Deciding on Your Budget

When you are entering the real estate market as a home buyer you need to know exactly how much you can afford to spend. This amount should include the cost of the home apart from the legal fees, real estate agent’s fees and house interiors and renovation cost. During the time that you own your house if you are physically living in the house then that house will not give you any income and indeed can be called a liability.

Therefore your budget must make note of a fixed period of time where you will be expected to pay the mortgage EMI’s while any renovation work is being completed. Most people often fail to factor in this aspect of cost. One should remember that every month that you own a house it will cost you money and it should be counted.

When deciding your budget always bear in mind how much amount the bank is prepared to offer you and what this will cost you in terms of interest payments during the time that you own the property. You should also ensure that you can afford home owner’s insurance if you can for the period of time that you own the property and understand the kind of taxes that you are applicable to pay depending on the type and size of your property.

Decide Home Buying Budget

You should definitely fix an upper limit on what you can afford to spend for the house you are planning to buy so that you only look at houses that fall within your price range and a little higher bearing in mind that there is always scope for negotiations. Once you finalise a house you must also get a contractor to give you initial estimates on the cost of doing repairs and renovation. Renovation can be expensive and time-consuming but oftentimes necessary to raise the value of the home or just to repair items in the house that need to be in good working condition.

Inspecting Houses

When you are inspecting houses you should always be aware that in the area that you are looking there may be a lot of similar houses for sale. If this is the case then look at what kind of competing houses there are available. Appointing a good real estate agent and getting friendly with him / her can hold you in good stead because if they know that you are not contacting too many real estate brokers and they know that they will get business from you they will be eager to give you their full attention and help you gain expert insights and knowledge about the residential market in the area. There are several things that you need to account for when you inspect homes. These are as follows:

  1. How the house compares with others in the market in the same area
  2. How the price compares with other houses
  3. What the home offers and the amenities
  4. What are the disadvantages of the house

Allow me to go into more detail here because at this moment you may not be accustomed to knowing a lot of things in terms of planning and preparation before buying a house. If this is your first investment then you need to get it right. The first point that we have mentioned is quite an obvious one because taking a look at other comparable homes in the area will give you an idea of what the market is like. For example if you are looking for a family home for yourself can you imagine your family living there and are the amenities surrounding the house suitable for family life? Family homes need:

  • Access to good schools
  • Safe areas for kids to play
  • Good transport options
  • Good shopping areas

On the other hand if you are a single person then you would need to look at other things such as:

  • Modern accommodation & Amenities
  • Proximity to metro and airport
  • Parking
  • Availability of evening entertainment in the area

Different kinds of home buyers need different things. Which is why as a home buyer you need to know the market that you are getting into. If your market is full of family homes then the executive bachelor pad may not be the best option for you and vice versa. The moment that you enter a home you should be looking for problems. Are the floors solid or are there areas that squeak? Are there repairs that were never finished? What is the décor like? Do the kitchen and bathroom need complete renovation? Are the walls and ceilings of the property in good condition? How much work will be required to be done before the house can be lived in or put on the market for sale? What will the repairs cost you?

Property Inspection Before Sale

If you are buying a resale home in an older building then you will be better off if you keep your eyes open to all details the moment you have shortlisted the property. If the electrical sockets belong to another era then you may need to rewire the entire house. If the tiling is cracked then you may need to go in for new flooring. When buying a resale property you need to be a detective to a certain extent! Take a notepad or use a note taking app like Evernote and write down everything that you see. Use your phone camera and shoot images of anything that you have doubts about so that you can discuss this with contractors later. If you are serious about making a purchase do not part with any money until you have assessed things correctly. There are professional home inspection specialists now in India who can help you appraise the pain points of a house and highlight anything that you may have missed out on yourself. They are professionals who inspect homes for a living and know what to look for. Check out an earlier blog post here for some firms who operate in the home inspection space in India –

Getting Ready to Make an Offer

As someone who has worked in this business for over 25 years running, here’s an insider’s insight from me to those who are looking to buy a resale property. There are several things that will tell you how desperate someone is to sell their house. These things will let you know that there is room for negotiation in the asking price for the property.

  • The house has been on the market for a long period of time.
  • The house is priced on the higher side compared to other similar houses in the area.
  • There are costly repairs that need to be done.
  • The owners have already moved out of the house into a bigger house and hence are desperate to break the link to their past life.
  • The home has been neglected.

The above points are circumstantial but they give you an idea about the potential for buying the property at a good rate. If there is a real estate agent who has listed the property, he / she will be able to inform you about the circumstances of the seller. At this point of the my advice to home buyers would be to:

Be friendly and learn as much as you can because the more information you have the easier it will be for you to get a bargain.

When you have a detailed property report made by a home inspection expert, you will be better equipped to make a more detailed assessment of the cost of renovations that may be required. Based on this information you can make an offer to the owner bearing in mind the repairs and renovation cost that is factored into the offer price.

If you are dealing with buying the property through a real estate agent you should never make the offer directly with the seller. Talk with your real estate agent and take his suggestions and also feel free to add your own inputs based on the home inspection report. For e.g. “After considering the amount of repairs needed to get the property up to tip top shape, I would like to propose an offer of ₹ X.” If the house is desirable and if you feel that you must make a tentative offer quickly, you can do but with a rider, “After considering the amount of repairs needed to get the property up to tip top shape, I would like to propose an offer of ₹ X subject to a satisfactory property report”.

Making Offer Price

The real estate agent knows the seller and should have a good idea of whether your offer comes close to the amount that the seller will agree upon. You can dig deeper and ask the real estate agent for more information because for real estate agents, selling a house is their biggest priority. At this point though I would advice you not to get talked into making an offer that your instinct tells you is a higher figure than what you are prepared to pay because in the end you will stand to lose more money. The normal procedure is always for the real estate agent to contact the seller and to get back to you with either a counter offer which you can walk away from or further details of the final figure that the seller is willing to accept.

When you are making an offer on a house you may find that you are left with a heightened sense of anticipation. This is normal. But my advice would be to relax and do not call or message anyone after this. By maintaining your composure you are signaling to the real estate agent that you are not too keen which is not a good thing for the agent! If on the other hand you show your desperation for the property you are revealing all your cards and thus you leave yourself vulnerable and which does not help you eventually. Always remember that even though you like this house there will always be another day another house and another possibility. Do not be talked into paying more for the house that you feel it is worth – of course considering the comparisons that you have done with similar houses on the market and also factoring in the cost of repairs and renovation based on a professional home inspection report. So the bottom line is this –

After making an offer turn your mind to other things. The more you give away at this stage the lesser chance you have of turning in a profit.

The strategy mentioned above holds true whether you are buying a home for end use or for investment purposes or for flipping (read more here). Whatever be the case you should still look at it from a commercial point of view. This is probably the biggest investment you will make in your lifetime. If it takes an immense amount of money to get a house into shape you may not recover your money back on it and its not worth the time, effort and expense to put yourself in that situation in the first place. As a buyer always be informed and be sure of what you are getting into and do not sign anything until you have all the facts and you are happy with everything 🙂

Real Estate Agent at Gupta & Sen
Chloe is a real estate advisor with Gupta & Sen. With a combined experience of over 15 years in varied industries, she is a vocal and knowledgeable ally for buyers and investors who want to make informed choices when buying a property in India. With superlative communication and marketing skills, Chloe handles our PR, real estate marketing strategy and client management.
Chloe Dodd