Five key steps to buying with confidence

Bring up the topic of stressful life events and most people will admit that buying a house is up there with divorce, bereavement and redundancy.

Combine financial uncertainty with fear of missing out, season liberally with emotion then add a dash of buyer’s remorse and you have the perfect recipe for mental torture.

But it doesn’t have to be that bad. Making the biggest financial commitment of your life is never going to be a walk in the park but there are plenty of insider tips and tricks to at least minimise the pain and maybe even enjoy the experience just a little.

Work out what you can afford

This is pretty basic; however, it’s more complicated than it at first appears.

The traditional rule of thumb is that repayments ought not to exceed 40 per cent of your income – but that rough-and-ready approach works only for average people on average incomes.

The more tailored approach is to calculate your budget using a good online calculator, such as the one on the Australian Securities and Investments Commission personal-finance website, MoneySmart (moneysmart.gov.au).

”Work out all your income and all your outgoings and what you have got left over,” says Delia Rickard, of ASIC. ”Then work out what you can afford in terms of mortgage payments and ask yourself whether you can afford it.”

Try: Domain’s Mortgage Calculator

Then, Rickard says, ”stress test” your budget by factoring in an interest rate rise.

”We tell people to work out what they can afford on current interest rates and then use the calculator to see what repayments would be if interest rates went up by 2 per cent.”

In other words, don’t draw up your budget so tightly that any variation will keep you awake at night. And if you can’t stretch to buying the house of your dreams in the suburb you want then maybe lower your expectations or save a bit longer.

It’s all a bit dull but that doesn’t stop it making good sense.

What to do at open houses

Repeat after me: ”I will not shoot my mouth off.”

Take that simple mantra to heart and you won’t go too wrong at the open-for-inspections you attend.

”It’s important not to talk price at an open house with an agent,” says a buyer’s agent and former McGrath selling agent, Amanda Segers from Amanda On My Side. ”You should be there to gather information rather than give information to the agent. It’s important not to talk price. All you have to say is, ‘I’m just doing some research. What’s your opinion?”’

Another buyer’s agent, Ben Handler from CohenHandler, agrees.

”The more interest you show, the more the agent can see that emotional attachment,” he says. ”You’re there to quietly observe. Show a minimal level of interest.”

Segers suggests going a stage further and sitting outside to overhear the conversations of potential buyers as they leave.

”People always talk about it as they are coming out and you can pretty much get the feeling of the open house by what people are saying,” she says.

But if you are genuinely interested in the property, don’t go so far with your detached approach that the agent dismisses you completely.

”Do make sure the agent is aware of your interest if you are interested,” Segers says.

Asking for a contract is enough to indicate interest.

”They are the ones the agent will call back,” Segers says. ”Agents don’t call everyone back these days.”

Get a building inspection

After more than 30,000 property inspections, building consultant John Worthington knows a thing or two about houses – and what can go wrong with them.

So, is an inspection worthwhile? ”Definitely, yes,” Worthington says.

”When someone wants to buy a house, they are looking for positives,” he says.

”They are looking for things that will suit them and the last thing they want to do is to go round finding things that are wrong with the house.” A building consultant has none of that emotional attachment to the property and is paid by you, the potential buyer, to give a dispassionate assessment.

Ensure your consultant is accredited by the Master Builders Association, the Australian Society of Building Consultants or the Institute of Building Consultants. There is no longer a mandatory licensing system for consultants.

Worthington says good consultants take clients through the house after finishing their report, pointing out the good and bad points.

A good consultant won’t simply ”tip the bucket” on every house they look at but will provide a balanced appraisal and, in many cases, give the client an idea of what it might cost to fix things.

”The object of a building inspection is to help the person buy the house,” Worthington says.

Closing the deal

If a property is being sold by private treaty or is passed in at auction, you will end up in the often unfamiliar – and sometimes downright scary – position of negotiating the sale price with the agent.

Handler’s advice is to the point.

”Always start low,” he says.  ”A lot of people are quite scared to put in an offer because they think it might be too low or it might be offensive but you never know what you are going to get. Always start extremely low and work your way up.”

And as with any negotiations, information is your weapon. At the very least you should have a good idea of all the recent sales within 500 metres and whether those sales are directly comparable.

”The agent might say the last one sold for $50,000 more but it turns out it had an extra bedroom and parking space, which they just forgot to mention,” Segers says.

”You also need to be able to act quickly. A lot of first-home buyers, in particular, stand back and think they have to be coy or they get cold feet.

” I always tell my clients to expect to have buyer’s remorse.”

Is a buyer’s agent for me?

Buyer’s agents are not the rare and exotic creatures they once were but they are still relatively uncommon. And, while the concept makes good sense – the vendor has an agent so why shouldn’t the purchaser have someone to go in to bat for them – the question remains whether a buyer’s agent is right for you.

”Our service isn’t for everyone,” Handler says. ”Our clients are generally time-poor and maybe they are frustrated at not being able to find the right property after looking on the market for months. Or maybe they are not comfortable negotiating.”

Segers claims she can always get a better deal for her clients than they would have got without her services.

”I don’t want anyone to see me as a cost,” she says.

And with a buyer’s agent acting for you, much of the emotion – which the sellers can use as leverage – is removed from the deal.

”I’m not emotional about the purchases,” Segers says. ”That’s why a lot of people do come to us. People have a lot more confidence when they have a buyer’s agent there. I do the numbers and say, ‘This is a bargain. This is market value. And this is overpaying.”’

And the cost of hiring your own agent? Handler charges between 1 per cent and 1.75 per cent of the purchase price, while Segers works on a sliding scale with a full service ranging from $8500 to $40,000 if she is successful.

It pays to be picky

After inspecting more than 200 houses over two years, being outbid at two auctions and having two private-treaty sales fall through, Dominic Chong and Alex Gilmour finally bought their dream house.

The pair are designers ‘‘very much into products and furniture’’, says Chong, 32. ‘‘Maybe, because we are designers, we are a bit more picky,’’ he admits.

‘‘We were looking for a very specific house. We like modern designs that retain the old feel rather than going with very modern”

‘‘We wanted a three-bedroom house, either a semi or freestanding. It would preferably have parking.’’

The marathon home hunt took Chong and Gilmour all around the inner west, through suburbs including Balmain, Annandale, Drummoyne and Lilyfield.

‘‘We just couldn’t find anything because we felt the houses we were seeing were not worth what they were asking,’’ Chong says.

In the end the pair decided to hire buyer’s agent Amanda Segers from Amanda On My Side (www.amandaonmyside.com.au).

Finally Segers’ search led Chong and Gilmour to Lamb Street, Lilyfield. Segers bid on their behalf at the auction and the property was knocked down to them for ‘‘$1 million-plus’’.

‘‘In the end we found the perfect place for us,’’ Chong says. ‘‘Looking back, I prefer this place over the other ones that we lost out on.’’