Top 5 property questions answered
Category Newsletter: Lead Article
They say there is no such thing as a silly question, and that is certainly true when it comes to questions pertaining to the sale or purchase of a property.
"Knowledge is power when it comes to property investments, which is why we always try to furnish clients with as much information as possible but also encourage them to ask as many questions as they need to," says Steven van Rooyen, Principal at Leapfrog Milnerton.
He says that years of experience has revealed that the five questions below are the ones most frequently asked by buyers and sellers.
1. I want to purchase an investment property - how do I decide on the best area?
While location is always an important consideration when it comes to property purchase, it is also not inaccurate to say that property in most parts of South Africa is a good investment but depends rather more on what the investor is looking to get out of the investment.
As such the decision rests on considerations such as the type of property, the desired return on investment, surrounding amenities, safety and security, and individual preference. A trusted property advisor will help you look at factors like location, future developments and the like if you're looking to make a long-term investment.
2. What is the value of my property?
It is useful to distinguish between value and price. In fact, Warren Buffet said it best with "price is what you pay, value is what you get". A property advisor will give you a market-related estimate for your property. This price is typically based on things like demand in the area, industry trends, location, as well as the condition and features of the property.
Value, on the other hand, is determined by what a potential buyer is willing to pay for the property. As such, value is subjective, while price is determined by various guidelines, which includes the property advisor's professional insight and expertise.
Van Rooyen adds that it is important to bear in mind that buyers today are very savvy, thanks to information about properties being easily accessible online. "Buyers today know the value of a potential investment because there are so many free tools that allow for comparative research. Oftentimes this means sellers need to be very realistic, and even flexible, about their price."
3. How does the Offer to Purchase (OTP) work?
The most important thing to know about the OTP is that it is a legally binding document, once signed by the seller. It outlines the purchase agreement, including terms and conditions.
When the buyer signs the OTP, they agree to the terms as well as commit to paying a set price for the property. Pay particular attention to the purchase price, the conditions of sale, stipulations around fixtures and fittings, as well as date of occupation and occupational rent.
4. What happens after the bond is approved?
A bond attorney is instructed by the bank to register the bond at the deeds office, while the seller advises the transferring attorney to transfer the property. The bond attorney then notifies the transferring attorney of the draft deed of transfer and guarantee requirements. Then the cancellation attorney cancels the seller's bond and the transferring attorney receives the title deeds and cancellation figures, and sends a copy to the bond attorney.
After this both the buyer and the seller sign the transfer documents. The buyer is then responsible for the transfer costs and the transferring attorney pays for the rates and taxes and the transfer duty. After all the documents are signed and costs paid, the transfer, new bond and cancellation bond documents are prepared for lodging at the Deeds Office.
On the day of registration the bank pays the loan as per the guarantees issued.
5. How does occupational rent work and who pays it?
Occupational rent is the financial compensation for occupying a property that you do not own - either because, as the buyer, you've moved in before the transfer and registration has been finalised or because, as the seller, you continue to occupy the property after the sales transaction is completed.
It is designed to protect both the buyer and the seller, and the rule of thumb is that the rental amount should be in line with what the property would go for on the open market.
Author: Leapfrog Property Group
