2. Calculate Affordability

For self-financed property buying, it’s a straightforward calculation, i.e. you can look to buy a property of price equivalent to 90% of the cash mobilizable. Remaining 10% needs to be parked aside for expenses like Stamp duty, registration, Agent commission if any etc. Please keep aside the respective share should you think of refurbishing. (Ex: 80% of mobilizable cash as the property price.)

Arrive at the property price based on the loan eligibility from income and own contribution if you intend to buy through loan.

Property affordable = Loan eligible + own contribution.

Note: 10-15% of own contribution amount needs to be kept aside for other expenses before calculating the Property affordability.

3. Requirement vs Affordability vs Availability

Property availability can be checked on renowned property portals by searching based on budget amount and preferred locality.

For the given requirement and budget, based on availability first shortlist few localities and then search for properties. If there are very few properties that matches your requirement, then redefine the budget and redo the above mentioned steps.

All these steps can be done online at Propwiser Decision support tool for Requirement vs Affordability vs Availability. This tool searches for appropriate properties across India’s all renowned Real estate portals at one go.

4. To use Agent or Not

Every prospective home buyer would have this question when they embark on buying a property. It's an important decision as Agent's commission may go beyond Rs. 1 lakh depending on the price of the property.

There is no simple answer that fits all. It's subjective to each individual.

Let's look at the pros and cons of using an Agent.

Pros of using an Agent • Agents know the locality and market trends in that locality better.

• Agents will have the know-how of most of the properties available for sale in that locality through their agent network.

• Agents know about the past transactions that have had happened in the locality. This knowledge helps them to judge if the property price is high.

• Agents do the run around with respect to shortlisting the properties for the site visit, arranging copies of property title from the owner, helping you in the negotiation, arrange meetings and follow-up with both the parties till mutually agreeable terms are arrived at.

• Once the terms are finalized and the token advance is paid, Agent will do the running around and follow up between all parties with respect to important timelines and milestones.

• Agents have a common interest for all the transacting parties in bringing the deal to closure.

Without an Agent, one has to manage all the above-mentioned tasks on his own. By using an Agent, you get all the services done by a single person for a price.

Suppose that you are aware of the property price in your preferred locality, you stay nearby, you may allow some time to call and meet the sellers' yourselves, Gain some first-hand knowledge of know-how of activities involved in a realty transaction. You are now all set to go ahead on your own for property search.

Even if you do that, suppose that the property you like has been promoted by the Seller through an Agent, there are high chances that you have to pay agency commissions to that agent unless and otherwise, you clarify that categorically at the initial stage of the interaction itself. Y

ou can completely avoid the agent's commissions by searching for properties promoted by the seller himself.

Our advice is if you are busy with your work or if you are new to the locality, it's better to go for Agency service.

5. Choose an Agent

You have decided to use Real estate Agents in your Property Buying Journey. Now the questions that creep into your mind are

• Should I engage with one Agent or multiple Agents?

• How to choose the right Agent?

Engaging with Multiple Agents:

You pay Agents only upon successful deal closure. So you would be tempted to use multiple Agents and share your requirements. But eventually, Agents will also come to know that you are interacting with other Agents and neither of them would put in a dedicated effort in searching a property that matches your requirement.

How Agents work is that they qualify the need and urgency of the proposed buyer and put in their effort towards the most prospective client who shows interest in closing the deal this month. If there is no client who would close this month, they either focus on getting a client who would close this month or focus on a customer who would close next month.

Hence, you should "interview" few agents and then commit to the one you develop the right "chemistry". Sign a Buyer Broker Agreement with that agent. This assures that you have the undivided attention of that agent.

The only exception where you can go for multiple Agents is when you have shortlisted multiple localities. In this case, if one Agent doesn’t specialize in both the localities, then it’s good to go for one Agent for each locality. It's better to inform them in advance about this so that they work harder to source and close the deal for you in their locality.

How to choose a Right Agent?

We recommend to source couple of Agents for the locality of your choice from friends and family of that locality or to look for Agents on the internet or in newspaper classifieds.

Then meet up with these Agents and ask these questions to qualify them of their service capabilities. 

10 ways to evaluate your Agents are

a. Ask them about the know-how of the locality of your choice.

b. If they have an office in that locality, it’s a proof that they specialize in that locality.

c. If they have done few transactions in that locality then it's again a proof of their expertise in that locality.

d. Ask them about the guidance value of the property, the sub-registrar office for the properties in your preferred locality, corporation rules, corporation ward office under which the locality would fall in etc.

e. Gauge them on their bandwidth they would dedicate for you. If they are too busy then they would show you only those properties where they are engaged in selling.

f. Inquire and learn about the agent's network and reputation.

g. Ask them if they are willing to co-broke with other Agents or not. Some Agents would like to keep the entire commission to themselves hence may not share your requirements with other Agents for co-broking opportunities.

h. Some won't have a good rapport or would not have demonstrated integrity with fellow Agents in which case, he may not be able to source deals via co-broking from fellow Agents.

i. Some Agents may be newbies and would not have the knowledge of the entire process involved in closing the deal. Hence this needs to be checked affront.

j. Ask them about the list of activities they would do for you while closing the deal. It's better to clarify beforehand on his roles and responsibilities.

k. Ask them if they are doing agency service as full-time service or as a part-time activity. Nothing wrong with part-time activity as long as they have ample time and priority for this service business.

l. Ask them about the Agency commission they charge.

m. Clarify that how and at what stage it has to be paid.

n. It's better to sign a Buyer – Broker Agreement to document all this. This will gain mutual trust and would make the Agent work dedicatedly.

6. Loan Preapproval

What is Loan Pre-approval?

This is a process wherein the home loan application is made by the prospective Home buyer before identifying the property. The Buyer need to pay the processing fee, which would be in the range of 0.5 to 1% of the loan amount applied, along with loan application and supporting income proof and identity documents. In return, Buyer gets in writing from the Bank, the maximum Loan amount they would approve along with terms and conditions of the approval.

Now, Lets look at the Pros and cons of going for Loan preapproval before finalizing the Property.

Pros of Loan Preapproval:

• Getting a loan preapproval gives you a peace of mind even though you have gotten favourable results from various loan eligibility calculators.

• Terms and conditions of the loan preapproval give you an idea of do’s and do not's in own contribution mobilization and in property selection.

• You can go for property selection with clarity on the overall affordable budget.

• With loan preapproval, you make the bank as your ally while evaluating the property from legal angle

Cons of Loan Preapproval:

• You must finalize a property within six months from the day you had received the loan preapproval. Generally, loan pre-approvals are valid only for six months.

• If you choose to opt for another bank for better rates or higher loan amount, then you have to shell out the processing fee to other banks too.

• There are chances that you might opt for a property for which your preapproval bank might fund lesser than some other banks.

In summary, one should go for preapproval only when

a. You are a first-time loan applicant for a big ticket item like a Car or a House.

b. You would complete the property identification within 6 months. (to be on safer side)

c. If their property budget is heavily dependent on loan approval ie if say 10% lesser loan approval makes it difficult to mobilize the required own contribution.

7. Properties you like

If you are using an Agent, let him suggest properties over phone or email.

If you are searching on your own, check all the renowned property portals, newspaper classifieds and make a list of properties that you would like to review.

From the list of properties for review, shortlist a few to gather more information about them.

A better approach to shortlist is to run these parameters through a set of filtering/elimination rules like

a. The property should be between these floors

b. The property should have a particular set of minimum amenities

c. The property should be not more than 10 km's from the child's school or from your office.

d. The property should be available for possession within 24 months.

Select properties from the shortlist for site visit

At this stage, gather detailed information about the property like owner details, whether it's under a loan with a bank, whether the price quoted is comparable to the market rate etc

Based on these analyses, select a few properties for the site visit.

8. Record your observations

Visit the shortlisted properties and make note of observations from layout size, quality of construction, amenities, interior furnishing etc.

Rate and compare the properties based on the parameters that are important to you.

Based on that, shortlist properties for Offer and Negotiation.

9. Offer and Negotiation

Once you have identified one or more properties for negotiation, here are the list of things you can do to win a negotiation and close the deal.

a. Share details about your profile and co-buyer profile with the Seller and the Agents. This is because deals are not closed just by the price you offer, Relationship, respect and trust play a critical role in closing the deal.

b. Share the details of your loan preapproval if you have one. This gives the Seller the confidence of the cash flow required for the deal.

c. Before finalizing the deal, ask for the title document copies. If the Seller is willing to share the document without any token advance that demonstrates his trust and willingness to deal with you. Even if the detailed legal check is not done, a simple Encumbrance check would give an idea of the property title. If the property is on loan, then its gives confidence that the bank has legally vetted the property.

d. If it’s a built property, then it's recommended to take feedback from the building surveyors regarding the structural stability, electrical and plumbing conditions etc.

e. The ideal approach would be to give the property documents to the bank that has preapproved your home loan and get the property vetted by the bank itself from the legal, technical and valuation angles. But most of the time, sellers may not be this lenient unless and otherwise, the demand is low. If the seller doesn’t permit, then the agreement should protect you for the refund of initial payment paid if there is an issue in loan approval from banks with respect to this property.

f. Clarify as to who will pay the agency commission before finalizing the deal to avoid the ambiguity during final settlement.

g. Check if there are any over dues to the Housing society, Property tax etc and take guarantee that it will be cleared by the Seller

h. If there are any discrepancies from the above evaluation and if you still want to go ahead with the Property, don’t hesitate to point out the issues and ask for the price adjustment compensating those discrepancies.

i. It's recommended to document the terms in the Memorandum of understanding Document listing all the terms and conditions negotiated and agreed upon.

10. Initiate Transaction

The first step in initiating the transaction is to document all the terms agreed with respect to price, future payment terms and initial payment etc in Memorandum of understanding or Sale Agreement.

How to go about the transaction is covered in more detail in Sale purchase transaction module.