What A Bad House Purchase Looks Like.

Getting into the property market and don’t know where to start?  Wise Real Estate Advice have created this guide on what buying a bad property looks like and how to avoid it.

A bad house purchase can be a significant financial and emotional setback. It occurs when a buyer purchases a property that later reveals various issues or problems that were not apparent to the untrained eye during the initial buying process.

While real estate agents can be valuable resources in the homebuying process, it’s important to remember there hired by the sellers to represent their best interest. Hence, it’s important for buyers and sellers to approach their interactions with agents critically and independently.

Not doing your homework can result in substantial financial loss for the property buyer or worse, an uninhabitable home.

Here are some signs of what buying a bad house looks like:

Difficulty reselling: Due to its condition or location, potentially resulting in a loss of investment or price discounting at the point of re-sale.

Paying too much: When negotiating with a real estate agent you must remember your up against a professional that negotiates prices daily. Getting emotionally caught up in the process is an agent’s strategy in getting you to pay more than market value.

Structural Issues: Foundation problems, such as cracks, settling, or uneven floors. Roof leaks or structural damage that requires costly repairs or replacement. Faulty or outdated electrical and plumbing systems that need significant updates.

Water Damage: Signs of water damage, such as water stains, mold, or a musty odor, indicating potential plumbing or roof issues.

Poor Water Drainage: Drainage around the property that leads to flooding or subfloor water infiltration.

Excessive Renovation Costs: A house that requires extensive renovations and updates that go beyond your budget and skill level. Hidden costs associated with repairs and renovations that were not initially apparent.

Inadequate Renovations: If the house has undergone renovations or additions that were poorly executed or not up to code, it can result in costly remediation work to bring the property into compliance.

Pest Infestations: Evidence of pests like termites, rodents, or insects that can cause damage to the structure and require costly extermination and repairs.


Inadequate Insulation or Energy Efficiency: A poorly insulated or energy-inefficient house can result in high utility bills and discomfort for the occupants.

How to minimise your financial risk.

To avoid buying a bad house, it’s essential to conduct thorough due diligence before making an offer. Hiring a professionals can be a wise decision in various aspects of buying property.

Whether it’s selecting the right home, assessing its viability, or paying the right price when financing and buying.

There are four main experts (listed below) you need on your side to make you a guru home buyer.

Expert No 1. Mortgage broker:

Using a mortgage broker can be a helpful step when you’re looking to secure a home loan and understanding your budget. 

A mortgage broker is a financial professional who acts as an intermediary between you and potential lenders to help you find the most suitable mortgage product based on your financial situation and needs.

Based on your financial profile and preferences, the mortgage broker shops around and presents you with several mortgage options from different lenders. This allows you to compare rates, terms, and features that are best tailored to your situation.

Cost of a Mortgage Broker: They are paid by the bank you sign up with. $0 upfront cost to the property buyer.

Expert No 2. Buyer’s Agent:

A buyer’s agent is a licensed real estate professional who represents the interests of homebuyers during the process of purchasing a property. Their primary role is to advocate for and assist the buyer throughout the home buying journey.

A good B.A will physically inspect all the homes that are on the short list. They can offer insights and advice on the viability of a floor plan, structural integrity, create a current and future maintenance list and advise on the neighbourhood.

One of the key roles of a buyer’s agent is to negotiate on your behalf either by private treaty or auction representation. They help you craft competitive offers, negotiate with sellers or their agents, and work to secure the best possible terms, including price, and closing timelines.
 

Cost of a Buyer’s Agent: Approximate $5,500 to $10,000 depending on the level of service.

Expert No 3. Building & Pest Inspector:

Using a building and pest inspector is essential when you’re considering purchasing a property because it helps ensure avoid costly problems when buying a home.

A qualified building inspector can assess the structural integrity of the property. They can detect issues like foundation problems, structural damage, and issues with load-bearing walls or the roof. Identifying these problems early can prevent you from buying a property with significant structural issues.

Some defects or damage may not be visible during a casual viewing of the property. Building inspectors use specialized tools and techniques to uncover hidden defects, such as termite damage or mold growth.

Pest inspectors are trained to identify signs of infestations by termites, rodents, insects, or other pests. These infestations can cause significant damage to a property and may not be immediately apparent to the untrained eye.

Cost of a Building and Pest Inspection: Approximate $700.

Expert No 4. Conveyancer:

Their primary role is to facilitate the transfer of property ownership from the seller to the buyer.

During the buying process, it’s wise to use a conveyancer for contract of sale reviews. They ensure that the terms and conditions are clear, accurate, and in compliance with Victorian laws and regulations.

They conduct a thorough title search to verify the legal ownership of the property and check for any existing liens, encumbrances, or restrictions that may affect the sale.

They work with your financial institution to ensure that mortgage financing is secured, and all financial aspects of the transaction are in order at the time of property settlement. They disburse funds as required to settle outstanding bills and fees, such as the agent’s commission, legal fees, and any other costs associated with the transaction.

Cost of a conveyancer: Approximate $1,100.

The experts working together for the best outcome.

A wise buyer’s agent can use your conveyancer’s due diligence of the contract of sale or building and pest inspection report to negotiate better terms, a cheaper price or knowing when to walk away from a particular property.

For instance: If significant issues are discovered with the contract of sale or a defects discovered via the building and pest inspection you can use the inspection findings to negotiate a lower purchase price or request that the seller address the problems. Inspection reports can provide you with negotiating power.

Conclusion

Buying a house or investment property will be your biggest investment, the right advice will give you piece of mind while owning and pay tangible dividends when re-selling.

To avoid making a bad house purchase, it’s crucial to conduct thorough due diligence before buying a property. This includes obtaining a professional home inspection, reviewing property history and disclosures, researching the neighbourhood, and working with a qualified buyer’s agent who can help identify potential issues. Additionally, be prepared to negotiate with the seller to address any problems or concerns that arise during the buying process.

Questions?
Feel free to ask them below.