The golden rules for buying property in a soft market
Prices are down so now is a good time to buy, but that doesn’t mean you should throw caution to the winds. There are some golden rules to follow when buying property – in any market.
So says Leonard Dann, director of CENTURY21 South Africa, local arm of the world’s largest real estate organisation.
Firstly, says Dann, you should by all means negotiate a reasonable deal after shopping around, but on the other had should look askance at a home that’s on offer at an impossibly low price. “It may appear to be the opportunity of a lifetime, but equally, it could quite easily be encumbered in some way.”
Secondly, you should rely on the tried and tested mantra of location, location, location. It may be the oldest cliché in the property book, but in practical terms it means not being tempted into buying that “bargain” property in a bad area.
“And third, do your homework! Have a property professional provide you with an opinion of value and carry out a comparative market analysis (CMA) of the selling prices of homes in the area in which you are keen to invest. A CMA has never been more important than right now,” adds Dann.
He says you should even obtain a second opinion if you feel uncomfortable about the advice you receive - don’t skimp on professional input if you hope to avoid buyer’s remorse or questions later.
“Moreover, although pre-sale structural inspections are not compulsory in South Africa (unlike the UK and the US) it is advisable to get a professional report on the state of the property you are interested in.
“In South Africa, property and other assets are most often sold on a voetstoots basis, which means ‘as is’, so once you’ve signed the sale documents, defects are your problem unless you can legally prove deliberate deception on the part of the seller.”
As for finances, Dann says that if you have cash in this market you are literally in the pound seats. “However even if you do not have such deep pockets, you will have to finance up to 25% of the value of a property, as the banks are not currently granting 100% bonds.
“Accordingly, you need to ensure that you can meet that obligation before putting pen to paper on an Offer to Purchase. This may mean disposing of unnecessary assets or delving into your savings and will need careful thought.
“Then finally, having bought the property, you will need to insure it adequately, using replacement value as the yardstick and not market value, which right now could be less than the cost of replacing the physical structure.”
Article from: ww.century21.co.za