Get SPA stamped; pay stamp duty
9) Get the transfer of ownership registered at the land office registry
10) You now own the property!
There’s one more thing to make a note of – upon handover of the property (or even before), you’ll want to ask the owner of the house for proof of payment of the utility bills of the property up until the day of the handover. This ensures that you pay nothing more than what you expect to.
Hopefully this article has cleared up any feelings of intimidation regarding the purchasing process. It should be a much less overwhelming prospect now that you know what to expect in your journey.
