Finding the right home is only one step in the process towards becoming a homeowner. When starting the house hunting journey, first-time buyers are likely to encounter many terms and concepts that they may never have encountered before.
WATCH : Understanding different types of property contracts.
Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett explains that while some may find this a rather overwhelming undertaking, leaning on the guidance of a knowledgeable professional will make it a far less daunting experience.
To help first-time buyers become better acquainted with some of the key terms and concepts they will encounter on their journey towards homeownership, RE/MAX of Southern Africa explains three key concepts that are crucial for the success of any real estate purchase.
1. Bond originators & pre-approval
Unless you have applied for a bond before, you might not have come across these terms before. Essentially, a bond originator is a service that helps you get the best offer on your home loan at no cost to you. A bond originator will complete the bond applications based on the information you submit and will then gather quotes from various banks on your behalf. The bank that grants the home loan will pay the bond originator a fee once the bond is registered. This means that you receive this service at no cost, saving you the hassle of shopping around and having to submit applications at each of the various banks.
A crucial step that many buyers overlook is getting pre-approval for home finance. The pre-qualification will state the bond amount for which you qualify along with the corresponding instalment amount, which provides buyers with a true indication of what they can afford. To apply for pre-approval, buyers will need their latest payslip, three months’ worth of bank statements, and a copy of their ID on hand and the whole process can be done online. However, buyers should be cautioned that these amounts are only 100% finalised after the bank has completed a property valuation and has received a signed Offer to Purchase on a property.
2. OTP & suspensive Conditions
Before casually singing an offer to purchase (OTP) on the first property you see, buyers are reminded that an OTP is a legally binding agreement that lays out the terms and conditions of the property transaction between the buyer and seller. Once signed by both parties, the house is as good as yours, pending any suspensive conditions that will need to be met, so signing this document should not be undertaken lightly.
Essentially, a suspensive condition is something that needs to happen before the sale can go through. For example, it is fairly common to submit an offer on condition of the sale of the property you already own or pending bond approval. In these cases, the OTP will include a suspensive condition, which will normally include an agreed-upon time limit to meet that condition. Once met, the OTP can be made unconditional and the sales can proceed. If it is not met within the allocated timeframe, the whole transaction can become null and void.
3. Transfer Process & Costs
Once the OTP has been made unconditional, the title deed of the home will now need to be transferred from the seller to the buyer. The seller usually appoints the transfer attorneys (who normally come recommended by the seller’s real estate professional). The seller’s real estate agent sends the sale agreement to the transferring attorney, who will basically take care of the rest of the process.
As a buyer, it is important to be aware of the costs that you will become liable for at this stage of the sale. As a rule of thumb, you should allow for between 8% and 10% of the purchase price of the property for all the other costs involved in purchasing a property, including transfer duty, transfer costs, and other legal fees. Usually, one of the biggest costs is the transfer duty, which is a tax levied on the sale of a property and is payable by the buyer to the SA Revenue Service (SARS) when the property is transferred from the existing owner to the new owner.
“Understanding and preparing for everything involved in the home buying process will ensure that it all progresses successfully, making the journey of owning your dream home more exciting and less stressful. If you’re still unclear on any of these concepts, reach out to a local agent who can offer further guidance and provide you with trustworthy advice around homeownership,” Goslett concludes.
Writer : Kayla Ferguson
