So you've scraped together enough money for a deposit, carefully worked out your monthly repayments and found a dream property in which you intend to invest. But before signing on the dotted line, it's vital to make sure that you've done your homework thoroughly, as there is far more to consider before taking the plunge into property ownership.
Many first-time homeowners enter the property market largely unaware of the various costs and considerations entailed, falsely believing that monthly bond repayments represent the full extent of their financial obligations. This ill-informed approach to such a commitment can often result in significant financial burdens and unexpected obstacles further down the road. Yet by understanding some of the most common pitfalls faced by first-time property buyers, would-be homeowners can ensure that their first foray into the property market is a successful one.
As a first-time property buyer, it's likely that you've come from a background of living at home with parents, or having rented property from a landlord. As a result, the day-to-day expenses of property ownership are not always top of your mind when working out monthly budgets.
Whilst tenants have very little to consider over and above rental, electricity and water costs, homeowners are forced to factor in a number of additional expenses on a monthly basis. Rates and taxes can end up adding significant strain on your monthly finances, and it's vital that you factor in these payments before taking on the commitment of property ownership.
Homeowner's insurance is also a necessary consideration in order to protect your asset. This type of cover protects both your home and the contents thereof against any catastrophe, such as a burglary, fire or natural disaster. When it comes to an investment of this nature, you simply can't afford not to take out some kind of insurance cover. The question is, can your bank account take the additional strain?
Over and above the monthly expenditure that is part and parcel of home ownership, there are a number of additional one-off costs that you'll need to plan for before you even set foot through the door of your new home.
The actual transfer process can be a costly exercise and you'll need to make provisions for bond registration fees, bank initiation fees, estate agent commission and property valuations, as well as the reconnection of municipal services.
The chances are that you'll also need to hire a moving company to transport your furniture into your new residence, so make sure to factor this in to your budget.
Protecting your investment
The new Consumer Protection Act (CPA), introduced into South African legislation in April 2011, shouldn't be mistaken as an overarching indemnity clause in a property transfer agreement. Whilst the CPA has gone a long way towards protecting consumer rights, it has little jurisdiction over private transactions between consumers and, as such, it is imperative that you make provision for any potential pitfalls that you might face as a property owner.
Many South African properties are still transferred under a "voetstoots" clause, meaning that the buyer assumes all liability for the property and any defects therein from the date of transfer. Latent defects and structural damages often go undetected prior to a sale, resulting in costly repair operations further down the road.
As a result, it's essential that would-be homeowners conduct a thorough and professional inspection of the property before signing on the dotted line. In some instances, the original owner will arrange to have the property inspected and have the relevant certification issued, but these inspections are not always performed thoroughly. As such, it's advisable to appoint your own reputable inspector, thus ensuring that you are fully informed of any potential issues that might arise.
Making an offer
In many cases, properties are purchased conditionally, subject to the approval of a bond application or sale of another asset. Many first-time buyers are not appropriately informed of their right to insist on having these suspensive conditions drawn into the Offer to Purchase, often finding themselves in a tricky situation in the event that the expected windfall fails to materialise.
Consequently, it's advisable to seek legal assistance at the point of signing an Offer to Purchase, in order to make sure that you are sufficiently protected in the event that you are, in fact, unable to finance the transaction.
Planning to succeed
Ultimately, the most critical pitfall responsible for derailing first-time property buyers is the failure to plan appropriately. So ensure that you are aware of your legal rights, as well as all additional financial considerations associated with your property purchase and your entry into the property market should be a smooth and successful one.
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