“Although in the fast-moving real estate industry you may feel pressurised to make decisions quickly, a home is a major investment and it is important to take the time to make it wisely,” says Adrian Goslett, CEO of RE/MAX of Southern Africa.
Financing and affordability
The first thing any prospective home buyer needs to determine is what they can afford and whether they qualify for a mortgage.
“There are a number of benefits of getting a prequalification for a home loan from a mortgage originator before you start looking. Bear in mind that this is not a guarantee, but it gives you a good indication as to what price range you can afford.
“Furthermore, a prequalification is also a clear indication to estate agents that you are a serious buyer. Today, with the National Credit Act (NCA), many applicants do not qualify for a 100% bond, and so the prequalification process will also indicate how much deposit you will need to save in order to qualify.”
However, Goslett notes that aside from mortgage prequalification and deposits, home buyers also need to work out whether or not they can afford all the other expenses involved in buying a new home, such as transfer duties, moving costs, home insurance, the costs of connecting the electricity, telephone, ADSL and television, as well as being able to modify and tweak the new home to meet their individual needs.
“It is also vital to work out what the monthly rates and taxes bill will be. If you are buying within a development, you need to know what the levies will be and whether there are any increases planned for the near future. Another very important aspect when buying a sectional title unit is to check out the financials of the body corporate and to ensure that everything is paid up to date and running smoothly. If you buy a unit and the body corporate in question is behind in its payments, then that could become your problem down the line,” explains Goslett.
He notes problems can also emerge if the buyer submits an offer to purchase that is subject to the sale of their property. This is because the money to buy the new home is being funded by the sale of the existing home.
“This is a standard practice, and all very well if the buyer has their property on the market for a reasonable price, but so often, many of today’s sellers still have totally unrealistic ideas of what their homes are worth and, as a result, put them on the market at unrealistically inflated prices. In such cases, it is really vital to determine a realistic price for your home before you make an offer on another one.”
Research the neighbourhood
Once you have decided what area you would like to invest in, it is time to roll up your sleeves and do some CSI-type investigations into the neighbourhood.
“There are a number of things that you should investigate, namely the level of crime and traffic the area experiences, whether there have been any relatively recent or planned zoning changes in the area, what kind of amenities the area offers and how well these are maintained. The area’s schools and their quality are also an important aspect to investigate.”
In addition, Goslett advises potential buyers to take note of the level of maintenance of the road infrastructure and pavements as well.
He says the local residents’ association, municipality and police station offer a wealth of information for interested home buyers.
Also, he highly recommends that anyone serious about buying a new home should make an effort to meet their potential new neighbours before making an offer to buy. “Not only are neighbours and excellent source of information about what’s going on in the area, but it is a good idea to determine whether you will get on with these individuals or not. Living next to neighbours that you don’t get on with can be a very stressful situation, and sadly, most homeowners only get to meet the neighbours once they have bought the home.”
Buying off-plan
If you are looking to buy off-plan into a development, be warned that although it is usually more cost effective, it does come with its own set of risks.
Due to inadequate controls, an increasing number of unscrupulous developers have entered the market and produce sub-standard work and inferior new builds. The faults in any development often only appear months down the line when it is too late for the new owner to do anything about it.
As a result, Goslett advises anybody who is interested in buying off-plan to do some in-depth investigations into the developers, as well as taking a look at the quality and durability of their prior developments, before signing on the dotted line.
Informed negotiations
In order to negotiate the best possible price for the house you want, you need to accumulate as much information about the value and market demand of the property in question. “Knowledge is power and any agent worth their salt should be able to provide an interested buyer with a list of properties in the area that have been sold, stating the asking price, as well as the actual selling price of the home. This will give you great comparative information with regards to the house you are interested in,” says Goslett.
Everyone knows that over time, areas change for the better and for the worse, and buyers should therefore ask the estate agent for some statistics on the capital improvement (or decline) of any particular area over the last five or so years. “This will give you an indication on whether or not the area is a secure investment and whether it has potential for reasonable returns going forward, bearing in mind that property is a long-term investment.”
Some other information that is of use with regards to the negotiating process is to determine the level of market competition and demand. “Work out how many properties are on offer in the area and how long it took them to be sold. This will indicate how quickly you need to move in order to secure the deal. Also, try and find out how long the house you are interested in has been on the market – the longer it has been listed, the more open to negotiation the seller will most likely be.”
Structurally sound
And lastly, determining that the home is structurally sound is very important. “It is highly advisable to hire a reputable home inspector who will be able to give you a full report of the home in question. Also, it is worthwhile asking the existing homeowners if there has been a history of any flooding, damp or sewerage blockages.”
He also notes that it is essential to check to see if all the fixtures work, such as the stove, all the lights, the pool pump, the electric gates and the alarm system.
While obtaining some of the necessary information about the property you intend to buy and the neighbourhood in which it is situated may seem like an unnecessary hassle, the more information at your finger tips, the more confidently you can negotiate the deal. “Buyers remorse on a purchase as large as a home is not a pleasant experience, and one of the best ways to avoid this kind of a situation would be to thoroughly do your homework,” Goslett concludes.
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