Buying property privately in South Africa

If you decide to buy property privately without the help of a real estate agent, you need to understand how the process works in the South African real estate market. In this concise, but informative, buyer’s guide, we explain each step of the way to reaching your dream – to put you on the right track and hopefully make you realise that buying real estate privately is neither very different from using an agent, nor as complicated as it may seem.

Step 1: Work out the price bracket you can afford (Affordability Calculator)

This may sound obvious, but you would be surprised how many people actually overstretch their budget when buying a property, only to find it difficult to keep up with mortgage payments or realise that they have no money left over for any necessary property renovations.

Work out carefully the total amount that you can afford based on the cash you have in hand and on a proper mortgage evaluation from a couple of banks or lending institutions. By being pre-approved for a loan through Mortgage Plus Bond Originators, you will know where you stand and minimise the chance of being disappointed by the financial institutions “banks” at a later stage.

Keep in mind that this total sum will have to cover the purchase price, transaction fees and any immediate work you will have to do on the property before you can move in.

Step 2: Find out which areas you are interested in

Do some homework on the areas available. Browse the Internet for information on those areas that catch your interest. The websites of the Town Councils in the region you want are a good place to start. Also, use the Internet to make a quick search for property for sale online, to get an idea of what properties are available in your price bracket and where they are located.

Eventually, you’ll have to make the trip and visit the areas you are interested in for yourself. It’s best to get in your car, a good map and drive around so that you can get a better feel of the areas and their surroundings. On your way, keep a lookout for services such as shops, schools, medical facilities etc. It is also a good idea to visit at different times of the day and on different days to get a better idea of traffic conditions, weather and so on.

Step 3: Search for properties in your areas of interest

The best – and most convenient – place to start searching for your property is the Internet of course. If you don’t find what you are looking for online, you could check the classified adverts in local newspapers and magazines or even drive around the area looking out for ‘For Sale’ signs. Moreover, if you still cannot seem to find the right property for you on the private market, or if you would like to search concurrently among real estate agents in South Africa we recommend you look at our list of trusted real estate partners.

Step 4: Schedule viewing appointments with the property owners

Once you have identified one or more interesting properties, call the owners and get as much information about the property as possible over the phone. Choose the ones you want to visit and arrange a time with the owners for a viewing. Before your property inspection visit, you should come up with a checklist of points to look out for. This property inspection checklist we have prepared is a good place to start.

When you visit a property in the presence of its owner, it is common to feel like you are intruding into someone else’s life, especially if the property is being lived in. However, remember that as a buyer it is your job to inspect the property thoroughly and that the owner actually expects you to do this. Naturally, politeness and common courtesy will go a long way in this situation.

Most importantly, do not shy away from asking the owner any questions you may have.

Be sure to find out:

• the age of the property
• how long the seller has owned it
• why the house is being put up for sale
• how much community fees are (if applicable)
• the statutes and laws of the home owner’s community (if applicable)
• the location of and distance to nearby services
• evidence of planning permission for any alterations/extensions, etc.
• which furniture or fittings will be sold with the house (though remember you are buying a house, so don’t be swayed by fancy extras)

Step 5: Get an independent evaluation of the property (optional)

Although this is really an optional step, it is highly recommended that once you are very interested in a property, you have it inspected by a qualified real estate surveyor. The surveyor will be able to give you an objective appraisal of the property, tell you if the property is overpriced, and even point out any important things you might have missed.

If you are going to ask for a mortgage, you might want to coordinate with the bank on the property inspection since they will send their own surveyor anyway (whose fees you will have to pay) prior to considering your mortgage (home loan) application.

Step 6: Negotiate the price and terms of the sale

There is no reason to shy away from negotiating when you buy property. In fact, it is usually an integral part of the process.

How much you can negotiate price-wise will largely depend on three things:

• how long the property has been on the market
• how urgently the seller wants to sell
• and how much interest the property is attracting from prospective buyers

On the other hand, as a buyer, you must stick to your budget and discard a property if the seller is unwilling to drop the price to something that you can realistically afford.

Keep in mind that by selling privately, the seller is saving thousands of Rands in real estate agent fees, so, in a private sale, there is that much more leeway for negotiating a price below the actual market value of the property. The seller may also be more willing to drop the price a bit if they have demanding sales terms that you can accommodate (for example either a very short or more drawn out transaction period).

Once you have agreed upon a price and upon a date when the sale will take place, you will sign an Offer to Purchase / Sale Agreement laying out all the terms of the Offer to Purchase you can start arranging your new home loan or mortgage finance with Mortgage Plus Bond Originators.

If you would like to speak to a Professional Mortgage Specialist about your lending requirements, please phone Mortgage Plus Bond Originators on:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

Home buying tips and Mortgage information

When it comes to buying property and applying for a bond, knowledge is power. Buying a home is a serious financial commitment, and certainly not one you should rush into blindly. Do your homework properly; speak to an authorised financial service provider such as your banker or broker, but also get to grips with home loan terminology by reading our bond terms glossary.

Property: to rent or to buy?
Knowing when to buy property depends very much on your personal circumstances. If you’re in a transitory part of your life like starting a new job, getting married or considering moving or emigrating it may not be the best time to be making big financial decisions.

Buying a property and repaying a bond  is no short-term commitment, and it’s generally a good idea only to buy once you’re fairly settled and financially secure. Yes, now is the best time to get into the property market, but certainly not if your income is going to be erratic for the next year, or if there is any reasonable chance that you’re going to be experiencing cash flow problems. Reduce your own financial risk exposure then only consider buying a property when you’re in a good position to do so.

Sure, renting from a landlord means paying off his or her asset, but it also limits your own financial commitments, and will ensure that your accommodation-related expenses remain constant for the duration of your lease agreement.

Know what you can afford
When it comes to buying a property, how much you can afford is influenced by a range of factors like your total income, total expenses, the nature of your income-generating activities as well the medium term economic prospects all play a role. Some property investors may argue that buying a bigger (more expensive) property will increase one’s potential return on investment, yet there are no guarantees that this strategy is fool-proof.

Even if you are able to get a “bigger” bond approved in accordance with the National Credit Act, unexpected interest rate increases could still increase your monthly bond premiums to the extent that you can’t keep up with the repayment schedule and then what? Not spending the maximum bond amount you can qualify for is not a bad idea inasmuch as it “builds in some fat” and protects you against economic factors beyond your control.

Buying a cheaper property thus means that you are not as vulnerable to interest rate hikes as you would be if you’d gone for the biggest bond possible.

When you’re using a bond calculator, be sure to take ALL your regular monthly expenses into account, and also allow for those unexpected expenses like medical and dental expenses, speeding fines, annual tuition fees, property related levies, birthday presents and holidays don’t pay themselves!

Buy property for now – and later!
Although you may wish to get into the property market as soon as possible, you would do well to consider what your property-related needs will be in five years’ time. Will you still be single and living on your own, or will you be living with someone else? Will you be starting a home business, or a family? Will your home’s locations still be suitable in terms of where you’ll work, and will the boho neighbourhood you enjoy so much be suitable for raising children in?

Buy the right property in the right location
When it comes to buying the right property, location is key and not only in terms of suiting your lifestyle requirements, but also to ensuring that your investment grows (“appreciates”) over time.

Prepare yourself for the long haul with a bond
Property is a not very liquid investment category. Be prepared that you will probably need to hold onto your home – and bond – for several years before you could sell it and make a profit. Given the cooling property market, chances are that you could end up making a loss on your home if you need to sell it after only a year! It is therefore critical that you’re in the right stage of your life, and that you truly can afford what you buy.

Choose your co-investors carefully
Buying with friends or family members can help you get into the property market earlier – yet it could also leave you stuck with having to foot their bond contribution if things go sour. Should you choose to co-invest in a property, it is probably a good idea to consider getting an “income protector” or similar type of bond cover or life assurance cover policy for all the parties investing in the property.

All the parties should also consider their own medium-term property needs like what if you and your mates all got hitched with live-in partners? Would everyone be happy with running your home as an adult commune? If not, will you all be able to formally agree to how the arrangement is to be managed?

Choose your bond type carefully
Choosing the right type of bond for you will again largely be influenced by your own circumstances, property-related needs and financial position. Be sure to discuss these at length with your bond originator or authorised financial services provider, and get as much bond information as you can. It’s one of the most crucial financial choices you’ll need to make, as it has long-term financial implications.

South African bond companies tend to offer a range of bond solutions ranging from interest rated linked home loans and fixed-rate bonds to variable-rate mortgages and second mortgages. Understanding the difference between these types of home loans is key, as it will enable you to choose the right type of home loan to suit your needs.

Always read the fine print
Applying for a bond tends to involve a fair amount of paperwork like always read carefully before you sign anything, and be sure to ask for more bond information if you’re not sure what a particular contractual clause means. Make sure that you know exactly what your contractual obligations are, and have your bond originators explain how different case scenarios would affect you financially.

Establish your fixed expenses and budget accordingly
Buying a house comes with a range of additional expenses. Property levies, property taxes, maintenance and bond cover all add up, so be sure to consider and list all your expenses (and potential expenses) before you apply for a bond and commit to buying a property.

CONTACT US

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

Complete this short form online
Call us on 011.327.4489
Email: morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za