Acquiring Your First Property

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acquiring-your-first-property

You’ve spent some time looking for the best property investment deals on the market, found the right property and are ready to put in an Offer to Purchase (OTP) ‒ how exciting! Your next step will be to sit down with the real estate agent, or an attorney, to draw up the OTP together. Involving an attorney in the process is advisable as they will be able to explain each section to you and make sure you haven’t left anything out.

What’s the big deal about an OTP?

An OTP specifies the conditions of sale of the property, the agreed date by which the property will be vacated and occupied, any occupational rent to be paid and the fixtures and fittings that will be removed or left behind once the seller moves out.

As the buyer, you can specify certain contingencies in the OTP that need to be met before you are lawfully obliged to go through with your offer. It makes no sense to buy the property if your home loan isn’t approved by the bank, for example. Many buyers will add a clause to their OTP that allows them to withdraw their offer should they not be able to secure a bond.

As the prospective buyer, another prerequisite you could include is a brief time frame, before signing the deed of sale, in which you can inspect the property for any latent damage, termites or borer beetles, safety concerns and the like. This can be done through a professional home inspection, which will put your mind at ease about any hidden electrical or plumbing faults, structural damage, or areas of concern related to the overall condition of the property. The home inspector can also help you with an estimate for repair and maintenance costs for any defects found.

If you plan to move into the property before the transfer goes through, the OTP can specify the agreed upon occupation date as well as any occupational rent that is to be paid over this period. It needs to be specified who will be responsible for rates and utility bills over this time, as well as house insurance coverage, should anything unforeseen happen.

Other points for consideration

Don’t forget to ask for all compliance and clearing certificates, including the necessary electrical or gas compliance certificates, as well as clearance certificates for electricity, water, rates and taxes.

Meyer de Wall, from MBF, also recommends that if you are looking to invest in a sectional title scheme, be sure to obtain information about the financials of the body corporate (i.e. special levies and its financial health etc.) before you sign a sale agreement, to avoid being landed with any unexpected costs.

What’s next?

A signed OTP will be the catalyst for your bank (or bond originator) to get the ball rolling to do a credit check and a valuation of the property. If you have already done a credit check and been prequalified for a bond through My Bond Fitness (MBF), then this process will be much quicker.

My Bond Fitness (MBF) is South Africa’s first online platform for a free affordability and credit checks. Visit www.reim.mybondfitness.co.za to register an account and find out your credit score, affordability and get prequalified for a home loan.

After the Deed of Sale is signed by both you and the seller, and you have paid across an agreed-upon deposit amount (to be held until the transfer goes through), the relevant attorneys are approached for help with the transfer and registration process.

Ask your attorney about the costs implications for you during this process (i.e. transfer duty, bond and registration fees) so that you have the finances available when needed. Some banks or bond originators will also require that you take out life insurance to cover your loan in the event of your death, so do bear this in mind.

Other points for consideration

Things that may delay transfer include lost title deeds, rates and taxes not being paid on time by the seller (all unpaid rates and taxes are regarded as debt to the property and not the owner, so you’ll be liable for these once you take ownership), or you, the buyer, failing to pay the agreed deposit or the transfer fees on time.

Resources: Ooba, MDW Inc, Law Society of South Africa, Pam Golding Properties.

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