Ep 72. Getting Ready to Buy
In this episode, Michelle is joined by Sam Neville, mortgage broker and founder of I Am Lending. Together, they unpack the real first steps for first home buyers and the conversations you need to have before you buy.
Here’s what you’ll learn from today’s episode:
How to choose the right broker for you
How a stepping stone purchase can fast track your long term property goals
Smarter ways to use the bank of Mum & Dad
Why some new off the plan properties carry extra risk and how to due diligence your strata reports
Speakers in today’s episode:
Michelle May - Michelle May Buyers Agents
Sam Neville - I Am Lending
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This podcast has been produced and edited by Snappystreet Creative
Please note that any views or opinions presented in this podcast are solely those of the speakers, and do not necessarily represent those of any business. These views and opinions are general in nature, and do not take account of your personal objectives, financial situation and needs. Please consider whether it applies in your circumstances and seek professional advice wherever appropriate.
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Michelle May
Welcome to another episode of the Buy Your Side Podcast, the property podcast to help you make smarter property buying decisions. Now, my name is Michelle May, I am the principal of Michelle May Buyers Agents here in Sydney.
And we buy primarily properties around the metropolitan area of Sydney. Now, when I am looking to help you make smarter property buying decisions, I'm always trolling the internet and looking for people who think like me and are you know wanting to help first home buyers in particular, make better decisions and get them on their property journey.
And so one day I was, you know, sleeting on TikTok and I came across a really wonderful page by this mortgage broker called Sam Neville. And Sam Neville is with me here today. Let me do a quick intro to who she is. Sam is a mortgage broker. She has her own business called I Am Lending. And with her trusty companion, Vinny, her sidekick / dog / expert bargaining specialist, as she puts it, Sam helps people, particularly in South Australia, and she's based in Adelaide, but first home buyers get on the property ladder.
And I'm so delighted, Sam, that you are here today with me to talk about Picking your first steps on the property ladder, which starts with understanding how much you can borrow and where to go from there. Hi, Sam, how are you?
Sam Neville
I'm good. Thank you so much for having me today.
Michelle May
It's such a pleasure. I really enjoy your TikToks. You are a lot better at it than I am, that's for sure. A lot more consistent to start with. I really love the fun way you engage with you know the people on the other side of the phone.
Just, you know, little tidbits of information, but fun as well, because just from my perspective, I think when I'm meeting first home buyers, they're so, you know, wide eyed and stressed and, you know, quite often don't know where to go, where to start. And I think your TikTok is a really accessible point to start from. So thank you for coming on.
So I wanted to ask you a few questions and by all means, you know, give us everything you know. But your background is actually in real estate years ago. Is that right?
Sam Neville
Yeah, so I actually started in education. So I went to uni to be a teacher, to be a PE teacher, to be exact. And I got sort of to the end of the first degree, it was a double degree.
And my partner is a teacher as well. So he was halfway through his degree. And I could tell at that point that he just loved it. And I didn't. And so I finished the end of that degree. And I sort of sat down I said, is this what I want to be doing?
And I looked at all the things that I liked doing, looked at all the things that I was interested in. and the answer to that was, I really liked the real estate industry. I loved people and I wanted to be involved in that. and so being a broker at that point wasn't really a sort of a career option.
I didn't really know any brokers. I didn't see it as a career path. And so I went into real estate because that seems the most obvious path when you are interested in houses and people, you go into real estate.
And so I sort of toddled along in real estate for a while, not really making much of a mark. I was quite young and it was in the middle of one of the real estate downturns. So a perfect time to get into the industry.
And after a little while in real estate at a couple of different agencies, I ended up getting a job at realestate.com.au. So the website, and that was like a marketing rep sort of sales rep position eventually. So I started in admin and then moved into a BDM role.
And that gave me so much more understanding of the industry as a whole and what's important and myself as a person and what was important to me. And so I worked there for about nine years and I, as I got to the end of that sort of experience and wanting to do more, I had that same chance to sit down and say, well what is it that I actually enjoyed doing? What is it about the industry that I really like?
And what I really like is helping people buy houses. So at that point, the option of being a broker was a lot more visible for me. I'd gone through a broker once or twice for my own properties. We had brokers coming in because they were sort of part of the team at realestate.com to do with the smart line brokers that came in as well. And so I had access and it gave me the opportunity to say, well, this is a career path for me.
So I got into broking about four and a half years ago and yeah, I just love it. It's the perfect place for me. I get to help people buy houses, I get to be in the real estate industry, but I don't have to. I think when I got into real estate, I didn't realise that it was more about selling houses than it was about buying houses. And when you're young, it doesn't feel like there's a difference. But then as you get a bit older and you realise what parts of the industry actually make you tick and give you those warm fuzzies, for me, it's very much the buying, not so much the selling.
Yeah. I love being a part of that transaction. I love helping people buy their houses. And then secondarily, once they have their houses, I want to help them pay those houses off because no one likes spending more money than they have to go to the bank or to anything else. So it's a really nice circle for me that I get to meet these beautiful clients. I get to help them into their first house and then I get to help them pay it off.
Michelle May
Yeah. And you mentioned before we started recording that you have a particular interest in people who are potentially neurodiversion making that path easier for them. Can you talk to me a bit about that?
Sam Neville
Yeah, so I noticed that, again, I take a lot of time to step back and look at my business and look at myself and sort of see what's working, what's not working. And one of the things I had noticed through a lot of the reviews that come in and a lot of the clients that I have is that a good number of them were neurodivergent. So they were somewhere on the spectrum. And a lot of the times their reviews or their feedback to me was how well or how easy I made that process for them, that it wasn't the kind of experience that they normally got when they went to a service provider of any description, that they didn't get the accommodations that they needed or they didn't get the information that they needed in a way that was easily digestible for them or easy for them to take away.
And so I really leant into that. My son is on the spectrum. He's autistic as well. And so for me, there's a connection there that I want him to be able to have the same experience as everyone else or to at least be able to advocate for what he needs when he goes to see someone, whether it be a mortgage broker or a job interview or just going to get something from somewhere or buying something.
And so I sat down with one of my clients and she's also a service provider in the industry. And we sort of mapped out what are the things that I can do, that we can do to make that process really easy and neuroaffirming so that when people come to me, they're not getting up against roadblocks that stop them from proceeding or stop them from having a good experience.
And a lot of those things don't in any way negatively impact or impact at all someone who is neurotypical. You know, a lot of it's just additional communication, being very clear, providing recaps after the meeting, that sort of stuff that just takes a lot of the wondering out. And I find that works perfectly for everyone, not just people that sort of require that additional support.
Michelle May
Yeah, absolutely. Yeah. Oh, that's fantastic. I think that's something that people need to pay more attention to, for sure. I think that even people who are neurotypical, you said, you know it's such an overwhelming process and having someone you take the time to take the steps because even though what we do is normal every day, you know we're just running through these things because we've done them for years. For someone who's coming to us, whether that's you know as a buyer's agent or as a broker, we can't take that for granted and having those steps in place for neurodivergent people or, you know, regular, non on the spectrum. It's, it's, I think it's, it's an added piece of service that you provide which is really good.
So I want to really dive into this because particularly because you cater very much to first home buyers, obviously everyone is welcome coming to you for a mortgage, but when it comes to first home buyers, I wanted to know, what are the top five things that you think that first home buyers should think about, maybe even before coming to you or when they're with you, that would help them make the process a bit easier?
Sam Neville
Yeah, perfect. And you mentioned a little bit earlier, I've heard you mentioned before about building a team and making sure that you've got the right people in the right spots for you. So definitely building that team, having the broker, having the right conveyancer, having the right buyer's agent that's going to support you. Because a lot of the time, first home buyers lean on real estate agents and they don't know any better because, again, they're very new to the industry, right? This is the first time they've possibly looked at or even tried to buy a home. And real estate agents as a whole, as an industry are lovely. But when they're doing that one-on-one negotiation with the buyer for that property, they don't work for the buyer, they work for the vendor and it's their job to get as much money out of the buyer.
And it's not necessarily, you know, there's a wide range between really ethical real estate agents and ones that will get there by any means. And so depending on what kind of real estate agent you're negotiating with, that experience can be wildly different.
So if you need that extra support of a buyer's agent or you're buying interstate, and that's definitely a really important one to have on board as well as your building inspectors, your pest inspectors and things like that as well, knowing that they're going to be there within your cooling off period or be there quickly and provide the report quickly so that if there is something terrible there that you wanna walk away from, you are able to do that within the timeframes. I know they're slightly different from state to state.
The next thing is making sure you do research early. So It's a bit of a chicken and egg, isn't it? Where you want to go research the market, but you don't know what you can buy for, but you don't know what you can buy for until you go see a mortgage broker. And it's sort of this cycle where you don't know where to start, but definitely starting with a mortgage broker will help you know where you are in that cycle and then making sure that you're doing a lot of research into the market from there. So not just in terms of the prices of properties, because you don't want to spend 6 weeks of your 12 week pre-approval, just getting a feel for where the market is, but you also want to have an understanding of what those processes are. So things like how to put in a letter of offer, how to negotiate, how to bid at an auction. So having a bit of time to research some of those processes before is really helpful.
Number three would be knowing what's achievable for them now, and also considering those long-term goals. So if your long-term goal is, for example, I've got clients that wanted to buy an acreage and they've wanted to buy an acreage for ages and ages and ages. But they couldn't buy an acreage when they first wanted to buy because they didn't have the money and the equity behind that. So they did buy something smaller and they stayed in that and they paid it down. And then this year they've gone and they've bought their acreage and they got a beautiful place and they're so, so happy with it.
If they had just waited and tried to save more to get into this acreage as their first property, they would have struggled. But because they did what was achievable for them at the time, and then they paid that down, it gave them so much more equity to be a bit more aggressive on that next purchase.
Michelle May
That's a really good point. That's a really good point because most people can't save more than the market moves, right?
Sam Neville
And once you're in the market, those movements in the market are working for you in the property that you own. They are somewhat working against you in the next property that you buy, but whether you bought in or you didn't buy in, that property is still going up in value. So you're always better off in the market than you are out of it.
Michelle May
Yeah. I mean, I guess it depends what market you're in as well. Like, for example, New South Wales with the cost of stamp duty and purchase and sale. Like for us here, you know, you need 5 to 7 years before you're actually starting, you know, come positive again, particularly if you buy something new off the plan that really initially just drops in value for a certain period of time. So it's important to understand that differs in which market you are significantly. But I think it's good. Yeah, that's a really excellent point to make that you've got to take bite sized chunks sometimes to get to where you want to be, you know. but yeah, perfect point.
Sam Neville
Beautiful. And then look, number four is probably quite topical. It's to be really wary of AI and also advertisements from the bank because we've had clients, I've had clients that will take my recommendation and they'll just drop the whole thing into an AI chatbot and say, can you check that this is correct? Can you check that this is the best deal for me?
And it will absolutely come back with a bunch of information. Whether that information is correct and whether that information is relevant is where it all falls apart because... the chatbot is already going to be behind because most of the time those chatbots are running off of slightly outdated information or they're running out of information that they can find on the internet. And a lot of bank policy is not accessible directly on the internet. It's behind a login to the brokers and to the bank. So if a chatbot comes back and says, oh, this bank is doing this amazing deal. Why didn't your broker talk about this? It may not be relevant at all to what their actual needs and requirements are or the policy that sits behind the decision.
So there are some wonderful things that AI can do and there's some really great ways that you can ask it to you know write your letter of offer for you or if you're sending something on that you want to have checked or if it's got a building inspection, you want to go through the building inspection and ask it questions about what does this specifically mean, fantastic.
But just keep a bit of a wider lens on. It's a guide and you want to go back to your professionals to get the final answer because they're the ones that are in the industry and know exactly what's going on.
Michelle May
Yeah, I couldn't agree more. Like I'm getting this pushback already as well, where, you know, people coming to me and saying, well, I've had a look at the strata report. I put it in ChatGPT and this is what it's telling me. I'm like, oh, no, no, no, no. There's a whole lot of nuance that, you know, the bot isn't getting.
I did a little experiment myself where I fed it our template that we use to review strata reports and wow, it got it so wrong. It got it so wrong. So, and anybody who's, who doesn't have the resources that we do and the experience to read strata reports, we just take it as gospel, right? Which is a very dangerous thing. So yeah, I take your point about using real professionals as opposed to, you know, a little bit of computer programming for sure.
Sam Neville
Yeah. It's a bit like Jeopardy too in that your answer is only going to be as good as the prompt. And so if you haven't prompted it correctly, if you've asked it questions about buying a property or putting in offers and you haven't specified this is for Australia or this is specifically in South Australia, you might get, I know I see a lot where someone's come back to me and they've asked me a question about closing costs. And I'm like, oh, you've either been reading American articles or you've asked a chatbot but you haven't specified that you live in Australia. Like it's not it's not a term that we necessarily use here. You're not going to go into escrow. It's a different type of structure.
So definitely there is a place to have AI do some of the background work for you if you want to check it in there and maybe get it to double check something but I think the final the final answer on the double checking should come back so if you pop it in and it gives you a question you're like, oh I do want the answer to that why didn't my broker talk to me about that, absolutely come back and say, hey why didn't you talk to me about this, but just be prepared that we'll be like, yeah this is why we didn't talk to you about this because it's completely not relevant to your needs and your goals and and your structure
Michelle May
Yeah, absolutely. Have we gotten to point five yet? Or here we go.
Sam Neville
No, we haven't. I got one more. So one more is really to think about what happens when it all goes, you know, upside down, right? What happens when it doesn't go to plan? What happens if you get sick? What happens if you have babies? What happens if you break up, which is a big one, if you're buying with someone, a partner, and then you break up, what happens if one of you wants to exit that property and the other one doesn't? What happens if you both have to exit and now you're, like you mentioned, you know, maybe you bought off the plan and your property's actually gone into negative equity now.
You know, will you need to split and take losses on both sides? If you're buying a property with either a partner or if you're buying with a friend or a family member, having a solid under understanding of your exit strategy because while you're buying it now, because you can buy something bigger together than you can separately, you need to have a good understanding of well what happens if that other person gets a partner. Hopefully not if it's your partner getting another partner, but if it's your family or your sister or your brother getting a partner and they want to live there or they want to live somewhere else, how do you exit out of that purchase?
And I think especially for deals that are not done between partners, so deals between family members or deals between friends, is treating it a lot like a business transaction in that you know what you're putting in, you know what you want to get out of it, you have a set timeframe where you're going to review. Like after five years, we're going to review, can one of us take it over and the other one gets paid out? Do we sell it and take our gains and buy something separately? What happens if someone brings in a partner and we want to look at that so having all of that discussion beforehand will really help with not finding out at year 3 that someone else wants to do something different and you can't afford to keep this property that you've purchased because you will lose that stamp duty in buying again and it's in the short term it is hard to make back what you spent on on your stamp duty if you did pay stamp duty. So definitely having a good understanding of your exit strategy and what you need to cover if one of you is not working or something goes wrong or if the market even if there's a market downturn.
Especially here in South Australia, we've seen sort of record growth year on year. The market does historically staircase in Adelaide where it just goes up and then it plateaus and then it goes up again. We don't see the ups and downs that you get on the eastern coast areas. But there's potential for prices at any point in the market to come down. And it's important for people to understand that if they have a mortgage that they can comfortably repay and they're not selling, it doesn't matter if the price comes down as long as they're comfortably able to make their mortgage repayments. If it's uncomfortable and the price comes down and they're forced to sell because of a breakup, because someone gets sick, because someone wants to exit their agreement, then you could be selling a property for far less than what you bought it for. And those are risks that everyone thinks that real estate is this incredibly safe market that you can get into and you'll always make money. But there are definitely downsides that if you don't buy smart and you don't have a good team behind you to take you through those questions of what happens when it goes wrong, you could leave yourself in a position where you end up worse off than you were if you hadn't done it.
Michelle May
Yeah. Oh, and I have had these conversations on the podcast many times that, you know, your asset selection is crucial. You make your money when you buy, not when you sell particularly.
But also the conversations with buying with other people, you know, asking those difficult questions up front, I've very much advocated for that because it's all rose-tinted glasses at the beginning, you know, and also with the bank of mum and dad, which I imagine you're seeing more and more of as well. What are mum and dad expecting, you know, and what if you are buying with your partner, and you break up with your partner, like a mum and dad wanting a piece of the pie, or you know, is it a loan? Is it a gift? All that kind of stuff. I imagine you're seeing more of that as well.
Sam Neville
Yeah, so we see a lot of assisted deposits and whether that's in gift or inheritance or guarantee, because it's very difficult, even for two people with a good wage to save a 20% to 25% deposit. It is very, very difficult to do that unless you started a long time ago. And with the changes to the first home buyer scheme, even if you started a long time ago, you probably took the opportunity to jump in with a 5% deposit because why wouldn't you?
I see a little bit more of, and a couple of banks have written this into their policies, but gifts which are repayable on sale. And so let's say mum and dad say, well, here's $100,000. When you sell this property, we expect it back. And so there's a couple of banks now that will accept that. Others will look at that as a repayable gift and may not accept it. So... If that's written into the specifics of the gift letter, we just need to wash that against the bank's expectations. But that's a good way, and I think the intention for a lot of those is not necessarily to have it be repaid on sale, it's to protect them if there is a breakup.
So let's say you've got two people buying a house and the gift is coming from the female applicant. And then when they break up, the parents who provided that $100,000 want to know that that's protected for their daughter. That's again, when we talk about what could go wrong and the exit strategies, it's important to have those conversations about who's putting in more. Maybe one of them is putting in a higher gift, but the other one has a higher income level, so they're covering more of the loan. So making sure it doesn't always need to be purely 50-50, but I have set up loans where we've done two splits of the loan and one loan was slightly bigger and one loan was slightly smaller to better reflect the portions that were being covered by each of the parties in the loan. And then that way, that was very easy for them to say, well, if I pay extra into my portion of the loan, you can see that because my loan has gone down. If the other person's just paying the minimum, then they're just paying the minimum. You can see that on their loan.
So there are ways to structure it to, I guess, protect each party a little bit more. If it all goes wrong, terribly horrible and it goes to courts, it's not going to stop them from making their own decision, but it will, as with anything, and we see this with like tenancy tribunals and things like that, it's the person with the most paperwork that tends to come out on top. So if you've got proof that, well, hey, I put in $100,000, that's why my loan was this. They put in $50,000, that's why their loan was that. It's really hard to argue with that. Whereas if it's all just in the pot, it's a little bit easier for them to say, well, we contributed equally. Therefore, when we split the profits, we split the profits evenly.
Michelle May
Yeah. Yeah. Gosh, Sam, so you're not just a mortgage broker, you're a counsellor as well up front.
23:31.08
Sam Neville
Oh, we wear lots of hats. Lots of hats, yes. ah Marriage counsellor. We try, we do, we stay mostly in our lane when it comes to things like financial advice, mortgage brokers generally, unless they are also qualified as financial advisors can't give financial advice or tax advice. So we will send you back to your associated professionals.
We mentioned about building the team. I did forget to mention accountants and financial planners. I deal a lot with first home buyers. So they tend to be more of a conversation with second home buyers or people who are looking to start downsizing. We'll send them back to their financial planners or we'll send them to their accountants for things like self-managed super funds. If that's the tack that they're taking, and we can enact the plan and we can tell you what's possible within the plan, but we can't give you the plan.
Michelle May
Yeah, no. But a good financial advisor, they're hard to come by. You know, like good brokers, good buyers, agents, you know, everybody's calling themselves an expert nowadays. But really, this leads me to my next question. How do you determine the person who has been recommended to you by your aunt's neighbour’s childcare person or, you know, your butcher down the local Woolies is actually the right broker for you? Are there any telltale signs or other things that perhaps people can ask their broker upfront to sort of determine whether, you know, they're working with the right person?
Sam Neville
I think when you get a referral from someone within industry, so if a mortgage broker refers an accountant or a mortgage broker refers a conveyancer, that carries more weight than a friend only because that friend has had one transaction, maybe two with that person, right? They've bought a house through that conveyancer and they had a great experience. But the mortgage broker might have referred 50 clients to that conveyancer and 50 times they nailed it. Because when they don't nail it, we stop referring to them because for us, we're responsible from the very, very start of that process, that house buying process to the very, very end and beyond, even the parts of it that aren't our responsibility.
So something like a delayed settlement, which is the responsibility most times of the conveyancer, as long as it wasn't something that the broker didn't do or forgot to do. But something like a delayed settlement because of the banks or because of the conveyancer sits with the bank or the conveyancer, but it still reflects back on the mortgage broker. So we're very hot on making sure our conveyances are on the ball.
So when you're getting a conveyancer recommendation, the one that you get from the broker is going to be rock solid.
And vice versa, I guess, if your conveyancer or your accountant refers you to a broker, that's a great referral because you know that they've dealt with that person more than once and they're not just saying, oh, you know, I spoke to a broker on the weekend, they sounded great. Or I saw a couple of TikToks. This broker seems amazing and so I've sent you there. It happens and I love that.
Michelle May
Yeah, but I would caveat that by saying that it is important to understand the referral structure there. So from us, for example, we have a really fantastic list of referrals that we give to our clients once they've exchanged. You're talking painters and movers and the whole list is there. But also when people come to us and they say, well, I don't have a conveyor, I haven't got a pre-approval yet, have you got a broker?
We also refer them to people that we know and trust. But no money changes hands, no no gifting, no favours, no nothing. We refer purely on merit. So it's really important to understand what that structure is. You know, there are some like business, what do you call them, groups where people have to refer within the network. And I've been to those and I would be you know like, yeah, I'm sorry, but I'm not referring to any of these people because I know they're not up to scratch.
So I think you would have to take that next step as well, just to make sure that it's actually a completely independent. Yes, these guys are great because I've seen the work that they do. And no, I'm not financially incentivised to do so.
Sam Neville
Yeah, and that's where your reviews come in. So having a read of the reviews, I mean, that's where you probably could use a bit of AI. So you could ask your AI to read all the reviews because you don't want to do that. that's a long That's a long piece of work if there's lots and lots of reviews. You can ask the AI to read the reviews and come back with what they're really good at based on their reviews, what they're not good at based on their reviews. Is there anything that is of concern based on the reviews that you've seen? Does this match with what we're trying to achieve? And that's a really good way to quickly filter out whether someone's going to match.
A lot of the time, I'm similar to you. I don't, I don't charge and I don't give referral fees in and out for my suppliers. I try to match the person, especially in the case of real estate agents, they're going to spend a lot of time in that real estate agent's pocket if they're selling a home. I try to match them with the personality and the type of person that's going to suit them best because there's no point in sending them to a real estate agent that I know they're not going to gel with. So that recommendation comes with, I guess, I guess a personal lens as well if I think you'll really get along with this person.
They'll do a great job regardless, but I think this is the one for you. But always double checking, yes, going in, having a read of the reviews, making sure that the information in those reviews matches what you've already seen or experienced in that conversation. Because ideally, if you've had a conversation with that person, you hopefully would know within that first call, that first interaction, whether or not this is the person that is going to work for you.
Michelle May
Yeah, absolutely. And if you are reviewing buyers agents reviews, if 80% of them are from sales agents, they're not real reviews. Let's just be real.
Sam Neville
Yeah, you definitely want them from the clients, right? You want the person that's experienced the end to end of the process.
Michelle May
That's it. Yeah, absolutely. Well, I think that's a great point to make. So if you're looking for a broker, this is how you get started. Now, you're in South Australia, I'm in New South Wales. Obviously, there's been a lot of hype for the government helping, you know, first home buyers, different incentives for different pockets, different price brackets and all that kind of stuff. Tell me, how do you feel about these incentives and do they actually help first home buyers?
Sam Neville
Any help is help. And there's such a gap in the market between the people who have money and have support and then the people who quite possibly will never break out of renting because it is so difficult once you have kids, if you're only on one income, to be able to save while you're renting. It's very hard. Rent has gone up so much in the last 5 years that it's not just a case of, you know, the boomer generation saying, oh, you just need to tighten the belt and you just need to eat out less and stop eating your avocado toast.
It is very hard to eke out a deposit when the gap between disposable income and rent has just tightened up so much. And then what you require for a deposit has increased so much. I was talking to someone about you know an $800,000 purchase and you need $50,000 here in SA, you need $50,000 just for the fees. And then you need a deposit on top of that. So you're looking at $200,000 of deposit. And even if you were saving a really significant amount, that's a long time to wait to get that kind of money.
If you're doing it while you're renting, it's difficult. If you can't move back home, if you don't have support from family for a guarantee, for a gift, it's a really long time to wait. And in that time, the market just keeps going up. So any support is helpful. It's a really intricate beast in that you give support to a group, then they enter the market and then there's still more buyers. So that the supply and demand issue is exacerbated.
And the answer to that comes down to the government releasing more land and incentivising more build. One of my bugbears is if we have first-home owners, like a build grant, so $15,000 in SA if you build a new home, if you're a first-home buyer. But that's not available if you're an investor or a second-time builder. And for me, if the intention of that grant is to stimulate growth in the construction sector, to get more people to build homes, to release more properties into the market, why wouldn't that then be available to anyone who wants to do that, to build, to employ people to build those houses to free up more housing stock.
There are a lot of people that maybe they bought their first house with a partner and then they've separated, they have a new partner. That partner is a first home buyer, but they're no longer eligible because one of the people in that partnership has already bought a house, whether they claimed it or not the first time.
So in that situation, there could be some leniency to say, well, if one of them is eligible, maybe they can both be eligible again, because otherwise there's potential therefore that they've missed out on one of those perks that's available to other people because they have a partner and there's there's probably sort of some of those inherent assumptions in those rules like, oh if you get a new partner you're no longer eligible because they've they've had it therefore you're trying to double dip, but blended families and divorces, they're they're very common and I can have a 30-year-old that's already been married and divorced. I can have a 25-year-old that's already been married and divorced coming in to buy their first home with a new partner.
And so I think there's possibly some more leniency with who could be eligible for those sorts of grants and schemes, but also understanding the reason why they're using those grants and schemes. If the reason is to stimulate the building industry, then let's let everyone build. If the reason is to help first home buyers, then specifically here in SA, why do first home buyers get no stamp duty rebate on established homes? Are we helping first home buyers or are not? So those things irk me a little bit in that often that's a bargaining piece for a political, you know, we want to get the vote. Here's something that we're doing. It ticks the right boxes for making people happy, but it doesn't tick the wrong boxes of making a certain set of other people unhappy. So they're not going to talk about negative gearing because they don't want upset everyone that already has an investment property.
Sure, I understand that. But I feel like they could be a bit more aggressive with helping first-home buyers into the market.
Michelle May
Yeah, no, I 100% agree. ah The flip side of that, of course, is that I see the cues at the inspections. And since it was announced that, you know, it wasn't going to happen next year, but it was brought forward to October, we have been inundated, and I mean, inundated with inquiries, and it's a race to the finish, whoever can get to the $1.5m first, which means like we had last time when it was, you know, a stamp duty exemption up to $1.5m, it was literally the first person who put that offer in and $1.5m got the deal done because no one was going to pay a dollar more.
But that also meant that properties that were potentially normally would have gone for $1.3m, $1.4m, all of a sudden, people were like, well, I'm just buying it because it's going to go up in value anyway, the longer I wait, you know, so it's it's a really complex conversation, isn't it? It's not just a one size fits all solution.
Sam Neville
No it is tough and I think so much of that panic and pressure from first home buyers is driven and by the media will get on and they'll say things like, oh, house prices are going to go up because of this. And then the first home buyers hear that and then they go out and they're like, we have to buy now and we have to buy $50,000, $100,000 above market to get it now before it goes up by $50,000 to $100,000. And they they can't see that that's exactly what happens when they go and they make ridiculous offers on properties to stop it from being a ridiculous offer.
So education then and and buyers agents can help with that because you won't let them go crazy and buy something for more than it's worth. But yeah, some education and some handholding to sort of say, if you're over capitalising on the property, you need to pull back. But also, yeah, that's the tough thing. We saw that here in South Australia, our cap on the first home buyer scheme was $600,000 and the medium house price in Adelaide hasn't been $600,000 for four years.
I think it tipped over $600,000 in the very first year that the cap was at $600,000. So I think it went from $550,000 to $600,000 and then it was immediately out of date. And we've had that for three or four years now. And it's only just gone to $900,000, but the median house price in Adelaide is already back up at $875,000.
It's quite a lag in terms of catching up with where the pricing is. And before 1st of October, it was nearly impossible to buy a house, even in the far edges of the metro area, because if you had to go far enough out that the house prices dipped below $600,000 for a house, it tipped over into regional and dropped to $450,000.
And so you just couldn't do it. You couldn't get there. You went out far enough for it to be cheap enough. The cap price dropped down to $450,000 and it was still priced out. Now that it's gone up, it's possibly made things less aggressive. We had a similar but flipped issue with the $600,000 where people were offering $601,000 because then that pushed out every single buyer that was using the scheme. They knew that if they offered $601,000, that knocked out 50% of their competition that was using the scheme to buy because they could not offer over $600,000.
So that gave an advantage to people who weren't using the scheme, even if that meant that they went into mortgage insurance territory to do it because it gave them an edge over getting the property versus not getting the property.
Now that it's loosened up a little bit, we can go up to $900,000. I think it's taken some of the pressure off of that lower part of the market, which means that theoretically... The people who do need to buy under $600,000 because that's all they can afford or they're buying a unit because that's all that they can get to. There's less people competing in that space. Hopefully means there'll be less aggression in that bottom end of the market where people really need to have cheap homes.
Michelle May
Yeah, good point. Good point. I mean, here in Sydney, there's never enough supply. But one of the things that I'm concerned about also, and I've spoken about this before on many occasions, is the risk of, you know, new home, like first home buyers buying new or off the plan or something that's, you know, less than 5 years old, because you know when you buy new or off the plan here at least it's like buying a new car as soon as you drive it off the full court it drops in value right and then with that comes with us here in New South Wales we had the privatisation there we go of certification of buildings so the council was no longer signing off on things it was private certifiers that are doing it now and that's where things like the Mascot Towers happen for example where there's massive, serious build issues, you know water ingress, cracking, all that kind of stuff. And it is insidious in the building industry.
And so we work with a lot of first home buyers and we walk away from so many of these complexes that typically first home buyers are drawn to or can afford because we go, no, this is too risky. There are special levies, there's risk of collapse, there's like serious dangerous things that I've read in strata reports. And so what I'm concerned about is that, you know, these buyers are flocking to this new stock thinking, oh my God, it's great. You know, it's Australia. Of course, it's going to be solid and quality and all this kind of stuff.
And then they're going to be left with, you know, actually a product that, you know, they're going to be left with huge costs. They can't sell all that kind of like such a stress to them, potentially negative equity as well. So I think that brings a whole another layer of stress where you've just got to go look, take a breath. I know you want to get into the market but you really need to think about this very carefully no matter where you are in this country because it is a serious commitment that you can't just you know pull out of if things don't go right.
i wanted to ask you this question as well now you're based in south australia you're obviously very knowledgeable about South Australia. But when it comes to choosing a broker, is it important or is it you know, is it crucial that your broker is in the same stage as you?
Sam Neville
So not crucial. As mortgage brokers, we have access to lending across the country. So there's no difference between a loan here in Melbourne or in Sydney or in Tasmania. There are possibly some situations where you do want a bit more local knowledge. And that might be where there is a lender that only operates within that state.
So the example I'll give is in South Australia, we have a state-backed lender called HomeStart, which only lends to South Australians in South Australia. And we have a local credit union called Credit Union SA, which again will only lend through South Australian brokers to South Australians. You can have security in other states, but you do sort of need to have a South Australian aspect to it.
So there are some situations where it might be a bank that is something I can't offer. And in those situations, an ethical broker is going to refer you back to a broker in that state that can offer you something.
So for example, WA has Keystart, which is their version of HomeStart. If it looked like it was going to be Keystart deal, or if it was, there are some developments which are only offered through Keystart through like the HomeSeeker program, which is like a low, like a bottom end of the market, they offer it to HomeSeeker clients before it goes to market to satisfy that sort of lower end of the market.
Then I personally would refer that back to a broker in that state to support Same with the help to buy scheme. That's not currently available here in South Australia because we already have HomeStart, which does a shared equity scheme. So any help to buy sort of shared equity scheme clients, I'll probably refer to those on, just because I'm not as knowledgeable about that yet as I would like to be. And I would want my clients to be getting the best advice.
That's a personal thing. You can't always guarantee that from every broker. And I think that comes back to having that referral in place where you've been referred for the right reasons, not just because there's a commercial relationship in place. But also what I do find with having a local broker is when you are purchasing in a local area, because I do know a lot of the real estate agents in my local area, they know me, we've worked together over years. Sometimes that can get you over the line where they know that finance is going to be rock solid. They don't have to worry whether two weeks later their broker is going to come back to them and say, oh no, sorry, we didn't get the deal, we're walking away.
You don't have to have a local broker. If it's important to you to have a face-to-face meeting and to know that they're nearby and to maybe take advantage of some of that home court advantage, then yes, definitely get someone that's local, but it's not a requirement.
If you have found a broker that you like to deal with, that you want to deal with, and they're in another state, absolutely reach out to them. Make sure that’s something that works for both of you. The broker should tell you if it's not something they can support with.
Michelle May
I think, I mean, the fact that you're saying, well, look, I'd rather just tell the client to go somewhere else than to stick with me because I'm not necessarily the best person. I would take you any day over just a random person I found on the internet because you know you don't know what you're going to get, right? So um if you're in South Australia, reach out Sam. But also if you are anywhere else in the country, reach out to Sam because she will tell you if she can help you or not. Right. This is how I like things.
Now, I think I’ve come to the end of my questions for now. But I'm sure that if you have been listening out there and you have more questions, please reach out to me hello@buyyourside.com.au. But also reach out to Sam directly. Sam, how are people best to get in touch with you?
Sam Neville
So the best way to get in touch with me is usually via the link on my page. So there is a link on both my Instagram, my TikTok and my webpage to book a meeting or book a callback. So you can go straight through there and see my diary and get in touch with me that way.
You can DM me on either of those. It might take me a little while to get back to you depending on what I'm doing at the time. But I'm very easy and accessible to get in touch with. I don't gatekeep my information. One of the things that drives me insane is when you go to a website and you can't get someone's phone number or email to contact you. Like that's the entire reason that you went to the website in the first place. So it should be very easy to contact me. And then from there, we'll sort of get the ball rolling on getting in touch and working out what you need, whether that's just an initial conversation, whether it's a full assessment or whether it's getting stuck into putting the approval in for your purchase or your refinance.
Michelle May
Thank you, Sam. Now, just to clarify, the website is www.iamlending.com.au. Look Sam up on TikTok as well. You'll find some really helpful information there and some really good entertainment, I have to say.
But thank you so much, Sam. I really appreciate you coming on um and talking me through, you know, the trials and tribulations of first-home buyers and how they get a mortgage. I hope to have you back another time, please, if you can.
Sam Neville
I would love to come back. Thank you so much, Michelle.
Michelle May
Thank you, Sam. Take care.
Thank you again for listening, guys. If you have any questions for Sam or myself, reach out. hello@buyyourside.com.au Until next time.