Key points for the first time home buyer
25 June 2021 | Lamees Finch
As a fresh-faced teenager, I had the dream of owning my own house one day. The plan was simple enough, get a good job, search for a house and buy it. As a novice member of the working class, I quickly figured out that buying a house was not that simple. This is a harsh reality many young adults and even some older, seasoned adults come to learn. So, lets break down the basic know-how’s of buying your first property.
A well-versed investor will tell you that there are three things you need to look for when buying property – LOCATION, LOCATION, LOCATION. A newlywed couple will tell you that buying in a decent suburban area is the best thing you could do for your start up family. The seasoned adult I referred to earlier, will tell you to rent for a few years, get a feel for what your style is, and then when you are ready, take the plunge and buy the house of someone you know. Smile and walk away from that seasoned adult.
The truth is, your house, your home, your investment, depends on you and the purpose that property will hold for you. The even harsher truth is the technical bits that are not on the sales board but in the fine print of the overwhelming Offer to Purchase, that has terms and legalese that they didn’t teach you at school. Go figure, right?
So here are the harsh facts:
An Offer to Purchase is the document the sales agent will hand to you, should you have intention to purchase the property. The agent will offer to take you through the document and explain some of the clauses in detail and others, they will say is “industry standard”. Those clauses are the ones you highlight in your mind and research as soon as possible.
The asking price is never the asking price is your room for negotiation. Make sure to walk the property, thoroughly. Check every corner, every cupboard door and every tap. Ask questions about the property. Why are the sellers moving? What are the neighbours like? Is there anything about the house or the property as a whole that they wish to disclose? This last question is important because any visible defect, also known as a patent defect, must be listed on the Offer to Purchase, and must state who is responsible for repairing these defects. Remember, room for negotiation.
Latent defects are the issues that you cannot pick up easily unless you do a thorough “scrub” of the property. Finding out that you have a gravity geyser is not a latent defect, unless the geyser no longer works. If the seller knew this, there would be cause for liability on the seller’s part. However, you as the buyer would have to prove that the seller knew the geyser did not work. And be careful, most if not all Offer to Purchase documents have a “voetstoets” clause which protects the seller from being responsible for defects known or unknown to him/her.Moving on to money! The establishment known as the bank can be a daunting, cold place, but the people that work there can be pretty helpful, especially to first time property buyers. Now I know a seasoned adult told you to save up a big deposit so that you can ask the bank for less money, so that you can pay the bank more money each month, so that you don’t have to pay for a bond for the rest of your life. Let’s face it, even with the average household income, buying a property has an overwhelming effect on your budget. It can and often is the biggest line item on your expense list. Listen to the seasoned adults!
Add to the list, transfer fees and bond registration fees. These fees are a big lump sum that you have to pay upfront. Banks do offer these amounts as part of your home loan, so ask them about it, if they have not asked you first.
Be aware that adding the fees to your home loan will push up your repayment amount to the bank, and the same interest rate offered for the purchase price portion, applies to that little bit extra you are taking for the registration fees. Do not go to one bank for a home loan. Shop around for the best interest rate (an interest rate closest to the prime lending interest rate) and for the best repayment terms. These two factors affect how much your home loan repayments will be. Remember, the prime interest rate can fluctuate. If it goes up, your payments increase and if we are all lucky it goes down, all of our payments go down.
You can predetermine these costs. Your bank, in fact all banks have a bond calculator which will include an estimate of the transfer and bond registration fees.
Now, transfer and bond registration fees. Transfer Duty is a government tax that is levied to the purchaser, to transfer the property from the seller’s name to the purchaser’s name. The cost of the property will determine the tax amount which is paid to the transferring attorney (conveyancer), who pays all your money to SARS. The conveyancer who processes the registration of the property into your name, also charges a fee. The Deeds Office charges a fee for the Title Deed and legal transfer and, registration of the property into your name.
Bond Registration is the conveyancers fee for the service of registering your bond/home loan, over the title deed of the property. In addition, the Deeds Office also charges a fee to register your home loan.
To summarise:
X2 conveyancer’s fee – one for the property registration and one for the home loan registration, both of which happens at the Deeds Office.
Property tax paid to SARS.
X2 Deeds office fee – one for the legal registration of the property into your name and one to register your home loan over the property
Both conveyancers charge for post and stationery.
In between all of the above, the property has to be insured. At first it will vest with the bank’s insurer and yes, you pay that premium. Thereafter, you can change the insurer but will have to provide proof to the bank that it’s been done or ask your insurance broker to manage that process because after all of the above, you are too tired.
Now that you have purchased your first property, you have a 4-6 week waiting period for the registration at the Deeds Office. The conveyancer will update the sales agent, who will hand over not only a full set of keys to your new property but maybe even a bottle of sparkling grape juice. Now you can add to your list of titles, a first-time property owner!
Should you have any questions on the above please contact us on info@tvdmconsultants.com or 061 536 3138.