15 Jan The costly shortcuts – Rafe Berding
Confronted with the prospect of entering an ever-rising housing market, you would think home buyers and property investors would be extra careful but that’s not always the case according to Rafe Berding from Global X. He gives us his tips for avoiding some common buyer mistakes.
Kevin: As the market continues to grow, to continue to improve, you’d think that many people being confronted with the prospect of entering the market – not necessarily for the first time, I have to say – they would do a lot of research. Well, that is not the case. That’s according to Australia’s legal professionals.
There was a survey done by a company called GlobalX that revealed that 63% of conveyancers say that people are not doing enough due diligence, therefore falling for a lot of traps and getting themselves into a lot of hot water.
So how do you avoid it? Joining me to talk about this and to give us the results of this survey, Rafe Berding, who is the head of marketing and brand at GlobalX.
From what your research showed you, can you tell me what are the biggest mistakes that people make when they do rush in like this?
Rafe: Yes, a pleasure to be with you, Kevin. First and foremost, the biggest thing the research has highlighted is that homebuyers are really failing to grasp an understanding of the local area in which they’re purchasing. What we would recommend is that homebuyers should thoroughly research the property they’re contemplating to invest in by conducting the local government and area checks before actually purchasing the property.
Kevin: Yes, there are many commentators we talk to who say you don’t even need to get your feet on the ground; you can actually do it by remote. That can be very dangerous, Rafe, can’t it?
Rafe: That’s correct. There are a lot of considerations when purchasing a property outside of building and pest, and also outside of finance, a lot of things that property buyers should consider and understand in the research and due diligence stage. Is there any future development planned for the area? What are the local council zoning restrictions? These things really affect the future development or renovation of a property.
Other considerations also include what is the flood modeling? Is the property in a bushfire zone? Is there a history of subsidence? The outcome of these searches can really affect how you build, your insurance premiums, and the overall security of the property.
Kevin: I mentioned buying remotely, and quite often when you do that, you have to take advice from people. Is there anyone you would recommend people should not listen to?
Rafe: There are a lot of people out there in the market who offer very sound advice. For example, property buyers are a great aspect if you are buying remotely or interstate or internationally, but we really advise that you seek legal professionals as well as also property buyers.
Kevin: I guess you have to be very weary of anyone who’s recommending a particular property to you.
Is this only with first-home buyers? Is that what your research showed, or is it fairly broad?
Rafe: No, our research was broad. First and foremost, property buyers weren’t conducting local government checks. Secondly, they weren’t conducting building and pests. And thirdly, they weren’t gaining the finance beforehand. So, it’s across the board, and what we would encourage all buyers – regardless of their experience – to do is do the background checks before making a decision that’s legally binding.
Kevin: It’s always good advice to take advice. At what point do you do that? Is that after you sign the contract if you have conditions on it, or is this before you sign the contract, Rafe?
Rafe: Before you sign the contract, it’s important that you undertake your necessary research and due diligence – so what is the local area you’re buying into, what are the certain restrictions whether it be zoning or future development – before you actually sign that contract. Then your legal professionals will come in and undertake that for you and conduct the actual transfer of that property.
Kevin: Which of those detailed searches are actually done by the conveyancer or by the legal person you would engage?
Rafe: The predominant amount of them are done by the conveyancer, but this is usually after signing of the contract. Importantly in the research and due diligence phase, most of this information is freely available online, be it through your local government authority or publicly shared information on a suburb. We would recommend that you get in touch with your relevant government authority.
Kevin: Okay. Give us your final tips just to close off here, Rafe. What are your tips for someone who is looking at buying to make sure they don’t make these mistakes?
Rafe: Great question. Do your homework. Undertake your research and due diligence thoroughly. Don’t rush; there’s always going to be another property. And ensure that the property meets your expectations. Whether you’re a first-home buyer or an investor, that’s integral to your purchase.
Kevin: If you do miss out, just make sure you don’t give up, too, because quite often, hunting for a house can be quite difficult. So, don’t give up after the first or second time. And I think that piece of advice you gave – that there’s always another property – is a particularly good one, easy to remember.
My guest has been Rafe Berding from GlobalX. Rafe, thank you for your time and for your advice.
Rafe: Thank you, Kevin. You’re welcome.