Navigating the property market as a first-time homebuyer can be daunting, and the fear of making a costly mistake adds significant stress. This article explores the most common errors made by first-time buyers, offering valuable insights and practical advice to help you avoid these pitfalls. With the right guidance, you can approach your property purchase with confidence.
Not understanding your affordability
Before you begin your house-hunting journey, it’s crucial to determine what you can realistically afford regarding bond repayments. Neglecting to do this may lead to disappointment when applying for a home loan. Numerous online home loan affordability calculators can provide a realistic estimate of the financing you might qualify for. As a general guideline, your home loan repayment should not exceed 30% of your gross monthly income or combined gross income if you are purchasing as a couple, and it should not surpass your net surplus income. However, keep in mind that a bond calculator serves only as a guideline; it does not conduct a credit check or a comprehensive affordability assessment, which your bank will require during the application process. Being informed will help you make sound financial decisions.
Not having a pre-approved bond
A highly effective method for assessing your affordability and strengthening your negotiating position is obtaining a pre-approved bond through your bank or a bond originator. Home loan pre-approval involves a pre-qualification process that includes a credit score check to determine the size of the loan you are likely to qualify for. Upon completion, you will receive a pre-qualification certificate, which serves as evidence of your serious intent as a buyer and can be presented to your estate agent, enhancing your credibility in the property market.
Not using a bond originator
While applying for a home loan directly through your bank is an option, consider the significant advantages of working with a bond originator. Unlike banks, which prioritize their own interests, a bond originator focuses on securing the best deal for you. They will assist you in preparing a single application that can be submitted to multiple banks simultaneously. Their services include improving your credit score, assembling necessary documentation, obtaining pre-qualification, and securing the most favourable interest rates from the banks approached. According to Ooba, using a bond originator can enhance your chances of securing a home loan by 36%. It’s important to note that you won’t incur any costs, as the bond originator is compensated through a commission from the bank you choose to work with, making this a beneficial option for prospective homebuyers.
Not taking a longer-term view of the purchase
The transfer costs and commissions associated with buying and selling property can be substantial, making it vital to consider long-term needs when purchasing your first home. Although predicting the future can be challenging, reflect on how your requirements may evolve, such as getting a pet, marrying, or acquiring additional vehicles like cars, boats, or motorcycles. Consider whether you’ll need to rent out part of your property for extra income and if the house can be adapted for this purpose. While a lock-up-and-go close to the city centre may suit your current lifestyle, evaluate how your needs might change in one, two, or even five years. This foresight can help you make a more informed investment decision.
Not understanding the size of the property
When purchasing a property off-plan, it’s crucial to accurately assess the building’s size and the overall property. Developer brochures and artist impressions can often be misleading, making it challenging to visualise the actual space available once construction is complete. If you are buying off plan, ensure you obtain comprehensive details regarding the square meterage of each room. This information will help you understand precisely how much home you are acquiring, allowing for more informed decision-making and reducing the risk of future disappointment regarding space.
Not researching the neighbourhood
Before committing to a specific street or neighbourhood, thorough research is essential. If you initially viewed the property on a quiet Sunday afternoon, you may only grasp a limited perspective of the area. Ideally, visit the home at least three times during different times of the day and evening to assess the neighbourhood’s vehicle and foot traffic, traffic congestion, and noise levels. Additionally, investigate the crime statistics for the suburb, any potential vagrancy issues, and the presence of difficult neighbours, which could affect your living experience. Busy roads may pose risks if you have pets or young children. Your estate agent can provide insights into recent property sales within the past year, enabling you to conduct a comparative price analysis. If you notice an unusually high turnover of properties in the area, don’t hesitate to ask questions and perform further investigation to understand the underlying reasons behind this trend.
Making emotional decisions
Buying a home is a deeply emotional process, but it’s crucial to balance your excitement with rational decision-making. If you’re enamoured with a property, be cautious not to waive your rights just to secure the deal, as this could lead to significant financial consequences in the long run. Prioritise your interests for a sound investment.
Not using a home inspector
While you may feel compelled to make an offer quickly, it’s wise to engage an experienced home inspector to avoid purchasing a property with hidden defects. A home inspector serves as a neutral party, fostering trust among the buyer, seller, and estate agent while conducting a thorough examination of the property for both latent and patent defects. Latent defects—those not easily visible—can expose you to significant financial risks, and pursuing legal recourse is challenging since you would need to prove that the seller knowingly concealed these issues. Most purchase agreements contain a ‘voetstoots’ clause, meaning the buyer accepts any existing problems, whether visible or hidden. A qualified home inspector can ask the seller critical questions to uncover specific issues such as dampness, leaks, water pressure, or structural damage, providing you with the necessary insights to make an informed decision and safeguard your investment in the long run.
Not insisting on building plans
As a buyer, never assume that the home you wish to purchase includes a valid set of building plans. If your offer to purchase does not include a clause requiring proof of approved plans, you cannot later demand them from the seller. The lack of plans will be considered a latent defect, governed by the ‘voetstoots’ principle. Additionally, if you’re applying for a home loan, the lending institution may require the approved plans, making it prudent to include such a clause in the sale agreement to protect your interests and ensure a smoother transaction.
Not understanding the rates and taxes attached to the property
Before putting in your offer to purchase, be sure to find out what you can expect to pay in terms of rates, taxes and other municipal services. Property rates and taxes are calculated with reference to the municipal valuation of the property, which in turn is based on the market value of the property. Each municipality sets its own rates which are dependent on the use of the property and the geographical location, so be sure to ask your estate agent for these numbers.
Not setting up an access bond
An access bond is a type of home loan that allows borrowers to withdraw any extra funds they have paid into their bond, making it a valuable tool for reducing interest costs. By contributing surplus money to your home loan, you effectively lower the capital amount on which interest is calculated. You can further save by depositing your salary into your access bond and transferring just enough to your current account for monthly living expenses; this way, the surplus in your access bond will help decrease your interest charges. While you can later convert your home loan to include an access facility, it is more efficient to apply for this option upfront to avoid unnecessary administrative complications down the line. This proactive approach maximizes your financial flexibility and optimizes your home loan benefits.
Underestimating the costs of home ownership
Your monthly bond repayments are not the only costs involved in home ownership, and it is important to fully understand all other costs that you will need to budget for as a homeowner. These costs include building and contents insurance, bond cover, cleaning and garden services, rates and taxes, electricity, security, Wifi and other connection services.
Not knowing your consumer rights
Don’t fall into the trap of assuming that the Consumer Protection Act affords you blanket protection when it comes to buying property. In reality, this piece of legislation only comes into play if the seller regularly sells property or markets themselves as sellers of property, such as a property development company. Also, be aware of how the 72-hour clause can work to protect your rights if the offer to purchase includes a suspensive condition such as where the sale is subject to bond approval. This clause effectively gives the seller the right to continue marketing the property where the offer is subject to the buyer’s bond approval, while on the other hand, the buyer is protected against making a commitment that he cannot meet, such as where he cannot secure financing for the property.
Not reading the fine print
Don’t let the sale agreement intimidate you; take the time to thoroughly read and understand the document before signing. Your estate agent should walk you through the contract line by line to clarify any concerns. Pay special attention to clauses regarding fittings and fixtures. Generally, items permanently affixed to the property, such as burglar bars, light fittings, and safety gates, are included in the sale price. However, movable items like curtains, blinds, and garden pots are typically not part of the deal. Additionally, regarding occupation rent, verify that the stipulated amount is reasonable and reflects the market rental value for that property. This diligence will help ensure a smooth transaction and protect your interests.
Have a wonderful day.
Sue
