Since the start of the year, I’ve been advising folks over the radio during my Property On Traxx show to invest in buying a home (if you haven’t already). I’ve also mentioned that a home purchase must be a smart one and not an emotional one.
As exciting as owning your first home, moving up the housing ladder, or investing in property may be, there are a few things you need to be aware of.
In this issue of Talking Points, I’m KEEPING IT REAL. I’m going to share with you, things no one actually tells you when buying a property.
Home ownership is an exciting experience and one that should be enjoyed, but the excitement can quickly turn to frustration if we don’t know all the ins and outs of purchasing a home. Don’t learn the hard way — do your research!
Remember, sellers often make mistakes too!
You need to be able to discover these mistakes from a buyer’s perspective. This could help you in negotiating and give you an advantage when talking with the sellers.
Here are some things you may want to consider:
1. Should You Really Give Up a Great Rental to Buy?
How many times have we been told that home ownership is a smart investment and we should stop throwing away money on rent?
Let’s take a step back and think about this scenario. Let’s play devil’s advocate. Let’s assume that you are currently renting a nice little apartment for RM1000 per month. Air conditioning, electricity and other utilities are included, there is a nice fridge, oven, dishwasher and microwave provided, and there are great laundry facilities available. In this situation, you know that your monthly costs are exactly RM1000 per month.
Now, let’s pretend you forgo this lifestyle because you dream of owning your own home. After house hunting, you find your dream home, so of course you excitedly buy it. After all, the bank says that your mortgage will only be RM1200 per month, so you can pull that off, right?
WAIT A MINUTE!
Here are some additional expenses that come with buying a home: water, electricity, property taxes, home owners insurance, gardening, maintenance or security fees, home maintenance costs for when things break (and they will), furniture to fill the home, a washer and dryer (now that you don’t have those nice laundry facilities) and all the kitchen appliances that were provided in your rental home.
These expenses fluctuate on a monthly basis, so you must set aside a little nest egg. Does buying still seem enticing?
2. Hire a Buyers Agent
If the list of expenses I mentioned earlier doesn’t scare you, and you still feel ready to buy, then hire a very reputable buyer’s agent.
These are real estate agents that are meant to solely represent you and help you negotiate the best possible price. These agents are supposed to be professionals and highly skilled at negotiating.
There is only one cautionary tale when it comes to buyer agents — they are only human so, of course, their own financial gains are also being taken into consideration. This means that the more you pay for the home, the more the agent makes in commission.
You need a buyer’s agent to help you negotiate, but their sole goal may not be to get you the lowest possible price. It is best to politely, yet firmly, push for the price you want and then have the buyer’s agent negotiate for this price.
In other words, don’t go into this blindly and assume the agent will do all the work for you. You need to be your own proactive advocate when it comes to the negotiation process. I would suggest looking at agents from reputed firms such as Knight Frank, Zerin Properties and REMAX Malaysia. I know some big shots from these firms and they are very genuine agents.
3. Buy a Home That You Can Really Afford
There is nothing worse than living in a glorious home that is devoid of furnishings because you are too broke to buy a couch. Getting a great mortgage rate can make monthly payments a little less harsh (and hopefully allow you to have some money left over for furniture).
In order to get a great mortgage rate, it is best to get your credit score as high as possible before pre-approval. Some people swear off credit applications a year before buying a home to increase their score. Of course, it also helps if you pay all your bills on time.
There are numerous online calculators, such as the one we have on our website www.property360digest.com, that helps you calculate just how much you can really afford.
Many websites also suggest that you “try before you buy”. Here’s a tip I normally give during my talks to first-time-homebuyers - before buying, try setting aside the monthly expenses for the home you plan to buy (minus what you are paying now in rent/mortgage).
If you can pull this off for a few months, then you’ll have a little nest egg, and you’ll know that you can probably afford the monthly payments that come with the new home you want.
4. Buy in Areas That Are Close to Schools, Even if You Don’t Have Kids
This is one idea that you have probably heard before, but it bears repeating. Buying in a well-known, high-rated school district is like investing in a sunscreen business in the tropic - it’s a winning scenario.
Maybe you don’t have children and never plan to, but when it’s time to sell your home, the new buyers are likely to be looking for a great school close to home for their kids.
Homes close to well-known schools are more likely to go up in property value and are more likely to sell faster.
Start your home shopping in areas with top-ranked schools but remember to stay within your price range. Realtors will try to show you homes that are slightly above your range, but hold firm — you know what you can afford.
5. Talk to the Sellers
Most home buying transactions are done by the buying agent and the selling agent, making you feel a bit like a third wheel. We don’t usually get to talk to the selling agent first-hand about negotiations, and that is OK, but wouldn’t it be nice to talk to the sellers of the home?
The sellers are the ones who know everything about the property and surrounding neighbourhood. Sure, they may not disclose that their neighbour stays up and parties all night, but they can tell you what they like about the house, neighbourhood and school. They can share information about renovations they did, gardens or trees they planted, local clubs, neighbourhood babysitters and other information you may not have even thought about.
If the sellers are not interested in talking with you personally, you could write out a list of questions for them and have your realtor give it to their realtor. Sellers are by far the best source of knowledge — a source that most don’t think they can use, but why not? The worst they can say is, no.
6. Don’t be Afraid to Walk Away From the Deal
There are some tough negotiators in this world, and it can be hard to seal the deal when one person is unwilling to budge. If negotiating has come to a standstill, don’t be afraid to walk away. Yes, you love the home and you already pictured yourself living in it, but it’s not worth it if you end up paying more than it’s worth to you.
You will live to regret it, forever thinking, “I should have stuck to the price I wanted”.
Sometimes walking away is the best way to motivate the seller to agree to your terms. In the end, whoever is willing to walk away is the one that holds the negotiating power.
Go into the deal knowing what your final price is - and stick to it when negotiating.
7. Wait Before You Decorate, Buy Furniture and Do Renovations
It is so tempting to jump into your new home with a paint brush in hand. Nights have been spent dreaming of the furniture you want to buy, the colours you will paint the walls, and the remodelling you will do—but wait.
Knowing what works in your new home requires living in it for a while. Use this new space as it is, and you will begin to see what is missing. Maybe you will discover that you dislike the kitchen layout and would prefer to spend remodelling money on renovating the kitchen. Or maybe you will fall in love with a new bedding set and decide to paint your bedroom walls around its colour scheme.
Everything will fall into place eventually, and there is no worse decorating mistake than buying everything all at once and ending up with a home that looks too haphazard.
Home ownership is not for the faint of heart. It involves a lot of stress and worry over money. The better prepared you are financially, the better off you will be when it comes to owning your own home.
Seek advice from a knowledgeable buyer’s agent and arm yourself with as much information as possible before going on house tours. If you need more home buying tips, check out or websites. If you need some agent recommendations, drop me an email.