For many first-time homebuyers purchasing a home can seem intimidating, but if you speak to the right people and spend some time researching all the options before you buy a property, it's not as daunting as it appears.
Most people involved in the ever-changing real estate industry agree: Buy in haste, repent at leisure! With this in mind, it is important to follow certain procedures and take special precautions when buying a home.
Before you purchase any property, you have to establish exactly what you want. Your key objective should be to find something that will meet your needs, while falling within an affordable price range. There are various options available to you, ranging from freehold property, sectional title units and vacant plots of land. Determine your needs before you go house shopping. This will minimise the risk of being swept off your feet by a property that may prove to be unsuitable in the long run.
Buying a new home will be one of the biggest financial transactions you are likely to be involved in, in your life. The decision to buy a house is filled with emotion and that is why proper research needs to be done by any prospective homebuyer, before any offer to purchase a property is ever submitted.
Types Of Property
Freehold property, also called full-title property, refers to any immovable dwelling and land that you own independently. With freehold property, you are solely responsible for maintenance and improvements.
Sectional title units are usually flats or townhouses in a building or complex, which often include communal grounds and facilities such as parking, gardens and a pool. With sectional title property, on top of your monthly mortgage bond repayments, a monthly levy is charged to meet the running costs and maintenance of the sectional title development. The advantage of purchasing a sectional title unit is that there are fewer hidden costs, as most of the maintenance is covered by the levy. But precious privacy is often compromised.
Another option open to homebuyers is to buy a vacant plot and build your own home from scratch. The vacant land option allows you to build the exact home you desire. But building that dream home can often end up costing more than initially intended.
Property Finance
Arranging finance for the new home should be investigated before you start spending your time looking at houses. Arranging the finance beforehand can help you determine what your affordable price range would be. This could save a lot of time and energy that might otherwise have been wasted looking at the wrong properties.
Unless you are one of the fortunate few who are in a position to purchase a home for cash, you will need to apply for a home loan to finance the purchase of a new home. Most banks offer-first time homebuyers a wide range of home loan options, adapted to suit their individual needs. Lending consultants and real estate agents will gladly help you determine what you can afford.
The general rule for qualifying for your home loan amount, is that your monthly home loan repayment should not exceed 30% of your single or joint gross monthly incomes. Home loan calculators are available online at most banking and real estate websites, or speak to your real estate agent, a bond originator, or a registered financial planner. To qualify for a home loan you will also need to have a good credit track record, be a South African citizen and must be able to demonstrate the ability to service the monthly home loan repayments.
Budget
Although most banks advise that monthly home loan repayments should not exceed 30% of the total monthly income, first-time homebuyers would be wise limit their mortgage bond repayments to below 25% of their total income. This precautionary extra 5% spending limit will provide an important financial cushion for any unexpected developments in your lives. Interest rates have a way to increase when you can least afford it, and for young married couples, babies often arrive according to their own schedule.
When preparing your monthly budget, it's important to remember that there will be other monthly costs associated with the new home, over and above the home loan repayment. These costs may include life insurance premiums, insurance premiums, rates and taxes, levies, water and electricity bills and maintenance costs.
Real Estate Agents
You can choose to go where the wind blows you, but finding a real estate agent you are comfortable working with can be an invaluable asset. It is true that agents are often excluded from marketing certain properties because of a mandate with a certain agency of group of agencies. But real estate agents negotiate shared commissions every day in South Africa, and your real estate agent will be able to give you dedicated advice, while the other agent protects the seller's interests.
Once you've decided on a house, be prepared to handle the ego's involved in the transaction. Real estate agents are human too, and may protect their own interests a little more diligently than either the seller or buyer's. Also remember that selling a home containing years' worth of memories can be a dramatic experience for the sellers. But under no circumstances allow anyone to railroad you into an agreement you either don't understand or want!
The estate agents' Code of Conduct requires that the agent explain the entire contract to you. If anything is unclear, ask more questions. If the agent can still not clarify the contract stisfactorily, contact the agency principal or a transferring attorney. But be sure to understand the agreement before putting pen to paper.
Offer To Purchase
Here's a novel idea: Read the contract from cover to cover. Someone has taken the effort to write the darn thing, but I have yet to meet anyone who actually read an offer to purchase document before signing it! Remember: It's what you DON'T know that will jump up and byte you in the buttocks!
Go back to the property a second time, when you've allowed your emotions to cool down, and try to be a bit more critical this time. Open the taps to test the water pressure, flush the toilets to make sure the plumbing really works. Check the intercom at the front gate, and open and close the electric gates while you're at it. Do this BEFORE making an offer. Get a copy of the title deeds, the site diagram for the erf and the house plans and check them thoroughly.
Every offer to purchase and contract of sale document will have an area earmarked for special conditions. If there are any loose items in, on, around or under the house, which you would like to have included in the purchase, this is the place to name them.
You might consider writing into the contract that the seller will provide keys as well as remotes to all doors and gates. People are often given only two keys, one for the front door and one for the back door. A locksmith must be called in to replace the rest, which can be very costly.
The contract you have with the sellers is the only valid agreement regarding the sale of the property. If some condition you've agreed about is not in the contract, it might not be binding. So get it all in writing.
To Buy Or Not To Buy
Potential first-time homebuyers often delay buying a home as they are afraid of making financial commitments. The best advice is to get into the market as soon as you can. Rumours that property prices might soon fall, are just that, rumours. The reality is that prices are still rising rather rapidly. Prices may very well rise slower in future, but rise they will.
By buying into the real estate market, two things happen: You will start getting the benefit of capital growth, and your property slowly becomes worth more. You will at the same time slowly be paying your home loan off, instead of simply paying rent out.
