The A-B-Cs of finding your first home – search with an app, but buy with the right paperwork

Technological advances during the past decade have completely changed the way in which property is marketed, with online search portals allowing prospective buyers to do most of the initial legwork from the comfort of their homes.

But while this aspect of house hunting is changing rapidly and already moving beyond the standard property websites to cutting-edge virtual and augmented reality portals, consumers – especially younger first-time buyers – mustn’t make the mistake of assuming that the entire process has been simplified by the fast-changing digital age.

This according to JP van der Bergh, founder of the Propscan app, one of the most technologically advanced property marketing tools in South Africa.

“Yes, strident digital advances in the 3D virtual world mean it’s now possible to preview homes in greater detail than ever before without even getting off the couch, but what hasn’t changed is the financial aspect of securing your dream property.

“As has always been the case, this is only concluded after a lengthy, complex process comprising multiple steps with voluminous criteria, legalities and paperwork – and for the uninformed there are myriad pitfalls that could sour what should be an exciting life stage of buying a first property, or actually scupper the whole transaction.

“Millennials, particularly, are used to being able to do just about anything by tapping a screen, so they often dive into the process without having done their homework about the amount of off-line graft that’s involved in the property purchasing process. While there are apps like Propscan for the first steps, at the moment none exist in this country to seal the deal.”

Van der Bergh says the first order of business should be to get a head start on the financial application – even before looking at property.

“Obtaining pre-qualification for a mortgage not only provides prospective homebuyers with the peace of mind that their credit records are in good standing and that they’re considered viable credit risks, it also arms them with the knowledge of how much they can spend and the type of interest rate bond deal they can expect from a bank.”

Kay Geldenhuys of mortgage originator ooba, says: “The two most critical requirements are a good credit score with a track record of repaying contractual debt responsibly, and tangible proof that the monthly bond repayments are affordable.

“Banks will require proof of income and will also ask buyers to provide income and expenditure statements which indicate that there is sufficient money to service the bond once all existing debt commitments and household expenses have been accounted for.”

She cautions that a little-known fact that can count against applicants is high but unutilised credit facilities available on credit cards, retail accounts and access bonds.

“Although you would expect this to count in your favour the opposite is in fact true, so applicants with unused or seldom used credit facilities should either reduce the limit or close accounts in order not to prejudice qualification for a bond.”

Sandy Geffen, executive director of Lew Geffen Sotheby’s International Realty in South Africa, adds that buyers shouldn’t forget to factor in the additional costs of purchasing and financing their new home, with transfer costs, bond and deed registration charges, legal fees and the financial institution’s initiation fees being the primary expenses that should be in the budget.

“First-time buyers can be in for a rude awakening if they aren’t aware of what’s required to complete the sale, and if they don’t do their homework and their sums they could be faced with sourcing the equivalent of a king’s ransom in a very short space of time.

“Some are upfront, out-of-pocket costs that are non-refundable even if the deal does not go through, while others will only hit your wallet once the sale is concluded and it’s essential that these are all factored into your forward planning.

“As a rule of thumb, you should allow for 8% to 10% of the purchase price of the property for the additional costs over and above the deposit, which you must save for in advance.

“We’re in a tight economy and banks are wary of advancing large sums of credit, so they will look more favourably on bond applications if buyers have between 15% and 25% of the purchase price saved as a deposit. The days of banks freely granting 100% bonds without equal collateral are long gone, so think 10% as your general minimum.”

Van der Bergh says once you have the all-clear from the bank that your credit-worthiness is intact and you have an idea of your budget, your next important decision is the location of your new home.

“The ‘where’ is a critical factor, because this not only affects your future lifestyle and return on investment, but also the approval of your bond application.

“It’s important that the property being purchased is in good standing and is in a suburb where prices are likely to show steady growth.”

If you’re choosing between two or more suburbs, Van der Bergh advises going through this checklist:

  • Neighbourhood: The primary rule in property investment is always location, location, location so always buy in the best suburb you can afford, even if it’s not the best house in the area. Is the suburb well-maintained or are there empty homes and boarded up businesses?
  • Proximity to schools and amenities: This is becoming an increasingly important factor in home selection and properties near good schools and top-class retail centres, medical facilities and sports or outdoor amenities will seldom stand vacant.
  • Property taxes: Rates and taxes can vary greatly between suburbs and you need to factor this cost into your monthly expenses. Bear in mind that higher taxes are not always a bad thing if the suburb is very sought-after and – if it’s an investment property – will attract good long-term tenants.
  • Levies: Buying into a sectional title scheme such as a block of flats or a cluster development will inevitably mean paying scheme levies over and above your bond. Always check the current levies and the past annual percentage increases, because if the property is inexpensive but the levies are extremely high, it’ll probably be a bad long-term investment.

Furthermore, people looking to buy in the best location with the intention of demolishing an existing building or renovating an older property must do additional homework, cautions Van der Bergh.

“Cape Town is a good example of a city that has very particular building laws that vary greatly depending on suburb, and what you can do to one property in one area you can’t necessarily do in a different part of the city.

“In Cape Town, the City’s Development Management Scheme (DMS) forms part of its 2015 Municipal Planning By law and is a legal tool used to determine the use of rights of a property by giving it a particular zoning category. Every city and town has by laws of this nature and they might not be as convoluted as Cape Town, but must nevertheless be checked.

“Buyers should request a property building plan before starting the purchase process and if possible, consult an architect about what they intend to do. Then they should have their attorney check whether the particular suburb’s by laws permit the desired alterations.”

Van der Bergh says while the purchasing process might not yet be as simple as clicking an app, it’s definitely worth the effort.

“It may seem really daunting if you’re buying for the first time, but if you do your research and you get your financial ducks in a row, it needn’t be nearly as tedious a process as it seems. It’s also always advisable to enlist the services of a knowledgeable and experienced estate agent to broker the deal once you’ve found your future home.

“If you follow these steps it’s conceivable that you’ll soon be living in the house of your dreams after a stress-free, seamless transaction.”