Ten things to watch out for when buying a house

Author: Jane-Anne Lee
Date: March 17, 2008
Publication:  Sydney Morning Herald

Sydney auction clearance rates are off to a slower start this year as buyers are clearly spooked by the prospect of rising interest rates, the credit crunch and a slowing economy.

Last weekend, the auction clearance rate was 49.9 compared with 60.4 per cent for the same time last year. These figures include properties that have been withdrawn from sale, says Michael McNamara, general manager of Australian Property Monitors.

"This really tells you that buyer confidence has been bashed around," he says. "It wouldn't surprise me if we saw softer conditions persisting throughout the year, which means, for those in a position to buy, it may be a good time to take stock and start looking for those bargains that are no doubt out there."

Along with the need to factor in more rate rises, buyers need to consider carefully whether or not the house is right for them. Here are some tips to get you started.


A building and pest inspection may cost about $550 for a four-bedroom home but could save you thousands. This type of inspection is a visual assessment of the condition of the property, says David Kessler, managing director of the Building Centre.

Stephen Ransley, general manager of Tyrrells Property Inspections, says about one in three properties has a pest problem. A building inspection can highlight illegal or dodgy renovations, leaking bathrooms, rising damp and problems concealed by paint or render.

Kessler says termite damage and structural problems are not covered by insurance and are expensive to repair, something worth considering if you are wavering on the inspection cost.

Also, when the market is running strongly and you're missing out on properties, the cost of several building inspections may seem excessive.

However, Rod Cornish, head of real estate research for Macquarie Group, says it is always worth it when buying a home. Along with the building and pest inspection, don't forget to organise a solicitor or conveyancer to inspect the contract and carry out the necessary checks.


Some people like their home to have the right feng shui for health, wealth and sound personal relationships. The Building Centre can organise this type of assessment for about $385. If you're not a feng shui fan, check the property is not overlooked and there are no privacy issues.


More buyers want a sustainability assessment, given the price of power, Ransley says. "In Canberra, it is compulsory before selling a house to have a sustainability analysis, which looks at the house's thermal capacity, glass area, insulation, orientation and rainwater tanks and solar hot-water capacity," he says.


A lot of buyers are still uncertain of the value of the area where they are house hunting, says Michael Harris, of Raine & Horne Newtown. He recommends approaching agents for a comparative market analysis that lists sales in the area with a photo and description of the property plus information about days on the market.

Cornish advises buyers to look at price movements over a year to see if they are accelerating or slowing.

Buyers can also visit websites such as www.homepriceguide.com.au (produced by Fairfax, publishers of Domain.com.au) for a property report  which gives a current price estimate, a forecasted price estimate (to help you work out whether to buy now or later), sales history, median price trends and comparable sales.


The right aspect can enhance your enjoyment of your property: it can be warmer in winter, cooler in summer and the garden, deck or courtyard may be a place to retreat to rather than withdraw from, says Donna Hartley, of property managers Quinn Harrington. Plants will thrive in the right aspect.


You may be tired of pounding pavements every weekend but don't let that fatigue affect your due diligence. Annabelle James, director of buyer agency Buying Sydney, says you must be sure you buy what you think you are buying. "We found what appeared to be a perfect property for one of our clients last year: a solid Californian bungalow on huge block of land, ripe for makeover and in a quiet street.

After a check on the ownership of surrounding properties, we discovered that the vacant block opposite was owned by the electricity board and was shortly to become the area's newest electricity substation. It definitely pays to do your homework. It helps you to make an informed decision and puts you in a stronger bargaining position when it comes time to negotiate."


Cornish recommends visiting the local council to check whether there are plans to widen roads, redirect traffic or build large developments that may create more sound. Also, visit the property at different times and talk to neighbours about noise issues. Find out if there are rowdy parties at nearby apartment blocks or if there are drag races on Friday nights.


Start with a broader area then tighten the search circle, says KPMG demographer Bernard Salt. Look at transport options and community infrastructure such as medical facilities and access to schools then turn your attention to green spaces within a convenient walking distance where people can cycle or throw a Frisbee, then seek galleries and libraries that add to the cultural capital of the area. As you close in on your search, check the streetscape: are houses set back at odd levels giving "a jagged-tooth effect" or are all the properties stepped back into a pleasing common line? "At any point where the property doesn't measure up, you move on," he says. "If you do it the other way around and fall in love with the house first, you may only make the occasional foray outward to look at things."


Housing Industry Association data reveal households are spending more on renovations: it cost an average of $1769 a square metre last year on a ground-floor extension compared with $1250 in 2002.

Cornish says if you're planning to renovate, obtain quotes from tradesmen before you buy. The Building Centre can also organise an inspection with an architect to assess and discuss the potential of the home and site for $495. "A recent customer had three design possibility inspections carried out by three different architects to give him the best choice of ideas and creative possibilities," Kessler says.


Many people prefer to buy property through a private treaty to avoid the stress of auctions, says Patrick Bright, director of EPS Property Search. But they are significantly reducing their property selection pool and may miss out on good buys.

"Instead of being scared of auctions, you need to get educated. Go to a number of auctions and see how they work. Do your research so that you know the value of the property. Set yourself an auction plan including a maximum bid price and stick to it," he says.


Amir (pictured with daughter Ella) and Michelle Demiri relied on a builder's report before buying their three-bedroom, single-storey cottage in Newtown in December.

"This report was crucial for us. If anything rang alarm bells, we wouldn't have touched it," says Amir, 39, business manager for Programme Maintenance Services. "The builder said the house had good bones and there was no sign of recent pest activity, so that was the green light for us. We bought it with a view to renovating it, so we needed to make sure it wasn't going to collapse."

The builder highlighted that the structure of the roof frame was old-fashioned but not a concern. The render had been patched untidily and might need to be re-done. The Federation bathroom was also out of character for the style of the home.

The couple, who have two children, Ella, 3, and Ava, eight months, plan to live in the house for about six months before undertaking renovations. They paid $878,000 through Michael Harris of Raine & Horne Newtown.

The builder also provided estimates for the revamp. "He gave me a ballpark figure to get an architect and builder involved for an upmarket renovation, which was $4000 to $5000 per square metre. These figures totally floored me."