I've Found a House
Before making an offer on a house...
You have found the perfect house. You want to put in an offer... stop! Before making an offer there is a number of essential checks that you need to make - these checks could make a big difference! If an agent is involved you will feel pressured to submit an offer straight away - an agent wouldn't be doing their job if they didn't try to get an offer from you as soon as possible.
If you can, sleep on it! Still want to go ahead in the morning? There are a few checks you need to do before the agreement is even prepared.
Most of these checks are free and all of these things could affect the price you are prepared to pay so are very important to cover off before numbers are even discussed. They are:
By doing these you may discover something that significantly affects the price you are prepared to pay i.e. rotting windows, boundary issues and/or finance limitations. This preparation will mean that you can go into the price negotiations with a clear idea of what the house is worth to you and what you can pay.
These checks are no substitute for registered property valuations, pre-purchase building inspections or a LIM, but give you some insight. You should always include some or all of these professional services in your conditions. And until you have unconditional approval of finance in writing for the house you should always include a finance condition.
If you feel you do not have the time or opportunity to do these checks before you make an offer on a house, make sure that you put some appropriate conditions into your sale and purchase agreement so you can complete these necessary checks if you agree on a price (find out more about conditions).
As a bare minimum check out - ten key rules before you put an offer on a house.
What should I check? A house inspection checklist
Arrange to go and see the house again - take your time and take all your house checklists. As a bare minimum check your 'not negotiable' list and go through our quick house checklist - this is 10 quick visual checks that give you an insight into a house in a hurry (great for open homes!).
Something to keep in mind when making this second visit is the maintenance issues that cost the most to fix - the big six:
- Piles or foundations
- Electrical wiring
- The wall linings
- The exterior
- The roof
- The plumbing
These six issues are the most important (i.e. expensive!) a good rule is that at least three of these should not need major work. Many insurance companies will not insure a house if it needs re-piling, re-wiring, re-lining, exterior work, re-roofing, and re-plumbing. They will ask that at least three of these things have been done if the house is more than 60 years old or they may not insure you.
Few of us have the experience to assess a house fully; you can leave that to the professionals. And let's face it most of us aren't that keen on climbing onto roofs, clambering in ceilings or poking under houses.
Taking this into account, we have put together the Propertytoolbox house inspection checklist - a guide of observations that you can quickly make that can indicate if there is a problem before you commit any money:
|Look at||Signs there is potentially a problem||Cost to Fix|
|Piles / Foundations||Sensation of walking uphill and downhill around the house or a general unevenness to the floor.||Re-piling costs start at $12,000|
|The Wiring||Look at the switchboard/fuse board - is it an old switchboard with black wiring and chunky white porcelain fuses?
Is the electricity meter still a part of the switchboard panel?
|Re-wire $4,000 - $20,000 - Depending on the age and style of the house|
|The Interior Wall Linings||Can you tell what is lining the walls?
Worst case scenario it is Scrim (sacking or jute laid over rough sawn wooden boards (sarking)).
Best case - plasterboard (Gib board)
|Re-Line Approx $400 - $1000 per room dependant on wall area.|
|The Exterior||Look for flaking and peeling paint and rotten weatherboards.
Cracks in the cladding.
Also check if there is ground/soil up against or close to the cladding of the house.
|Re paint from $10,000 - $30,000
Repairing weatherboard - from $300
Leaky building issues - many thousands
|The Roof||Look for flaking and peeling paint and rotten weatherboards.
Does it look dirty, patchy, faded, rusty, or is lichen, moss or plants growing on it?
Can you see loose tiles?
Internally, are there any stains on ceilings or walls. Is their lifting wallpaper or bubbling paint?
|Re-roof from $10,000
Repaint from $4,000
Resurface from $4,000
Re-tiling from $13,000
|The Plumbing||Flush the toilet, turn on a couple of taps and the shower. Any noises? What's the pressure like?
Are outside drains overflowing?
Walk around the house and look for water after you have flushed the toilet.
|Plumbing work from $150
Re-Plumbing from $5,000
|Guttering||Are there holes or signs of rust, does it look blocked, are their plants growing out of it, do the downpipes go anywhere?
The ground will be indented and damp to muddy in areas under leaking guttering.
|Replace $1,000 to $4000
Repair From $200
|Heating||How is the house heated?
Is the heating electricity or gas?
|Heat Pump from $3,500
Wood burner from $4,000
|Windows||Are there cracks in the window glass or sills?
Or sunken or soft areas in wooden windows?
Do aluminium windows look in good condition?
Do the windows open easily?
|Window replacement $600 - $1500 each|
|Interior Decorations||Try to visualise the house without any furnishings.
What condition and colours are the walls and wallpaper?
Look under rugs for stains, wear and fading of carpet or discrepancies with wooden floors.
|Professionals to Repaint/Paper a house - from $8,000.
Re-carpet - From $4,000
Re-finish floors - From $1,000 depending on area etc
|Damp||Can you smell damp?
Is there condensation on the windows?
Do the walls feel cold/damp?
|Depends on the source of the problem - could be a small problem that is inexpensive to fix or could be many thousands (leaky building!)|
|The Driveway and Paving||Are there cracks? Puddles? Weeds growing through?||New driveway from $10,000|
|Drainage||Is there evidence of water collection or run-off around the house and section?
What direction is water likely to go when it rains?
Will there be run-off from adjacent property's/land/roads?
Are there any drains around the property?
|Installing drainage systems
Basic up to $1000
Comprehensive drainage works will not cost less than $5,000
|Sun Aspect||How is the house orientated for sun?
Are there surrounding trees, hills or buildings that will cause shade?
Do the walls feel cold/damp?
|Depends of the source of the shade. Could be impossible to fix!|
For a pdf version of the Propertytoolbox house inspection checklist.
While this second house inspection is no substitute for a Building Inspection done by a professional, having a good look around with these things in mind will give you a good understanding of the house and what it is worth to you.
It is really great to go around and see a house in mid-Winter, late in the afternoon, during busy times of day for the location, on a day that is pouring with rain and windy - then you are seeing it dark, wet, cold, noisy and busy.
If this is not possible, try to take these things into account - at a bare minimum drive by a couple more times at different times of the day to see where the sun and prevailing wind is in relation to the house and outdoor living. To work out sun orientation, refer to our sun guide.
About the title check
This is done by your lawyer. A title check establishes:
- Who the owner of the property is.
- Type of title i.e. freehold (fee simple), cross lease, leasehold, company share or unit title.
- Any covenants or right of ways.
- Any easements.
- Any other interests in the property (e.g. mortgages)
A title check can bring some information to light that can really affect the price you are prepared to pay - perhaps the title type is not what you expected, or the boundaries do not correspond with the fences, or easements are a problem. Implications of covenants or right of ways may affect your enjoyment of the house, or put a stop to plans you have for the house (extensions - additions).
Getting this check done is especially important if you are buying through auction or tender. Commonly, the normal vendor warranties (promises) about features of the property and the purchaser's right to requisition (raise objections to) the title are deleted from the sale and purchase agreement in the case of auction or tender.
This means you need to get your lawyer to check the title and any other reports on the property before the auction or the lodgement of a tender as you have forgone your legal right to raise objections by signing an agreement with the vendor warrantee clause crossed out.
Find out the ongoing costs
Make sure you are fully aware of the cost of owning the home. There will be costs specific to this house i.e. rates. The real estate agent will give you a figure - but double check this amount with the council.
Check with your insurance company how much the insurance will be for the house and contents. Any number of factors specific to the house - including floor area, garage size, house alarm and locality - can significantly affect the amount of insurance you are paying. Think about your car insurance to, where you have available to park your car (on the street, off the road or in a garage) and your locality will affect your insurance premiums.
Are their body corporate fees? Are the body corporate fees changing? And is there any body corporate maintenance planned that is likely to see you with a big bill in the near future?
Confirming your finance
Ring your bank, lender or mortgage broker. Give them specific details of the house you are looking at including the address and the amount you think you may be looking at paying.
You may find that they are not prepared to lend the amount of money you need for that house. This may be because of the type of title, the location of the house, the condition of the house, the price you want to pay in comparison with the rateable value or any other reason that they think is relevant to their risk exposure.
Once your lender has looked at relevant details of the house they will be in a position to give you a pre-approval for the purchase of the house up to a set amount. They will also make clear any conditions associated with the pre-approval i.e. they may need a property valuation.
If there are any conditions associated with your pre-approval of finance you should put a finance condition in the sale and purchase agreement.
Now you have your finance confirmed you can be confident that you can attempt to buy - and you will have a budget. You will also know if there are any finance related conditions you need to add to the contract.
If the house is for sale by auction, you need to make sure you have unconditional finance pre-approval for the purchase of the house. Buying at auction is the same as putting in a cash offer (an unconditional offer). You do not get the chance to get your finance sorted or your building inspection done after the event. Once the hammer goes down you have gone unconditional, you are buying the house! You need to have worked through all you conditions before even bidding.
Do you still want to make an offer?
Your second inspection is no substitute for a building inspection but hopefully it has given you a better understanding of the property. You may no longer be interested!
If your title check came through fine, you are ok with the costs and your finance is sorted, you are now in a position to make an offer. Have you worked out now how much you want to pay for the house? Have your thoughts on price now changed, taking into account all you know?
If you are still keen and the house is for sale by auction you should now launch into getting the house evaluated professionally. Organise a building inspection, a valuation and a LIM then send the auction papers to your lawyer to look over. This all needs to be sorted so that you can confidently bid on auction day.
Now for everything you need to know about making an offer on a house.