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First time buyers guide

The purchase process

Once the ideal property has been identified, an offer to purchase is delivered to the seller by the buyer. The offer to purchase or sales agreement must be in writing and must include both buyers and sellers details, property description, price and other relevant information pertaining to the deal.
The offer to purchase must be completed in black ink in order for it to be legally binding. Upon acceptance of the buyers’ offer, the buyer should make application for finance (mortgage bond) from a financial institution if not already done. The bond attorney is then instructed to register the new bond once approved. The bond attorney informs the transferring attorney of the amount available for guarantees, and requests a Draft Transfer Deed and guarantee requirements. The transferring attorney then proceeds with the process of registering the property into the buyer’s name.
The transferring attorney requests the Title Deed and Cancellation Figures from the current (sellers’) bondholder. The cancellation attorney is instructed to cancel the existing bond (on receipt of guarantees for the outstanding amount). The title Deed is forwarded to the cancellation attorney. The transferring attorney request Rates Clearance certificates from the local authority and rates and levy clearance certificates where applicable.
The transferring attorney proceeds to draw up transfer documents and arranges for signature by both seller and buyer. It is the duty of the buyer pays transfer costs and the transferring attorney then pays rates, taxes and transfer duty. The transferring attorney then applies for a Transfer Duty receipt from the Receiver of Revenue.

At this point the bond attorney draws up all bond documents which is then signed by the purchaser who pays the associated costs. The bond attorney issues guarantees in favor of the seller and /or the existing bondholder (of the seller) so that the existing bond may be cancelled.

The cancellation attorney gets consent for bond cancellation from existing bondholder.
The transferring attorney then contacts the bond attorney and the cancellation attorney to arrange the simultaneous lodgment of the various deeds in the Deeds Office. The documents are examined and once cleared by Examiners are forwarded for registration. Guarantees may then be presented for payment of the purchase price.

Proceeds of the sale are allocated towards payment of the existing (seller’s) bond if applicable. Accounts are reconciled, adjustment and apportionment of rates payments are made and the local authority advised of the registration.
 The complete registration process may take up to 3 months however this may vary based on individual circumstances.

Residential property

Residential property can be classified as any property that is used primarily for the purpose of living in. This includes standard homes, sectional titled flats, complexes and cluster developments. When purchasing a home for personal use, personal preference plays and integral role in the choice of properties. Characteristics such as number of bedrooms, design, layout, view, proximity to amenities  and other details are of vital importance.
When purchasing a residential property for investment purposes, one must first determine his/her investment strategy.  Examples of residential investment strategies include:
•    Buy and hold: A property is purchased with the view of selling it in the long term at a substantially higher price.
•    Turn around: A property is purchased with the view of making renovations and improvements, thus increasing the potential market price of the property.
•    Rental income: A property is purchased with the view of leasing the property for a stipulated monthly income.
•    Development: A property is developed from the ground up. This strategy requires in depth knowledge of the development process.

Commercial & industrial property

Commercial property is favored amongst investors for its potential to earn continual rental income and its ability to maintain its stability as an asset class.
 
Commercial and industrial property can be loosely defined as any property not used for residential purposes although many investors consider larger blocks of flats as commercial property.
This property  class includes;

  • retail,factories,
  • warehouses,
  • development land,
  • offices
  • hotels

and any other property used in any stage of the production and distribution of goods and services.

In the case of a commercial property being purchased for personal use as an owner occupier, the following characteristics are of vital importance; cost,zoning,size, location,power ,infrastructure, condition of building  and security. Each property is unique and thorough due diligence (see below) must be carried out in order to determine the viability of purchasing the property.

Commercial property is favored amongst investors for its potential to earn continual rental income. The annual net income and selling price of the property are used to determine the yield (see definition) of the property. Each investor has a different return requirements and the minimum yield they will accept differs.
Tenant risk is an important factor to consider and the likelihood of tenant default plays an important role in determining risk levels (see due diligence).