Buying a home - what you need to consider

Buying a home is a huge step in many people’s lives, and there are many advantages of owning a home over renting, highlighted Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa.

One of the advantages of owning a property over renting one is that you do not need anyone’s permission to do things to the home. Furthermore, Goslett highlighted that owning a home is a kind of forced saving, as you are required to make your monthly bond repayments. South Africa’s current household saving rate is about 16%.

However, “a homeowner will be able to sell the home that they have paid off over 20 years and downsize. This will offer welcomed financial relief when it is needed most. South African’s that have rented for their entire lives will have no asset to sell,” explained Goslett.

Entering into the buying process

Before starting on the path to purchasing a home, there are several steps that you can take to help make the process smoother.

1.       Get pre-approved: When you are a ready to enter the property market to start hunting for a home, Goslett suggested that you visit a bank or bond origination company to see how much you qualify for. The pre-qualification process is like an affordability assessment that is based on your income and credit profile.

Once you know how much you will qualify for when applying for a bond, you will have a better idea of the price bracket that you can look at when house hunting.

“It is important to factor in all costs when determining what is affordable, such as transfer fees, attorney fees and any renovation costs if applicable. It is also advisable to consider that South Africa is currently in an interest rate hiking cycle. Should rates increase, it is vital that the buyer can still comfortably afford the home,” emphasised RE/MAX.

2.       Making an offer: When viewing properties in an area, consult with a reputable estate agent who has knowledge of the properties in that area. This will make sure that you are informed when new properties enter the market.

Once you have found a property that you like, Goslett advised taking family or friends to see the property to get a second opinion. Seeing the property with a fresh eye and having an objective view may allow them to point out defects that you missed. Any defects that you identify must be taken into consideration when making an offer. (Scroll down for more on defects)

Goslett noted: “The real estate agent will be able to provide guidance to the buyer regarding what offering price would be acceptable to the seller. The agent will also be able to provide the buyer with comparative pricing of what other similar homes in the areas have recently sold for.”

3.       Apply for a bond: Once your offer has been accepted by the seller, you need to approach your bank or the bond provider to apply for a bond. You can either apply for a bond yourself or make use of a bond originator who will apply to all the banks at the same time on your behalf to find the most competitive interest rate.

If all your paperwork is in order, you should receive a response with regards to your bond application within a week, according to Goslett. Furthermore, Goslett pointed out that while it may be tempting to take out a 30 year bond to have lower monthly repayments, in the long term you will be paying much more interest on your bond.

Identifying possible defects in a home

When purchasing a home, there are several things that you should look at before putting in an offer. In some instances it may even be a good idea to get an expert or specialist to look at the property if you have concerns.

“Due to the fact that a property investment can have such a significant impact on a buyer’s financial well-being, it is imperative that they look past the aesthetic appeal of a home and focus rather on the integrity of the components that make up the property. While a home can be beautiful at first glance, there may be underlying elements that could end up costing the buyer a lot of money in the long run. While the seller is required to provide the buyer with a list of defects, it is still advisable for the buyer to be aware of certain aspects when viewing a property,” stressed Goslett.

When you are looking at a home, there are a few things that you should look for:

1.       Rotten wood: Areas of the house that are exposed to moisture, such as the bathroom or kitchen should be checked, as the moisture could cause wooden elements in those parts of the house to rot over time if they are not maintained. This is also true for outdoor wooden areas or items that are made of wood and exposed to the elements. The wood should be treated with a finish designed to protect it from moisture damage.

2.       Loose or dangerous railings: If you have a railing around an exterior deck area, or by staircases and balconies in a house, it is vital to ensure that these are securely fitted and there are not areas where the railing is missing. Goslett highlighted that unstable and insecure railings can be very dangerous.

3.       Ventilation: Another thing to note when looking at a house is that there is adequate ventilation to allow for any moisture in the home to evaporate. If moisture sits in the house for an extended period, it can cause problems. Furthermore, the space between the ceiling and the roof should be well ventilated as this will help with the longevity of the roof, according to Goslett. “Weep holes and ventilation ducts will allow the intense heat in that space to escape, which will promote evaporation of the moisture and ensure that interior walls and structural elements stay dry.”

4.       Roof problems: When looking at a house, check the roof for any signs of missing, old or broken roof tiles, as a damaged or leaky roof may cause other problems in the house that may be costly to repair.

5.       Plumbing problems: “Buyers should look under sinks for pipes that are leaking or need repairs. It is important to have all plumbing issues addressed before the purchase of the home goes through as this will save the buyer a lot of money in costly repairs,” advised RE/MAX.

6.       Electrical faults: While an electrical certificate is required to be presented by a seller during the sale process, RE/MAX suggested that buyers “double check that electrical systems in the home are up to code.” Having a faulty or outdated electrical system can be dangerous, and may cause fire or breaker tripping.

7.       Drainage and water control: It is advisable to check the exterior of the house for issues with the drainage system. Poor drainage could result in water and damp problems in the low lying areas of the property, with penetrating damp having the ability to compromise the foundation of the building if it is not addressed. “Water intrusion can be one of the most destructive and expensive problems.  Make sure all drainage areas are properly graded and direct water away from the house. Buyers should also check that water control elements such as gutters and downspouts are well-maintained,” stated Goslett.

8.       Amateur repairs: This may not always be easy to spot, however, Goslett highlighted that homeowners who have lived in a property for a long period often try to make some repairs themselves. According to Goslett, plumbing and electrical repairs are the most common DIY repairs, and these should be looked for when viewing a property.

“If homebuyers are in doubt, before they sign on the dotted line they should get a trained, certified inspector who can help them look for defects and guide them to a smart buying decision,” added Goslett.