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Unlike other items purchased that you can easily return if you are not satisfied, property cannot simply be returned. Purchasing a property is a significant decision with long-term financial implications. It requires a commitment of at least 20-30 years, and should not be taken lightly, says Samuel Seeff, chairman of the Seeff Property Group.
An offer to purchase is a legally binding document, and breaking the contract can incur significant financial penalties, including liability for the estate agency commission. Once the property is transferred into your name, you take full ownership. Needing to sell it soon after purchasing it might result in a financial shortfall due to the substantial upfront costs that would have incurred.
It is therefore vital that prospective buyers conduct thorough research and are certain about their decision before making an offer. Seeff provides some vital pointers, and by following these, buyers can make informed decisions and minimise the risk of buyer’s remorse when purchasing property.
Define your requirements. Start by clearly defining what you are looking for in a property and the maximum price you can pay. Ensure that you can afford the purchase price with the costs factored in, and that you are able to secure a home loan. Knowing your budget and requirements will allow you to search for properties with confidence.
Consider the reason for your purchase. If you are buying a property for personal use, the criteria may differ compared to if you are looking to invest in a rental property or second home. While you will consider your lifestyle needs for an own-use property, you will need to consider the financial case for a rental investment.
Focus on financial preparedness. Budget correctly to ensure you can comfortably afford the property. It is always best to buy below your means to avoid future financial difficulties, especially if you are a first-time buyer. If buying a fixer-upper, be prepared for renovation costs and potential challenges and delays.
Research the area and prices. You should start by checking out the area and evaluating the prices, especially if you are not familiar with the neighbourhood. Spend some time in the area to assess the traffic and other factors which might lead to regret. Travelling time or inconveniences can impact the quality of life and are important considerations.
Inspect the property. Always view the property yourself and conduct a thorough walk through before making an offer. A condition of property report should be available so that you can familiarise yourself with any issues. Check the plans and that renovations or additions are compliant.
Beware of deals too good to be true. If a property price seems too low, do thorough research to understand why. It might be a quick sale, but it could also indicate underlying issues with the property or area. Always deal with a credible real estate agent with a valid FFC (Fidelity Fund Certificate) to ensure that all is above board.
Dealing with regret. If you regret your purchase, but cannot sell the property, you could always consider alternatives such as renting it out. This might help manage the financial burden and make the best of the situation. After a period, you could then consider selling the property, or you might end up keeping it as an investment.
READ: Co-Living smarts for young property buyers
To help demystify these terms, RE/MAX of Southern Africa runs us through the A-Z of property transactions:
Asking Price:
The price set for the home, usually suggested by a real estate professional based on a competitive market analysis and agreed to by the seller. Depending on demand, buyers can choose to make offers above or below the asking price.
Bond Originator:
A free service that can help buyers find the best deal on their home loan. Bond originators have several services that will help buyers navigate the bond application process more efficiently.
Conveyancer (also known as a transferring attorney):
A legal professional who will attend to all the paperwork and other legalities that are required for a property transfer to take place.
Deposit:
An amount of upfront cash provided by the buyer upon acceptance of an offer to purchase. The rule of thumb here is roughly 10% of the asking price. A deposit is not a legal requirement but can make a buyer’s offer more appealing and could help the buyer acquire the remaining home finance.
General Valuation Roll:
A document that presents a value upon which household municipal rates will be calculated until a new roll is issued. It is important to check this when it is released to make sure you do not end up paying more for municipal rates than what the home is truly worth.
House Price Appreciation:
A percentage of growth calculated based on average house prices in an area (usually calculated at a national level). These averages can provide an indication of how much more a property will cost in a year’s time. For landlords and tenants, these averages can provide an indication of what a fair annual rental escalation could be.
Interest Rates:
There are various rates at which interest is calculated on debts, including home loans. Consumers should focus on the Prime lending rate, as this is the base rate that banks use when offering loans to consumers. This will either be above or below Prime depending on how good your credit score is.
Off-market sale:
When a property is for sale, but it has not yet been publicly advertised or listed on any property portals.
Pre-approval:
A certificate issued by a bank that provides a buyer pre-approval of a certain loan amount, calculated based on what a buyer can afford. These amounts are only 100% finalised after the bank has completed a property valuation and has received a signed Offer to Purchase on a property.
Reserve Price:
The minimum price set for a home when it is sold via auction.
Sole Mandate:
A written agreement that places the responsibility on a single agent for a period of time. It can often be more effective to sign a sole mandate and allow one agent the space to secure the best sale. A sole mandate is also a more convenient option because sellers will only have to liaise and deal with one agent rather than several.
Turn-key property:
A property that is move-in-ready, with no need to do any further renovations or updates.
Unconditional offer:
An offer to purchase that is not subject to any other conditions, such as a home loan or private home inspection, etc.
Zoning: the type of property that can be built on a plot of land. Local planning authorities control zoning permissions.
“There are a lot of moving parts to any property transaction. That is why the real estate profession exists. Property professionals are there to help guide clients through these transactions. Never feel afraid to ask questions if you are ever unsure of anything during the process,” says Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett.
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