Buying a home can be overwhelming. At times it is the single most important decision in a person’s life. Yet there are many issues that a home buyer may overlook. These are the top 10 questions which a home buyer should ask before making an offer on a property.
1) What is the market value of the property?
This is perhaps the most important question which a home buyer should ask. This establishes a price range and makes the offer process simpler. If the selling price of the property is way above the market price then the buyer is not going to get the property if he is not willing to pay a premium. The market price of a property also establishes the loan quantum which the bank will be willing to accept. Banks generally loan 80% of the market value of a property. Anything above the market value will not be financed and the buyer will have to fork out cash instead.
2) How much did the seller pay for the property?
This can be found out by doing some checks on the past transacted prices. For properties whereby the home owners have been living in them for decades, their profits can be extremely huge and thus they may be more reasonable with their pricing. Certain home owners bought their properties at a peak and may not be willing to let go of their properties at a substantial loss. These home owners may be more rigid in their price negotiations. They may rather continue staying in the property than to realise their losses.
3) How long has the property been on the market?
This can be an indication of how serious a seller is about selling his property. There may be instances whereby a certain property may be on the market for more than 6 months. One of two scenarios can be happening. Either the seller will be more accepting to the fact that his price is too steep and thus be more willing to negotiate or he may be unrealistic in his pricing which is why the property is on the market for such a long time. If a home buyer sincerely likes the property, he can try to throw in an offer to start negotiations. He will then learn whether the seller is a weary seller or an unrealistic one.
4) What was the last offer?
This is an important fact and knowing this would give the home buyer a gauge as to how much room there is for negotiation. If a home buyer’s budget is below the last offer on a certain property then he may want to save his, and many other parties’, time viewing that particular property.
5) What is the current market condition?
The state of the real estate market is important when making an offer. If the market is doing well, throwing in a low offer may never work. The buyer may end up missing properties that suit his criteria. If the market is soft, then as a buyer the room for negotiation is larger. If the general economy is doing badly or if there is a recession then prices should be extremely soft and more home owners may not have the holding power to tide through rough times.
6) What are the developmental plans for the area?
It would be wise to find out whether there are any plans to develop a new train line in the area or whether there will be a new shopping centre coming up. Such things can affect future home prices positively. In the immediate term the construction work around the area would make the area undesirable. This could result in less tenants wanting to rent the property. Also, if a buyer were buying a property facing the sea, he should do a little research and find out whether there are any plans to develop a property which would block his sea view. These are just some of the few questions which the home buyer should ask the property agent selling the property.
7) Are there any issues with the property?
Some properties may be illegally modified. They may have structural issues as well, especially if the property is a very old landed property. For HDB flats, it would be wise to ask the property agent selling the property whether the property owner has any debts with illegal moneylenders. Knowing the issues of a certain property would better prepare the home buyer against any unexpected incidents. If these questions are asked, then the home owner and the property agent have to truthfully tell the home buyer. If not the buyer may seek legal recourse if these issues come to light eventually.
8) How long ago was the last renovation?
Wires, carpentry, water proofing in the bathroom and many items in the house have a certain lifespan. If a renovation was done recently then the home buyer could possibly save on a major overhaul to the property. If the renovation was done decades ago, then it would be wise to set aside some budget to redo things like the wiring and plumbing.
9) What is the home sellers’ timeline?
Many buyers fail to ask whether the home sellers require an extension of stay after the sale has been completed. Most home sellers need to sell their current property before purchasing their next property. They may not want to look for temporary accommodation as it may be too troublesome for them to move around. Thus if the home buyer is in an urgent need of a property, such a property may not be suitable for them.
10) What are the transaction costs involved?
Many buyers fail to realise that there are many hidden costs involved in purchasing a property. The common costs involved are things like stamp duties, legal fees and agent fees. When in doubt they may want to get their property agent to list down these costs to them. This way they do not overlook certain amount which may present themselves later.
There are many questions that a home buyer should be asking when making a home purchase. These 10 questions are not exhaustive but in my opinion they are important questions that can have an impact on the home buyer’s life in the near future.
Yours Sincerely,
Daryl Lum
