Buying Property

Owning a Property: The Key Advantage

Capital Growth

If you rent a property for 20 years, you will end up with nothing. If you buy the property on a 20-year mortgage, at the end of the mortgage term you will own it outright. The opportunity to achieve a capital gain in this way is, for many home owners, the single most important factor behind their decision to buy their own property.

Purchasing your dream home is the most important investments you will ever make in your lifetime. This is the reason why it is so important that you understand all the facts. PNS strive to provide the best advice possible to buying your own home.

How much money can I borrow?

The amount you can borrow, commonly known as your borrowing capacity or borrowing power, will differ from lender to lender. Our Home Loan Calculators will give you an initial idea of how much you can borrow. To have a complete individual assessment done of your situation (free of charge), click on the “Need a Bond” button (located on the top scrollbar of the home page).

Before you buy

This fact sheet is general information only. If you need an Attorney, try our Recommended Attorneys (located on the top scrollbar of the home page), a free service that matches you with an Attorney who meets your legal needs and preferences and have been evaluated, reviewed and approved for quality and service. 

 

Shortlist for purchasing

Is the property:

Does it have:

What to check?

If you are thorough about checking out possible problems, you may save yourself a lot of hassle later on. The main areas that you should cover are listed below. And to make it easier for you, have a look at our Buyer's Checklist.

It's not possible to list everything you should check, but the following is a good start:

 

The property

There are a number of inspection options, from do-it-yourself to professional help, for which you may wish to receive professional advice.

If you want to find an inspection report from a professional building inspector look under 'Building Inspections and Building Consultants' in the Yellow Pages. Many items can be checked including (amongst numerous others).View Checklist above.

Types of title

There are two types of ownership for residential property

Freehold / Full Title:

Full title describes the transfer of full ownership rights when you own the property as well as the land it is built on.

Freehold - Full Title

House

This is a normal free standing house with ERF number.

Cluster House

A cluster house is a freehold property, usually in a development of similar houses. The group of houses usually has limited access through a security control. Each house is individually owned and no levy is charged to the occupants.

Residential property used for business purposes

The property will be regarded as residential property provided that no structural changes are made which could affect its description as a domestic residential dwelling. A risk premium above the qualifying home loan rate is applicable if more than half of the house is used for business purposes.

Smallholding

A smallholding is classified as such if it is situated in or within a 150 km radius of a built up area, does not exceed 20 hectares and is able to be connected to a local authority water supply or has a borehole.

There must be a dwelling on the property and the main source of income must not be from farming on the property. If the smallholding is larger than 8.56 hectares, it will be charged a risk premium above the qualifying home loan rate.

Sectional title:

This describes separate ownership of units or sections within a complex or development. When you buy into a sectional title complex you purchase a section or sections and an undivided share of the common property. These are collectively known as the unit.

Sectional Title

Mini subtype house

This is a small, sub-divided portion of a large property which is suitable for cluster housing developments.

Semi-detached house

This consists of two houses attached to one another. They may be on separate stands and bonded individually as ordinary houses. They can also be on one stand and bonded together under one bond. They can be sold as separate units in a sectional title development.

Townhouse or flat

A townhouse or flat unit must be in an approved sectional title complex. The complex must contain residential units only.

Duet house

This is similar to a semi-detached house, but there are two separate free-standing units on one stand. It could also be two dwelling units attached to one another on one stand. They can be sold under sectional title. When you buy into a sectional title complex you purchase a section or sections and an undivided share of the common property. These are collectively known as the unit.

Common property

The common property is that part of the development which does not form part of any section. Structures and areas in this category include; driveways, gardens, swimming pool, club houses, corridors, lift, entrance foyer, outer wall and foundations.

Exclusive use area

Exclusive use areas are portions of the common property which have been demarcated and may only be used by the owner of a particular section.
It is an aspect of the property which you do not own, but over which you alone have use. This could include: parking bays, garden, patio, garages and storeroom

The Body Corporate

It is the collective name given to the owners of the units in your complex. All registered owners of units are members of the body corporate. This means you will be liable for the debt of the body corporate, so it is advisable that you scrutinize the financial statements of the body corporate before you purchase.

Levies

These are the costs incurred in running the complex which have been paid by the body corporate. The levies include the following costs: Rates and taxes and other charges, insurance premiums, repairs and maintenance of the common property, wages and salaries of cleaners and other staff, water and electricity used on the common property.

Buying off the plan

This is a term that is commonly used in today’s property market, especially for apartments. 'Buying off the plan' refers to buying a property before it is completed, and this may include buying a property that is an architect’s plan. The deposit that is paid secures the property and the contract, and the balance is paid when the property is completed.

It is important to comprehend the nature of this type of transaction before you enter into it. Make sure you understand (amongst other things):

Checking the title

A title is the short name for "Title deed". These days, titles are on computers at Deeds offices in each State.

The title gives details about the registered owner and details of any servitudes, mortgages, agreements etc.

Also check:

If there is a mortgage or a caveat, it does not mean the property cannot be sold, but they must be removed by the seller before, or at, settlement. Remember, most properties have a mortgage that the seller will pay off with the money from the settlement.

The local council

Check whether:

 

The costs

The potential costs include:

Transfer Duty

 

Buying a home

Well done! The decision to buy a home has proven to be one of the best made for millions of happy homeowners. It's a fact that property is a good investment, especially when you compare it to paying rent. It is important, however to enter the property market with a good understanding of how a property purchase works, what your costs will be and a respect that this is probably one of the largest financial commitments you will ever make.

Mortgages

When a financial institution lends you money to buy your home, it acquires a legal interest in the property. In this case, the property is said to be ‘mortgaged’. A mortgage acts as a form of security in case you fail to make the repayments. When you mortgage your property, you give the home loan provider interest in the property. This means that you don’t have a clear title to the property and cannot sell it without their consent.

If you wish to buy a home you may be able to borrow money to do this. Capital borrowed is repaid gradually over the period of the loan. The capital is paid in monthly installments together with an amount of interest. The amount of capital which is repaid gradually increases over the years while the amount of interest goes down.

The loan is for a fixed period, called a term and you have to pay interest on the loan. If you do not keep up the agreed repayments, the lender can take possession of the property.

Best advice

Your Bond consultant will give you the best advice on all aspects of your home purchase, and most importantly on financing it, particularly when the banks differ in their approach to lending. They will help you understand the different interest rates, fees and charges, and terms and conditions available. They will explain to you the features of the different loans and why they are more suited to your individual requirements.

Important Pointers

-Know what you can afford and the costs
-Consolidate your finances

Significant savings are possible by consolidating all your finances. The days of having a home loan, a personal loan or overdraft, a car loan, a savings account, a cheque account and owing money on credit cards are over.
Financially, it is far more effective to consolidate all your loans. As home loan rates are significantly lower than those for personal loans, overdrafts and credit cards, but significantly higher than savings and cheque account rates, it makes sense to consolidate everything into your home loan account.
Talk to our Bond consultants today about how to consolidate your finances and save. "Need a Bond"

Minimise your Mortgage

By effectively structuring your finances, you can significantly reduce your total home loan debt.
Arranging part of your salary to be credited directly to the loan and making additional repayments on an ad hoc basis (like when you get a bonus) will have very beneficial results.
By sticking to a workable monthly budget and avoiding unnecessary debt, you can repay your loan much more quickly and save vast amounts of interest.

Example

You can settle your home loan in 5 years:
 Pay off an extra 1.2% of the original capital debt each month (R1 200 per R100 000)
Adjust for interest rate changes when they occur
Don't access funds already paid off
Whilst this may mean some sacrifices, you will save a fortune in interest. To calculate the permutations to pay off your home loan view our Home Loan Calculator (located on the top bar).

First time buyer’s loan

Most lenders offer a loan specifically for the first time home buyer. You can borrow more than 100% of the property value and can include costs like the transfer fees and bond registration costs in your loan, making it easier for you to own your first home.

The advantages are:

- No deposit required
- Transfer and bond registration costs are absorbed into the loan
- You can get into the property market more easily

To qualify:

- First time homebuyers only
- With a clean credit record
- Loan amounts between R100,000 and R1,500,000
- Single or joint income must be minimum R6,000 a month
- Your monthly bond repayments cannot exceed 30% of your gross monthly income
So perhaps you can own your own home! To have a complete individual assessment done of your situation (free of charge), click on the “Need a Bond” button (located on the top scrollbar of the home page).

Pre Application Checklist

One way to make the home loan process quick and simple is to ensure you have all the necessary documentation before you apply for your loan.
Below we have outlined the minimum documentation required in applying for a loan, although the different banks’ needs may vary.

All Applications

• A copy of your ID document
• Proof of income
• A salary slip (no older than 2 months) or a formal letter from your employer with details of your salary and deductions.
• If you are self-employed, a letter from your accountant detailing your income, or a statement of assets and liabilities
• A copy of the offer to purchase containing seller and purchaser's details
• Address confirmation – utility bill or statement from another institution confirming address

Companies / Close Corporations

• Copy of financial statements, signed by the auditor.
• Names, ID’s and contact details of all the directors/members
• Founding statement of the close corporation
• Company/close corporation certificate
• Memorandum and Articles of Association
• A resolution by the directors/members giving authority to sign the home loan application.

Trusts

• A copy of the Trust Deed
• A resolution giving individual(s) authority to sign the home loan application (or pre-approval)

Finding a property

As well as looking in estate agents’ windows, the internet is also an excellent research tool for finding properties and is specifically geared for property searches, as well as those catering for people who want to sell without an agent altogether.

Viewing properties

Here are some useful tips to keep in mind when looking for the house of your dreams:

 

Making in an offer

It's human nature to try to strike a deal, but if you find your ideal home and it seems to be priced correctly, consider offering the full asking price. This means you'll be taken seriously, there won't be any time-wasting and it will lessen the possibility of another party stepping you.

All offers should be made with the stipulation of taking the property off the market. Getting a 'Sold' board outside is a good way to dissuade others from looking.

You do not necessarily have to pay the price being asked for it by the owners. You can offer less if, for example, you thinks there are repairs to be done which will cost money.

If the property is being sold through an estate agent, you should tell the estate agent what you are prepared to pay for the property. The estate agent will then put this offer to the owners.
If the owners do not accept the first offer put to them by you, you can decide to make an increased offer. There is no limit on the number of times you can make offers on a property.

Chains

One in three property chains fall apart. This can happen for numerous reasons, from one party not having their finances in order, to an unpleasant surprise in the survey.

Under present South African house-buying and selling practice, little can be done to alter the process.

The best way to ensure a chain progresses smoothly is through good communication. Stay in regular contact with your Attorney and Estate Agent to make sure everything possible is being done to speed things along.

It can also help to stay flexible. Be prepared to move in with your family or rent as a short-term measure if it means you can keep the chain going.

Renovating for profit

Renovate - modernise, overhaul, refit, reform, renew, repair, restore.

Renovating property is an avenue that some property investors may wish to explore. The work may range from a fairly minor upgrade through to major structural alterations. Renovation possibilities are:

Advantages of Renovating

Disadvantages of Renovating

Gathering facts and figures

Deciding to renovate property is a matter for serious consideration. There are a number of methods you can employ in helping to assess the nature and extent of the work to be undertaken, the planning permission requirements and the costs. 

Assess the work carefully

Get a professional evaluation of the extent of the work required from an architect/building surveyor. 

Estimate the cost

Get a reliable estimate of the cost of the work from an architect/quantity surveyor/building contractor. 

Investigate planning permission

Check if planning permission will be required and if it is likely to be granted.

Secure your finance

Check your source of finance for approval.

Take advice

Talk it over with a professional adviser.

What should I look out for?

Ensure you're not buying a money pit. In an older property you should be prepared for anything. Don't be afraid to make umpteen visits with every type of tradesman in order to know what you're letting yourself in for!

Ask the experts

Roofers, timber and damp specialists and electricians will charge nothing or very little to engage their services for estimates and will be more beneficial to you than a surveyor in the initial stages.

How much work is involved?

This depends on the property, but don't bite off more than you can chew. For a good first experience of renovating, try doing up a dated property rather than a wreck. A new kitchen, bathroom, carpets and re-decoration will miraculously transform something dark and decrepit into a 'des res'.

You can always leave the architects, specialists and planning department to another time when confidence and funds are more plentiful.

Funding

Be prepared. The phrase most heard when doing up a wreck is: "It cost twice as much as I thought it would." Set yourself a budget and build in some contingency funding - 15 per cent of the total cost is a good guideline.

You could start your renovation with a small cash fund, and once you've re-decorated and carpeted, the overall improvement should allow a small re-mortgage (second bond). This can be used for a new kitchen and reinstating period features such as fireplaces and built-in outside braais.

Managing the project

A project manager will liaise with the builder and ensure work is carried out to a specification. You could manage your own project or employ an independent.

Get all the quotes well in advance, from carpets to carpenters. That way you can calculate all your expenditure.

Never expect the scheduled timescales. The buying and the restoring may not always go as planned.
Seek as much advice as possible, especially from people who've done it before.
Be prepared to live in a building site until things are settled.


Employing tradesmen

Decide exactly what work you want to undertake before asking for any quotations. Write a clear specification; it need not be technical, but it should detail the work you want to carry out.

Confirm the precise arrangements for the work to be done: the price, the payment terms, working hours, insurance and guarantees and how to resolve disputes if they arise. How to make changes to the work to be carried out and how to deal with a builder who wants to extend the time taken for completing the work. In essence, you must set out clearly what's expected of you and the builder. This is the way reputable builders will want to go.

Additionally, remember that your builder will be spending a lot of time in your home, and therefore should be someone you feel comfortable with. Good communication and a professional relationship is very important if you want the project to run smoothly. Reputable builders will always want to do their best work for you from the very start.

Buying on Auction

Preparing for auction

Auctions are a great way to buy property competitively. But be warned, there is more to buying than just turning up and landing yourself a bargain.
A lot of properties with development potential are sold at auction. Auctions can be quite intimidating places for the amateur and if you are seriously interested in buying a property at auction it is a good idea to go to an auction as an observer before you go to buy something. It is still possible to buy a bargain. Unfortunately, it is just as easy to make a catastrophic mistake.

If you make an offer to buy a property at auction then that offer will become immediately binding. You will have to sign a contract immediately, pay a 10% deposit on the day and complete your purchase within the stipulated time. If you do not, you could lose your 10% deposit, be sued for breach of contract and be liable, to pay any shortfall between the price which you agreed to pay for the property and the amount for which it is subsequently resold. You cannot therefore bid for property until you have completed the necessary preparation.

1. Do your Homework on the Property

You will need to arrange to view the property. If it is in need of refurbishment, you will need to take your builder or surveyor with you to estimate the likely cost of necessary work. If you are unfamiliar with the area you will need to check it out carefully. Never buy a property that you have not seen, however tempting the price may seem to be. Some properties are sold at auction for what appears to be a fraction of their true value. There is nearly always a reason for this.

2. Arrange your Deposit

The 10% deposit must be paid on the day of the sale. You should check with the auctioneers about what arrangements are acceptable to them but most require a bank guaranty.

3. Instruct your Attorney

You will need a conveyance Attorney lined up to check that there are no legal problems with the property or unfair terms in the contract of sale.

4. Decide on a Maximum Price

There have been many instances of inexperienced buyers getting carried away in the heat of the moment and paying far too much for a property at auction. Decide what you are prepared to bid for the property and stick to it. If you don't trust yourself to do so ask someone else to bid on your behalf.

At the Auction

On the day of the auction try to arrive in plenty of time. Many auction houses require you to register as a bidder at the start of the sale. Check whether this is the case, otherwise your bid may not be accepted. Double-check the catalogue entry - you wouldn't want to buy the wrong property by accident! It has happened!

Stories of people scratching their noses and buying a house by mistake are greatly exaggerated. The auctioneer will be watching your whole body not just your hands and he will not misinterpret who is bidding and who is not.

Try to avoid making the first bid. If a property is not popular, the auctioneer may drop the opening bid to a lower level. You wouldn't want to pay more than you had to. Once you have entered the bidding, try to pause for a second or two between bids. By slowing down the pace you can help to prevent your opponent from getting over-excited and bidding more than they intended to. Finally, do not on any account bid above your previously agreed limit.

The down side of buying at auction is the high chance that your opponents will be professional dealers who will be buying for cash. The up side is that there are genuine bargains to be had. The dealers will typically be looking for a margin of 20% plus financing costs. This margin can be yours - if you buy wisely.

Consult our handy guide before you attend your first auction:

"If you're new to auctions, sit in on one first before you join in - bidding isn't for the fainthearted!"

 

 

 

 

 

 

Confused by auction speak?

Actual completion date

The date when completion takes place or is treated as taking place for the purposes of apportionment and calculating interest.

Addendum

An amendment or addition to the conditions whether contained in a supplement to the catalogue. This may be a written notice in the catalogue, or announced at the auction.

Auction

A public sale in which property or items of merchandise are sold to the highest bidder.

Auctioneer

The person who conducts an auction. The auctioneer introduces each lot offered for sale, acknowledges bids, and announces whether lots are sold or unsold and their final bid prices.

Auction catalogue

The catalogue gives a description of the property, details on how to view each property and the General Conditions of Sale. These are prepared by the auctioneer, stating the basis on which the auction is carried out.

Bid

The offer to buy property at a specific price.

Completion

On completion of the sale of the lot there is usually a defined time period from the auction to the completion date in which the sale must be finalised.

Signing the contract

If you are the successful bidder at the auction sale, the sale is binding on the fall of the hammer and you will then be asked to sign the contract in the auction room.

In the room

A bid from someone in the room (not by phone.)

Legal pack

The vendor's attorney prepares a legal pack containing copies of all the legal papers that you and your attorney are likely to need to make an informed decision about your lot. The pack should include (where applicable) copies of: special conditions of sale, title deeds, leases, office copy entries, searches, replies to pre-contract enquiries.

All legal packs will be available for inspection at the auction room. You must be aware that you buy subject to all documentation and terms of contract whether or not you have read them.

Lot

Each separate property described in the catalogue or (as the case may be) the property that the seller has agreed to sell and the buyer to buy.

Previews or exhibitions

A viewing of the property held in advance of the auction. Pre-auction viewings are open to the public and may be attended at no charge.

Private treaty

The sale of a property at a price agreed by the seller and the buyer or their agents.

Proxy bid

The auctioneers can undertake bidding on behalf of buyers unable to attend the auction in person. The buyers must contact the auction house prior to the auction to obtain an official, proxy bidding form. This must then be returned to the auction house with a deposit cheque within the time specified by the auctioneers. The buyer writes the maximum amount they will bid to on the form and the auctioneers will bid on behalf of the buyer, up to, but not beyond, the stated price.

Reserve

A reserve price is the lowest price the vendor will accept. This is agreed between the vendor and the Auctioneer. Most properties entered into the auction have a reserve price. This is confidential and not disclosed to any interested parties.

Telephone bid

A telephone bid, made by a member of staff from the auction house. The staff member telephones the client from the salesroom to bid on particular lots and relays the client's bids to the auctioneer during the bidding on those lots.

Tenancies

Contracts to occupy or lease the property subject to rent. A lot may be sold subject to existing tenancy agreements.

Withdrawal

Failure to reach the reserve price or insufficient bidding. The auctioneer will withdraw the property from the auction.

 

Auction day

"If you're unable to attend the auction, you can make a bid by telephone or in writing. Contact the auction house for more information."

 

The role of the auctioneer

"Decide on your maximum bid in advance and be strict. If you don't trust yourself not to get carried away, entrust somebody else to bid on your behalf."

 

 

 

 

Buying a property abroad

Buying property abroad is more popular than ever, with increasing numbers of people following their dream in purchasing a holiday home, a buy-to-let, or moving lock, stock and barrel to the sun.

Location checklist

Before you start looking for a property abroad, it's worth asking yourself a few basic questions, which should save you time and money in the long run:

Professional advice

Use qualified professionals to protect your interests and make the purchase of your new home a stress-free experience. Estate agents are a good source of advice. Only negotiate with ones that are officially registered and hold a licence. Ensure you have a good lawyer with an excellent command of English and the native tongue, to deal with the endless stream of rules and regulations. For instance, did you know that if you're buying in Spain you'll need to make out a will in Spanish before buying, or that you can inherit debts from a previous vendor?

Costs

Research all legal issues and costs involved. Your attorney will advise and assist you. Before you have decided on a property it's important to be fully aware of the legal process and costs involved in your purchase. Obtain professional advice and check your finances, taking account of these additional costs.

Be well prepared with your finances; taxes can be high when buying abroad. Set up a direct debit from a native bank account to pay for bills. Be careful not to miss payments and read those red letters; foreign banks are not lenient with those who don't pay up in time.

Making a foreign offer

Make your offer in writing if possible (of course, subject to contract), and include not only the price, but also the amount of deposit, when you're prepared to pay it, when you're prepared to complete, what you understand to be included in the price (for example furniture and fittings if applicable) and, an often neglected point, that all machinery equipment and installations are in normal working order.
If you make a written offer it will always be made subject to contract. This means that you will not be committed to the purchase before finding out more about the state of the property.
“End of Buying a property abroad”

The Psychology

There is only one reason why people do not buy a property - fear.
There is only one reason why people do buy property - control.

So if you want to get on the property ladder you need to eliminate your fears and want to take control.

People's Fears

There are a number of fears that people have which are fully justified. They are not dissimilar to what business people face when appraising a potential investment.
These are called risks. The difference between the ordinary person and a business person is that a business person:

a. Identifies all the risks involved
b. Mitigates each risk as best he or she can
c. Considers the overall risk based on how well he or she can mitigate each individual risk
d. Makes a decision based on the overall risk

So to get on the property ladder you need to:

a. Identify all your fears involved in buying a property
b. Think how you can overcome each fear involved in buying a property
c. Consider the overall fear factor based on how well you can overcome each individual fear
d. Decide whether you want to buy a property or not based on the overall fear factor

The Fears and How To Overcome Them

With every fear you can take what we call countermeasures which overcome each fear. A countermeasure is an action you take to counteract each fear. No countermeasure is fool-proof otherwise the fear would not be a fear purely by its definition as it could be fully overcome.

There will still always be an overhang of fear but it will be a lot less than the starting fear. This is what we call residual fear. The residual fear is therefore still present even after the countermeasure and thus is a real fear. You can take further countermeasures to reduce this residual fear but it depends on how far you want to go. But, there will always be residual fear however.

The fears, countermeasures and residual fears in buying a property are:

	Fear	Countermeasure	Residual fear
1	Losing your job and can't pay the mortgage.	About The Author: Property Experts for 18 years More info: Property For Sale © 2012 Simply Links All rights reserved. Simply Links | Free South African Web and Business Directory | Articles & Press | About | Contact | Web Development by Eiledon