Updated: Nov 5, 2018
Buying a home can be a roller-coaster experience: it is a thrill to visit properties on sale and to look for the dwelling that makes your heart skip a beat. However, it is also an intimidating experience with tonnes of paperwork! Besides signing serious, binding contracts, you may need to make large financial commitments for many years to come and separate with some hard-earned cash. If you are thinking of kicking off your house-hunt, you may have many questions occupying your thoughts. Here are the answers to a number of common questions that you may also have:
Q: What home can I afford?
You may dream of one day owning a villa on an exotic island, but in reality you may not be eligible to afford such an amazing villa just yet! Your current amount of cash in hand, your monthly income or joint income with your spouse, as well as your current financial obligations are what determines your affordability.
If you don't have the cash available to do an outright purchase, you need to know that banks calculate the bond amount you could qualify for on about a third of your gross monthly income – in other words, what you get in total before you pay taxes, your medical and other insurance, pensions and so forth.
They then look at your nett monthly disposable income, after all deductions were made. For instance, if your gross monthly income is R30 000 per month, the banks will allow you to spend approximately R10 000 per month on a mortgage loan or a bond repayment but only IF your other expenses can accommodate it.
You may look online for a bond affordability calculator to help you determine the figure the banks may potentially approve. Alternatively you may contact a bond originator to assist with pre-qualification for a home loan. This will give you a very good indication, but remember that the bank has the final say on availability and may include other factors not considered by the bond originator's estimate.
Please note: a poor credit rating will negatively impact your bond application. Don't think you can hide anything - it will be discovered!
Since your affordability drives the entire home-buying transaction, it is wise to determine your affordability prior to embarking on a house-hunt. Pre-approval will guide you toward looking only at properties you can afford and limits the chance of disappointment when all the banks reject your bond application on the most fantastic, stunning home that you just cannot afford.
Q: May I buy home and sell my current house at the same time?
Yes, you may if you are sure you can afford the consequences if things do not work out as planned.
On the one hand, buying a home before your current house is considered sold, may potentially overextend you financially, having to pay the mortgage, rates and taxes and maintenance of two homes simultaneously. On the other hand, if you sell your current home before you buy another, you may have to rent a home temporarily, until the new transaction is completed successfully. If you are sure about buying a new home before your current home is sold, it is possible to sign an Offer to Purchase contract with "suspensive conditions." This means the sellers have not only granted you the right to purchase their property, but also accepted your conditions by signing the Offer to Purchase. The owner will be aware of the condition that the Offer to Purchase depends on your ability to sell your existing home first and may put an expiry date on it. This will enable you to back out of the contract if your current home does not sell in time, but may also mean you may be forced to accept a lower price for your property to make the deal work, if you really want the new property.
Unfortunately, sellers seldom agree to accept offers with suspensive conditions, especially if they know their property was priced correctly, was in great condition and in a superb location.
NOTE: Before you do decide to sign an offer with "suspensive conditions", read the contract really well and make sure you understand what it means and what would be expected of you. A contract is binding and not a matter to enter into lightly.
Q: How many homes should I see before making an offer?
It really is up to you, but finding a home is a strenuous exercise! It may be good to compare a few properties to get to know the local market and the value attached to a certain type or size of property. However, if you want to streamline the process, it can help to really hone in on a particular neighborhood you're keen on based on your own key criteria; that said, if you feel limited by your options, it may be time to expand to surrounding areas.
Q: What do you think the seller will accept as a fair price?
To offer a few percent less than the asking price of a market-related priced property, is still fairly acceptable, but if a home is priced correctly, offering less than the asking price may proverbially be shooting yourself in the foot because you may lose your dream home if the seller rejects your offer. Also, a lower selling price may benefit your pocket in the short term, but may negatively impact house prices of homes in the area including your future resale price as the selling price is reflected in the Deeds Record. However, if a house has been in the market for months on end, you can safely venture below the asking price since the market rejected the asking price as is. You will never know how low a seller will accept, but if the sellers are eager to sell, you may just get lucky and purchase a bargain.
Q: How do I know if the property is a good deal?
While it may be challenging to determine whether the home you are interested in buying is a bargain or not, researching prices of similar houses currently on the market, will certainly give you peace of mind. There are a number of ways to research property prices: check the main online property portals for the area you want to buy in. Read the advertisements properly and compare yard size, size of the property, rates and taxes and levies to be paid with similar properties such as the one you are considering to purchase. You may also ask your real estate agent whether the property is being offered at a market related price.
Q: Is there a cooling-off period when I signed an Offer to Purchase on a property?
Section 29A of the Alienation of Land Act 68 of 1981 applies only if the purchase price of the property is R250 000 or less. This means there is no way to back out of an Offer to Purchase unless the suspensive conditions are not met. For instance, an offer may be subject to the written approval of a mortgage loan by a financial institution, in which case you, the purchaser, are expected to pursue all reasonable sources of mortgage finance and to do everything necessary to procure the granting of the loan. Any non-compliance by the purchaser to pursue all reasonable forms of mortgage finance, will constitute a breach of contract which will entitle the aggrieved party to claim any damages they may have suffered as a result of the breach. You are advised not to take the signing of an Offer to Purchase lightly. Most often there is no cooling-off period when purchasing a home, as most houses are sold above R250 000. Contact Alta, The Property Match Maker, from SEEFF, if you want to buy or sell property in
Centurion, South Africa. She has a wealth of knowledge and delivers service excellence with flair! Mobile: 071 758 0996