Buying your first home can be both exhilarating and overwhelming at the same time. Navigating the world of property and property finance for the first time can be daunting, especially when it comes to applying for finance and shopping around for the best interest rates. As a first-time home buyer, here’s what you should consider:
Use technology to your advantage
Technological advancements have made shopping for your first home so much easier than in the recent past. Most reputable estate agents now operate interactive websites which allow potential buyers to conduct virtual tours of each marketed property, access 360-degree photos of each room, and filter the properties according to their specific needs so as to narrow down their choices. Nowadays, potential buyers viewing a property for the first time are already equipped with an enormous amount of information on that property, and this puts them in a much stronger position when it comes to asking questions, identifying defects and negotiating. Take full advantage of all available online facilities when looking for your home, including Google maps and Google earth which can give you a good insight into the location and surrounding areas of each property.
Engage with a property finance expert
If you need to apply for a home loan, consider engaging the services of a bond originator as they tend to have a much higher success rate when it comes to securing home loans. A bond originator is essentially an intermediary between you and the various banks who assists in negotiating the best deal for you. They take care of all the paperwork and lodging of the applications and can assist you in getting a pre-approved loan which improves your purchasing power and gives you a clear idea of your affordability. In addition, a bond originator earns a fee from the bank with whom you ultimately place your business and therefore, as a buyer, you can make use of their guidance and experience at effectively no cost.
Understand the costs involved
As the purchaser, you will be responsible for a number of expenses over and above the purchase price, and it is important to budget for these costs. Firstly, in order to register the bond over the property, you will be liable for the bond registration costs which vary depending on the value of the property, a Deeds’ Office registry fee, as well as the costs of sundries, postage and petties. As the purchaser, you will also be responsible for paying transfer duty which is a government tax levied to transfer the property from the seller’s name to the buyer’s name. This money must be paid over to the transferring attorneys who will then pay it over to Sars on your behalf. You will also be responsible for paying transfer costs to the transfer attorneys to cover the costs of registering your ownership with the Deeds Office. When taking a home loan, a purchaser can also expect to pay a bond initiation fee to the bank which can either be paid upfront as a once-off fee or capitalised over the period of the home loan. This fee essentially pays the bank to process the home loan application for you, bearing in mind that you will still be liable for the fee if your home loan application is rejected.
Determine the type of property you want to purchase
Give careful thought to the type of property that you want to buy, keeping in mind that each comes with its own set of advantages and disadvantages. Purchasing a freehold property will allow you more privacy and greater freedom to renovate as you wish. On the other hand, sectional title ownership means paying levies but provides more convenience in terms of maintenance and upkeep. Similarly, estate living can be restrictive in terms of the look and feel of your property and garden and can be expensive, but it does come with the benefits of better security.
Research the area
Once you’ve identified an area that you feel suits your needs, make a concerted effort to do as much research as possible. Firstly, check what other properties have recently been sold in that area and at what price. This will give you a good feel for the value of properties in that area. If properties are not selling in that suburb, ask yourself why. Find out whether there are any property developments planned for that area, if there are any traffic congestion problems, and whether any large office blocks create traffic flow problems at peak hours. Depending on your circumstances, assess the proximity of important facilities such as schools, doctors, hospitals, shopping malls and parks. Research the crime statistics of the suburb and what armed response or neighbourhood watch groups operate in the area. Read the local newspapers or magazines, and do your best to get a feel for the neighbourhood before making an offer to purchase, keeping in mind that an offer to purchase is a binding legal document.
View the property multiple times
Ensure that you view the property multiple times before putting in an offer. Be intentional about looking past the aesthetics to identify potential defects and faults, especially those that could be critical. Specifically, look out for damp or water seepage, structural damage and cracks, bearing in mind that these defects can easily be covered up. Ask about the age of the geysers and whether they are still under warranty. As a purchaser, you will also want gas and electrical certificates as proof that these facilities have been correctly and safely installed. Ask about any hazardous materials such as asbestos roofing, whether the fireplaces and chimneys work properly, and what kind of electricity metre the property operates with. While you might love the property, it is important to be able to put aside your emotions aside and be realistic about the financial implications of the property’s shortcomings. Be sure to also establish if there are any restrictions in terms of the title deeds that you need to be aware of. It is also important to ensure that the property has an approved and up-to-date set of plans.
Offer to purchase
If you’ve done your research, you should be in a position to put in an educated offer. When filling in the offer, check all details including the erf number, purchase price and property description. Other details that you will need to include are the date of occupation as well as any occupational rental payable should you wish to move in sooner than transfer. In doing so, be clear as to what expenses the occupational rental covers. It is also important that the offer to purchase specifies when risk transfers from the seller to the buyer. If there are any suspensive conditions in your offer to purchase, for instance, the sale being subject to bond approval, be aware of the 72-hour clause. Most offers to purchase contain a 72-hour ratification clause which allows the seller to continue marketing the property until the suspensive conditions have been met. This means that if the seller receives another offer that does not have any suspensive conditions, the seller can give you 72 hours’ notice to either waive or fulfil the suspensive condition, failing which the offer lapses and the seller can accept the second offer.
Lastly, it is important to budget for the costs that arise as a result of your property ownership. Importantly, you will need to factor in the costs of moving and possibly storage which would include short term insurance for the duration of the storage and the move. When moving into your new home, you will also need to budget for installation costs of services such as fibre, Wifi, networking, DSTV and landlines. If the house is not adequately secured, set money aside for burglar bars, alarm systems and/or electric fencing, as well as the recurring costs of armed response. The costs of maintenance and upkeep will include cleaning, garden services, pool maintenance and general DIY. You will also need to factor in the monthly costs of household and building insurance, utilities, rates, taxes and electricity which will vary depending on the size and price of your home.