It has been proven over centuries that immovable property is the most stable long term investment one can make in your lifetime. Land was created with a fixed extent – people not; they increase by the day. Supply and demand determine value and in the case of land, the demand is becoming greater by the day. It is always the right time to buy property, provided the price is right.
Where does one begin?
First establish whether you can afford a bond. Very few mortals can buy property cash. You will need to apply for a bond with a bank. It is always tempting to buy beyond one’s means. Make sure that you know what you can afford to pay as a monthly installment without having to starve! If you are married and your spouse has an income, this will obviously be to your advantage. Also bear in mind that the National Credit Act contains strict provisions that financial institutions have to adhere to regarding your affordability. Although you may think that you qualify for a certain bond, the bank will not necessarily agree. They are also at risk of being held accountable for granting reckless credit. Consult a qualified estate agent to help you establish your price range. Most importantly, don’t forget about transfer costs. The purchaser is liable for this and the amount can come as an unpleasant surprise. Transfer costs have to be paid upfront prior to transfer of the property. The purchaser must therefore budget for this amount. An attorney or competent estate agent can assist you to calculate the exact amount.
Transfer costs include the following :
Transfer duty – this is a form of tax payable to the state and is calculated on a sliding scale with reference to the purchase price. Residential properties up to a value of R750 000,00 are exempt from transfer duty.
Transfer fees : this is the fee payable to the attorney who tends to the transfer and is a recommended tariff, also on a sliding scale based on the purchase price.
Municipal rates for a future period, usually three months.
Deeds Office fee : a fee charged by the Deeds Office for registration of the property.
Bond fees : this is the fee payable to the attorney appointed by the bank to register the bond. The bond is registered simultaneously with the transfer of the property. The attorney deals with this.
Find a property
The next step is to find the right property. Appoint an estate agent or visit show houses. You should also consult the well known internet property platforms such as Property.CoZa.co.za, Property24 and Private Property.
Taste differs and therefore one cannot be too prescriptive regarding what property is ideal. However, be mindful of the fact that the price that you are paying should be market related for the specific area where the property is situated. There is a lot of truth in the saying “location, location, location”. Having said this, it is also true that a buy at the right price in a less popular area may be a very good investment. Don’t allow emotion to get the better of you. The lovely cottage with the colourful porch, may be a bad investment for various other negative characteristics. It therefore will not have a good resale value. Remember, you are not only buying a home – you are making an investment. You can buy a nice home and a good investment. The main principle is : you make your profit when you buy, not when you sell. Don’t be shy to make an offer – the asking price is rarely ever set in concrete!
The offer to purchase, bond application and transfer process
When you have found the right property, an offer to purchase has to be prepared, when, if signed by all the parties, becomes the sale agreement. Consult an attorney about this. Most estate agents are competent to deal with this aspect, but not all of them. Stay on the safe side. There are many statutory requirements that need to be complied with. Always consult an attorney before you sign anything. It is common practice that the seller appoints the attorney who will be taking care of the transfer, but the purchaser may negotiate otherwise.
After the agreement of sale has been concluded, the purchaser may proceed with the bond application, unless it is a cash sale. The estate agent should assist the purchaser with this. Once the bond is granted the process can proceed. If the bond is declined, either the purchaser does not qualify or the property’s valuation is adverse.
The attorney entrusted with he transfer should assist the parties with the remainder of the process. Do not worry about anything further. The registration of the property basically entails the drafting and signing of transfer documents and transfer in the Deeds Office.
The whole process probably still looks daunting for the beginner in the property market. Begin by consulting a competent estate agent. Let him or her establish if you qualify for a loan and take it from there. It cost’s nothing.
Buying property is an adventure – enjoy!