Letter from the editor

Know how to negotiate and when to walk away to ensure you buy the right home for the right price. PICTURE: PAUL BRENNAN

How to buy your dream home wisely

it IS no secret that current property market conditions are enticing for aspiring homeowners and investors, but purchasing a house can be daunting for first-time buyers. Did you offer enough or perhaps too much? Or are you too nervous even to make that first offer? It is perfectly normal for those navigating the ins and outs of property for the first time to feel mildly panicky, especially after submitting an offer, says Carlo Mariani, founder of The Property Coach. “There’s no doubt that buying a property in South Africa can be a daunting experience for most people especially when considering problems, latent defects, structural issues, shoddy electrical installations and leaking plumbing after you’ve signed your offer to purchase. Do not rely on agents’ and sellers’ promises or even written declarations. “This is not the time and place for DIY. Engage the services of a professional property inspector. This is guaranteed to be your best investment in avoiding expensive surprises.” 3 DO YOUR OWN “FACT FINDING” “Any claims by seller or agents that are not in writing are just that – claims,” Mariani says. So, ensure that you have a good idea of the crime issues as well as unforeseen problems.” 5 CONSIDER THE AMOUNT OF YOUR FIRST OFFER FNB’s Property Barometer for July says, on average, the sale price is 12% below the asking price. However, the asking price is a “marketing trick” and so you have to be careful of using it as a yardstick for negotiation. Importantly, you should establish a “walk-away” price before even starting the negotiations, Mariani advises. “I also suggest you give yourself some time between one round of negotiations and the next to reflect “The reality is that agents and sellers are always in close contact and you want to establish urgency with both of them, rather than allowing them to use your offer to seek competing offers from other prospective buyers.” 8 A STANDARD PURCHASE AGREEMENT DOESN’T EXIST Mariani says you should beware of any claims by sellers and agents that you should sign the offer without any worries because it is a “standard agreement”. “I often come across a number of really nasty clauses in agreements that are designed to reduce your rights and boost those of sellers and the amount of money involved.” actual market value of the property, on whether you really want the agents. Making an offer on To avoid expensive mistakes and that the property has been property. It can also create a bit of “Ask for a copy of the a property can be and tap into the endless power of property ownership without the built in accordance with approved building plans. fomo (fear of missing out) on the parts of the seller and agent and agreement, take it home, read it with care and ask for advice if you unnerving, but an risks, he offers a few practical tips: “I am a big fan of using tools like Lightstone Property...” make them more negotiable. Do not negotiate in a rush.” do not understand something.” He says an offer to purchase is a expert gives tips on how to survive 1 KNOW YOU CAN AFFORD IT Before you start looking seriously for your property, Mariani says it is If you are purchasing in a sectional title unit, you should also ask for the body corporate’s 6 NEGOTIATE IN WRITING “The best – and only – way to legally binding agreement that can cause problems, such as having to pay agent’s commission, even if you the experience and critical that you establish what you can afford by approaching a moneyfinancial books. “Check they are in good shape negotiate in a professional manner is to submit a written offer to never take transfer of the property. come out smiling raising expert and finding out your creditworthiness. by obtaining a copy of the latest audited accounts and by having a purchase,” Mariani says. It will also give you the chance to engage in 9 DON’T WAIT FOR A “BETTER” TIME “Take this action three months telephonic interview with the chair serious discussions with the seller Property ownership remains the BY BONNY FOURIE in advance to avoid nasty surprises. of the body corporate.” and / or the agent. most proven and resilient way to bronwyn.fourie@inl.co.za This will allow you to approach sellers and agents with the 4 THE THREE-VISIT RULE “Once you have done so, expect reciprocity and do not engage in build wealth and cash flow for generations to come, and while you confidence of knowing what you Mariani recommends that you counter-offers unless they are also in should exercise caution and build can afford.” visit the property – or at least the writing.” your specific knowledge, you should complex or area – on three different not let fear stop you forever. 2 INVEST IN A PROFESSIONAL days and at different times. 7 CREATE URGENCY IN THE “Ask those people who have INSPECTION “Make sure you visit at SELLER been waiting for the perfect time Once you’ve found the property, weekends, after sunset and at rush Specify in your offer that it is valid since 1999, or even 2007, whether get it professionally inspected. You hour. This is a powerful way to for 24 hours only, no matter what they wish they had bought a don’t want to discover unexpected ensure that there are no safety and you are told. property back then,” Mariani says.

LOCATION. Location. Location. I can almost still see and hear the estate agent from a few decades ago telling me this as she showed me a fixer-upper (okay, okay — dilapidated) house in a posh Joburg area.

Of course I didn’t listen to her, and more’s the pity because Parkhurst did end up being a brilliant investment.

I’ve thought about many important pieces of advice I have received over the years in regards to property. One from a friend (read, not an expert) sadly turned out to be untrue - ‘you can never lose with property’. Well, as my pockets can attest to, you can.

Which is why, before making the property leap, it is important to ensure you have a trusted adviser who understands property.

And then to actually take their advice.

This week, our writer Bonny Fourie asked estate agents and other experts about where firsttime buyers should be investing.

They’ve given us some important insights, which I hope will help you in the important, but also fun and exciting, prospect of buying a home.

What fascinates me now is how the pandemic may have us witnessing new things in the property market, including the ‘de-gentrification’ of some areas.

Things are changing, and it will take an astute adviser to predict what will come next. I hope you find one and that you can make good use of the favourable conditions in the market.

Warm regards Vivian Warby vivian.warby@inl.co.za

The art of spotting an up-and-coming suburb

New development in a suburb is an indicator of future growth. PICTURE: PORTER RAAB

It is a good time for first-time buyers to get a foot in the door but do your homework when selecting the area in which you want to invest

BY BONNY FOURIE

bronwyn.fourie@inl.co.za

LOW INTEREST rates and declining house price growth means that aspiring homeowners with relatively small budgets now have an excellent opportunity to get onto the property ladder.

In most cases, though, they will not be able to buy in the most favoured suburbs and will need to settle for a less popular location.

Buyers should know how to spot the potential of an area as, even though it might not be a hot spot now, it could one day become one. Similarly, they be aware of areas on the decline.

With these considerations, the old adage “location, location, location” is key.

Neighbourhoods with good prospects will have easy access to highways and will be close to shopping centres, gyms, coffee shops, restaurants and grocery stores, says Scott Allnatt, co-founder and managing director of Shelley Residential in KZN.

Alternatively, if a major grocery chain is moving in to a new area then you know with certainty that they have done their homework and anticipate growth in demand in that particular area.

Buyers should also look for developments, he says.

“New buildings, complexes or gated estates being developed, or even many homes being renovated, are great indicators.

“Buyers should also look to see if the roads and parks are well maintained and if the homeowners are taking good care of their verges and keeping their homes in good condition.

“This means that the municipality and its residents are financially sound.”

While crime is “obviously a key factor”, Allnatt says a neighbourhood that has recently put new security measures in place or has an active and enthusiastic community association – even if it had a past reputation for being a high crime area – would be attractive options if there is an ongoing reduction in crime levels.

The states of the local schools also tell an important story.

“If the size of classes is growing, or if it is becoming more difficult to get your child into one of the local schools, then you know that places are in high demand and that should give you the confidence to move into the area.”

Furthermore, he says buyers should watch the for sale boards or partner with a local estate agent to establish how long it takes to sell a home in a particular neighbourhood.

“If houses are selling quickly, and the number of days on the market is declining, then you know that demand in that area is on the rise.”

Cowies Hill in Durban’s Upper Highway area is a good bet for growth potential. It is an established suburb that is being rejuvenated, Allnatt says

Areas that are seeing a rejuvenation of retail and commercial spaces are also signs to look out for, says Hayley Vann-Herbert, sales manager at Jawitz Properties in Cape Town’s southern suburbs.

“Typically, it’s the main road in an area where you see improvement first and the residential market then follows afterwards.”

She says potential buyers should be wary of areas where the retail or commercial spaces start getting less affluent and there’s a decline in top blue chip retail and commercial tenants.

Echoing Allnatt, she advises buyers to keep an eye on developments in an area as bigger investors would have done their homework.

“They will not be investing millions in a project if they are not certain of a decent return. Potential sales prices of these developments will also give buyers a good idea of future value in the area.”

Vann-Herbert says buyers should purchase the worst houses in the best areas they can afford or in up-and-coming areas. They can live in such houses and upgrade them slowly knowing that the area’s value will make it worthwhile.

“If you have your eye on area, but can’t afford to live there, look at surrounding areas,” she advises.

“For example, if you love Constantia in Cape Town, then look at surrounding suburbs such as Bergvliet, Meadowridge, Diep River or Plumstead. If you are drawn towards Claremont and Newlands, consider areas such as Lynfrae, Harfield and Kenilworth.”

When assessing areas currently flying under the radar, Dogon agent on Cape Town’s western seaboard Natalie Kock agrees that factors such as developments, retail growth, schooling options, crime levels and property prices should be taken into consideration by buyers looking for areas with potential.

“Some hotspot areas that are popular and will continue to be are Sunningdale, Parklands North and Durbanville. However, Parklands itself has areas that are in decline.”

Aspects such as little or no growth; low rents; unkempt and neglected properties; poor infrastructure; an influx of vagrants; and high crime are warning signs that an area is deteriorating, she says.

Letting property can provide extra income but protect yourself from unreliable tenants

BEING A LANDLORD CAN BE TRICK Y

This is a good time to get into the property market but avoid over-extending yourself financially as interest rates could rise. PICTURE: BONGKARN THANYAKIJ

Q: I AM an 80-year-old pensioner and divided my home into two units to earn some extra income. We installed pre-paid electricity meters .

The estate agent found us suitable tenants – or so we thought.

The tenants paid their first two months’ rent on time and then started paying 17 to 18 days late. They did not pay their last four months’ rent, nor for water for seven months. After not buying electricity tokens from me for a few months I investigated and found they had tampered with the meter, which meant it was not recording the unit’s electricity usage .

Confronting the tenants lead to vulgar language and threats against me. I reported the case to the police and was advised to apply for a legal attachment through the magistrate’s court. I have been sent from pillar to post and, ultimately, returned home without an attachment order. How can I get one ?

A: Before a creditor, can get a warrant of attachment issued against a debtor, you need a judgment against which you are executing the warrant. To get a judgment, a summons first needs to be issued and served on the debtor. You should instruct an attorney to institute action by way of a summons. You can do so personally but you will not be familiar with the process that needs to be followed and may not get it right. – Maria Davey, partner at Meumann White Attorneys contribution will have the biggest impact.

Should I just buy it on my own (and apply for a home loan on my own) or should we do it jointly? We are not married, so is that going to be a problem? Also, what are the benefits of applying with someone else compared to on my own?

A: A joint loan generally enhances the application’s affordability, provided both applicants earn an income. Co-applicants can be a married couple, family (siblings, aunt, uncle) or even friends. Having a co-applicant will help if your income should reduce and the mortgage repayment could then be paid by the other applicant. Clients are also able to split the bill which assists in collecting the monthly instalments.

Of course, there are pros and cons and a joint home loan is not suitable for all. Pros: More applicants for a loan can increase your chances of qualifying for one as both parties’ income and expenses are taken into account to assess your application and affordability. This means that the disposable income may be greater.

Having a higher combined income threshold allows you to look at a property that you might not be able to afford on your own. There is a greater chance that the loan will be approved based on multiple applicants. Cons: If there is a default on the loan, all parties to the loan will be impacted in terms of credit bureau and liability and future eligibility for credit. If you are not married to your co-applicant, you may want to consider future eventualities and the impact this may have on your home loan. Should one partner want to pull out of the bond agreement, a new bond application will have to be processed and a full credit assessment conducted on the application to verify affordability.

If the original terms of the agreement need to be varied, for example, further lending or cancellation, then all parties to the loan need to concede.

Should one party to the loan not meet any of the requirements or conditions, all parties may be impacted, for example, if life cover for a party is required for one of the applicants, then the registration may not proceed until the requirement is met. In the event of death or divorce, the intricacies can become complex. – Buyisile Maseko, growth head at FNB Home Finance

Q: When applying for a home loan, what criteria are taken into account by the banks? Is it only financial aspects or do they consider things like gender, race and age? A: In line with the National Credit Act , customers’ income, current debt commitments and monthly household expenses are all considered to accurately determine an applicant’s affordability and, ultimately, their ability to take on additional debt. In other words, the granting of loans and pricing at Absa is dynamic and purely based on risk.

As part of the application process we also consider credit history (the manner in which previous credit obligations have been managed) and specifics about the loan (including the type and quality of asset).

At no point does race, gender or other demographic information feature in our credit policies or decision making tools. – Geoff Lee, managing executive at Absa Home Loans

Q: The market conditions for buying are currently really good and I am tempted to take advantage of them to buy my first home. I have done the numbers and I do think that I can afford it, although only just, but I do not want to lose out on the opportunity to own. Should I just take the plunge and buy or wait until my affordability levels improve?

A: Indeed, with the prime interest rate now at a mere 7%, a 100% bond on a R1 million property could cost R7 753 a month – R1 700 less than in January this year. This brings it within the affordability range of buyers earning around R26 000 (gross) a month. However, I do caution buyers against extending themselves to limits of their personal finances.

Now is an excellent time to buy but it’s not the time to push the boundaries of affordability. Our economy is under extreme pressure and job security is low – it would be much smarter to use this time to buy low and pay off debt faster than to push your limits and risk losing it all if your finances take an unexpected knock. – Tony Clarke, managing director of the Rawson Property Group