Why is homeowner's insurance so important?Thu 16 Mar 2017

Why is homeowner's insurance so important?
For most, their home will be the largest financial asset they will ever own, which is why homeowner’s insurance is imperative. Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, says that when a financial institution grants a home loan, they will require that the new homeowner has the property covered by insurance. 
“In most cases, the bank will take out the homeowner’s insurance on behalf of the new homeowner, and the monthly premium can be debited to the home loan account and paid with the monthly bond repayments. However, if the homeowner would prefer, they can take out the insurance themselves – provided they supply the bank with proof that the home is insured on an annual basis,” Goslett explains. 
He adds that it is vital that the insurance covers the property, along with all buildings on it, such as a freestanding garage, a swimming pool, the driveway, all walls and the borehole pumps. “Every part of the property needs to fall under the insurance policy and should be insured for the full current replacement value, which is why a qualified valuer should be called to assess the replacement value of the various aspects of the property,” says Goslett. 
He notes that while all features of the home will be covered, homeowner’s insurance does not cover any of the homeowner’s personal belongings, such as their furniture, jewellery, clothing or motor car. “These items will be insured under the homeowner’s household contents insurance and motor vehicle insurance. Another thing that it doesn’t cover is the balance of the home loan should the homeowner pass away or become disabled. Something like this would be covered under a home loan protection plan, which ensures the bond is taken care of in the event of either of these things happening.”
According to Goslett, there is some insurance terminology that homeowners should be aware of, such as being over insured, which means that the homeowner’s insurance is more than the replacement value of the property.  The insurance company will only pay out the replacement value - so the homeowner will be paying a higher than necessary premium.  He notes that being underinsured is where there is a shortfall between the value of the property and the amount insured. The homeowner will have to pay the shortfall amount from their pocket.  Insurance to value is the preferred status and means that the insurance cover equals the replacement value. 
If the property is within a sectional title scheme, the body corporate will be governed by the Sectional Title Act, which states that all buildings must be insured for their correct replacement value. A building is defined as a structure of permanent nature erected or to be erected and which is shown on the sectional plan as part of the scheme. 
Once the property has been paid off, the homeowner is not legally required to have homeowner’s insurance. However, this leaves the homeowner at risk of losing an asset that they have worked so hard to pay off. “Fire or flood could destroy the home leaving the homeowner with nothing if they no longer have homeowner’s insurance. Homeowner’s insurance protects of the homeowner’s most precious asset and ensures that they will have a roof over their head, even after disaster strikes,” Goslett concludes.
 
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Using a bond originatorMon 13 Mar 2017

Using a bond originator
The process of applying for a home loan can be involved and often time-consuming, which is why so many would-be homeowners choose to make use of a bond origination company to assist them, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
He adds that bond originators have several services that will help buyers navigate the bond application process more efficiently. “As experts in their field, a bond originator will be able to assess the buyer’s financial situation and level of affordability, advise them on the best way to finance their new home, along with explaining all the different banks’ home loan options and assist with the paperwork when applying for a bond. They will also liaise with all of the major banks and will negotiate the best possible deal on the buyer’s behalf. And the best part is that the service is generally free for the buyer,” says Goslett.
The estate agent will receive a commission from the bond originator for referring a buyer, and the bank that grants the home loan will pay the bond originator a fee, once the bond is registered. “The buyer receives the added service of using a professional bond origination company, without having the pay any costs. It makes sense for buyers to use the strong relationship that bond originators have with the banks to their advantage,” says Goslett. 
He adds that it must be noted, however, that while using a bond originator will simplify the process for the buyer and has several benefits, it doesn’t guarantee that a home loan will be granted. All lending by the banks will be subject to the home buyer’s affordability ratio and their willingness to repay the loan. “Regardless of whether a buyer uses a bond originator or not, they will still need to have a good credit record, have disposable income available, a deposit and additional money for the costs associated with purchasing a property,” says Goslett.
According to Goslett, there are numerous bond origination companies in the South African market, so buyers need to ensure that they choose to work with a brand that is reputable and respected in the industry, such as the BetterLife Group. “Make sure that the originator doesn’t request an administration fee, as this is not normally a fee that the home buyer would incur. Also, buyers are not obliged to sign any agreement with the bond originator. However, they will be required to provide them with all the required documentation and information as soon as possible,” he says. 
Buyers will need to provide the originator with all their personal information such as their contact details and a copy of their ID document. They will also require the buyer’s banking details, financial information and a copy of their latest salary slip or audited financials if the buyer is self-employed. The originator will complete the bond applications and will submit them to the banks on the buyer’s behalf. Once the applications have been submitted to the banks, the buyer should hear from the originator in the next three to five working days, provided the information given is correct and accepted by the banks.
“Buyers must ensure that they are kept informed throughout the entire process from signing the offer to purchase, to registration and transfer.  It is advisable to take each option the bond originator provides into consideration, taking into account the pros and cons of each of the bank’s products and the interest rate they are willing to give. There is no obligation for buyers to accept any of the offers that the bond originator comes back with,” advises Goslett. 
He concludes by saying that bond originators provide a comprehensive and valuable service that will not impact buyers’ back pockets – using a bond originator will take the hard work out of the bond application process, without costing buyers a cent.
 
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How to cancel your home loanThu 09 Mar 2017

How to cancel your home loan
In certain cases, homeowners who have paid off their home loan may have the option to keep their bond account open, which will keep the loan facility available to them. Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, says that the reason that a homeowner would want to keep the facility open is to ensure that the have access to money when they may need it for household improvements or repairs. 
“The advantage of keeping the account open is that the homeowner will not need to register another bond over the property and incur more registration costs. All the homeowner will have to pay is a monthly payment that covers the administration of the account and the insurance policies. They will also be able to keep their Homeowner’s Insurance and Life Assurance policies,” says Goslett.
He notes that if the homeowner decides that they would rather cancel the home loan account, there are a few procedures that they will need to follow, as it will not happen automatically. Goslett says that the homeowner will need to provide the bank with a written request asking for the home loan account to be cancelled. In the instance that the bond has been settled early, there might be a penalty or administration fee that will need to be paid by the homeowner to cancel the bond.    
“Once the bank has received the request to cancel the account, they will instruct the cancellation attorney to attend to the cancellation and provide a cancellation figure. The cancellation figure will consist of the bond settlement figure and approximately six months of Homeowner’s and Life Insurance premiums, to ensure that homeowner is covered until the transfer takes place,” Goslett explains.
He adds that once the bond has been settled, the homeowner is entitled to request that the bank provides them with the title deed to the property upon cancellation, along with any other security documentation.  If the settlement of the bond is due to the property being sold, then the bank will give the title deed to the conveyancing attorney, who will then register the buyer as the new owner of the property.  A guarantee will be issued by the registering attorney to the bank, ensuring them that there is enough money to cover the bond on the date of cancellation. The bank will then issue consent to the cancellation. 
“If the property has been sold and the bondholder still owes money to the bank, they will need to notify the bank at leats three months in advance. The homeowner also needs to stipulate how they intend to pay the outstanding owed, for example, with the proceeds of the sale of the property,” advises Goslett. “Failing to notify the bank of the cancellation within the stipulated minimum three-month period could result in additional finance charges. If the homeowner is selling one property and refinancing a new property, the bank may decide to waiver the notice period.”
If the bondholder passes away, the bank will need to be notified of the death as soon as possible. In the case of a deceased estate, the three month notice period does not apply. However, the bank will need to know to make the necessary arrangements. During the period between the death and appointment of an executor of the estate, the bond will need to continue being paid as interest will accrue on the account. 
Goslett concludes by saying that homeowners who are unsure of anything regarding the bond cancellation process should consult with their bank or financial adviser who can shed further light on the subject.
 
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Be aware of possible rental scamsWed 08 Mar 2017

Be aware of possible rental scams
While the Internet is an extremely useful tool, it has also made it easier for criminals to prey on prospective tenants – with the number of incidences on the increase. Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, says that unfortunately there is a criminal element who use the internet to scam potential tenants out of their hard-earned money. 
“Emotionally driven, enthusiastic tenants who are excited about the prospect of finding the ideal rental property are often more susceptible to fraudulent activity. Time is also a factor. Tenants are often eager to find the right home within a limited time frame, which can make them vulnerable targets for criminals,” says Goslett.  “Tenants move for various reasons, such as job opportunities or possibly personal issues, which could make them more desperate to find a place to stay and not be as cautious in their approach.”
How do rental scams work?
A scammer will attempt to get money from a potential tenant for a rental property that they are not in a legal position to offer for rental. The fraudster will place an advertisement for a property, usually offering a great deal to lure in a victim. Often the advertisement will include photos of the property, and in some cases, the scammer will include a copy of a fake contract which is ready to be signed. The rental property could either be real or fictitious, with the scammer possibly a landlord or impersonating the landlord or rental agent.  The scammer will request that a deposit and possibly the first month’s rent be deposited into their account to secure the property. Once the unsuspecting tenant has transferred the agreed upon amount - the scammer disappears.      
Goslett says that there are ways for vigilant tenants to lower their chances of becoming rental scam victims. He provides a few tips below:
“Even if the property is listed on a reputable website, it could still be a rental scam, so keep your guard up at all times. Crafty rental scammers are resourceful and often manage to get their listings onto search portals,” advises Goslett. “Also trust your gut. If at any stage of the process you feel there is something wrong or the whole thing is rushed with unwarranted pressure; you feel information is being withheld or it all seems too good to be true – walk away.”  
He notes that tenants should contact the numbers given by the landlord or rental agent to ensure that the office exists and is part of the brand they say they are representing. A reputable agency will be able to provide the tenant with all the information they require about the rental agent and their rental listings. 
Red flags to watch out for:
Don’t transfer money without meeting the landlord or rental and seeing the actual property.  It is best to see the property and inspect it before any money changes hands – know what you are paying for.  A red flag should be raised if the landlord expects payment purely based on website images alone. 
Landlords and rental agents will have a vetting process, which will include a credit check, before they select a tenant. Beware of landlords or rental agents who are willing to sign contracts without following the correct protocols. 
Be wary of landlords or rental agents who request excessive deposit amounts or too many months upfront or are never able to meet and show you the property in person. 
A lease agreement is an essential contract that protects both parties, so don’t trust a landlord who says there is no need for one. A landlord who doesn’t want to enter into a lease agreement may not have one to offer in the first place.
Before signing a lease agreement, have legal representation review the contract.
“Unfortunately there is no foolproof way to avoid a rental scam completely. However, potential tenants will be far more protected if they pay attention to the warning signs. It is vital for tenants to deal with rental agents from a reputable agency that they know and trust,” Goslett concludes.
 
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Hive living - a growing trendTue 07 Mar 2017

Hive living - a growing trend
As many consumers feel the financial constraints of higher living costs, coupled with the rising property prices, more and more people have turned to hive living as means to get into the property market, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa. 
“While property price growth has not been exorbitant over the last few years, it has still gone up, particularly in regions such as the Western Cape.  The problem is, so has general day-to-day expenses, making it harder for first-time buyers to get into the market. As a result, many have turned to hive living as an alternative. Essentially what this entails is several generations of a family purchasing a property that they can live in together, which saves on costs. In a hive living scenario, each family member has their own space. However, there are communal areas of the property where all the family members can come together. For this reason, properties with multiple dwelling on the same stand are becoming increasingly more popular,” says Goslett. 
He adds that in cases where properties do not already have multiple dwellings, some homeowners are subdividing or building granny flats that they can move into to allow their children to live in the main home with the families. “Rather than downscaling to another property or retirement home, many older homeowners are choosing to build onto their current property to assist their families where possible,” says Goslett. “With more people living on the premises, there should be greater collective income coming in to pay shared costs, which will make it easier for everyone financially.”
According to Goslett, money is not the only reason that this trend has gained traction. “Aside from the cost saving aspect, the concept is growing in popularity because of the increased safety element.  South Africans are some of the most security-conscious people in the world due to the high crime statistics in our country. As a result, property-buying and living decisions are heavily influenced by safety and security. Hive living provides people with a greater sense of security without paying a high premium,” says Goslett. 
He notes that while there are several advantages to a hive living situation, it is not without its challenges. Goslett says that with so many people living on one property it is easy for toes to get stepped on - so each person will need to respect the space and privacy of the other. “For hive living to be a success, there need to be a few ground rules in place from the start – especially about finances. All parties involved need to come to an agreement regarding who pays for what aspects of the costs from the bond repayments to the garden service. Each aspect, no matter how small, needs to be discussed and considered. All parties will also need to come to an agreement about the usage of the common areas and inviting guests over,” says Goslett. “Living together can be rewarding, but it will be important for each person to be able to spend some time away from their extended family,” he concludes.
 
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Questions to ask the conveyancing attorneyFri 03 Mar 2017

Questions to ask the conveyancing attorney
Ownership of a property takes more than a signature on an Offer to Purchase or for that matter the payment of the purchase price.  The property needs to go through the process of transfer and needs to be registered in the new buyer’s name at the Deed Registry Office, which is where the services of a conveyancing attorney are required.
According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, the process of purchasing a home can be complicated, and there are several aspects that buyers may be unsure of during the various stages of the transaction.  He adds that there are a few questions that buyers can ask the conveyancing attorney that will provide them with more clarity and give them a better understanding of what is required. 
Goslett lists the questions below:
How long will the registration and transfer process take?
On average the process should take around three months from the date of sale. However, this depends on a few key elements, such as the due date of the buyer’s bond grant, along with the guarantees stipulated in the deed of sale. If there are no complications, the process can be expedited. Likewise, if there are complications, registration can be delayed. Staying in communication with the conveyancing attorney will help buyers stay abreast of the situation and possible timing. 
To whom do I pay the deposit? 
The answer to this question will depend on what is stipulated in the sales agreement. However, the deposit is usually paid to either the estate agency or the transferring attorney - both of which should have trust accounts. The deposit will never be paid directly to the seller, but rather into a trust account where it is held safely.
What happens with the interest that accrues? 
If buyers provide written consent, the estate agency or attorney can have the deposit invested into an interest-bearing account.  Once registration of the property has taken place, the interest which accrued over the period it took for the transfer to go through will be paid to the buyer – unless other arrangements have been made. 
How much will the transfer and bond costs be? 
The transfer duty payable is based on the purchase price of the property, while the bond costs will be determined by the total loan registered with the bank. Either the estate agent or the conveyancing attorney should be able to provide a fairly accurate answer to buyers based on a schedule of bond and transfer costs. 
When are the transfer costs due?
The transfer costs will be due a few weeks after the sale of the home when the transfer attorney requests the documentation to be signed. The conveyancing attorney is required to pay the transfer duty in advance, along with any rates and taxes or levies required to obtain the necessary clearance certificates. The longer it takes for buyers to pay the transfer duty, the longer it will take to transfer the property into their name. 
To whom do I pay occupational rent?
If the buyer moves into the property before registration has taken place, they will be required to pay a predetermined occupational rent.  The buyer and seller can come to the agreement that the rent be paid directly into the seller’s bond account. Consecutively, the buyer can pay the occupational rent to the estate agent or conveyancing attorney, and they will ensure that it is paid either into the seller’s bond account or directly to the seller.
How will I know when the property is registered in my name?
As soon as the property is registered in the buyer’s name, a representative from the conveyancing attorney’s office will contact the buyer to let them know. At this time the buyer will also be given the final statement of account. The bank will also provide buyers with written confirmation that their bond has been registered and when they can expect the first repayment to be debited. 
Goslett concludes by saying that communication between the relevant parties is a key element in the property transfer process. If ever buyers are uncertain of anything at any stage of the process they should contact the conveyancing attorney or estate agent.
 
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Property value affects rates and taxesFri 24 Feb 2017

Property value affects rates and taxes
Each month homeowners receive a bill for the rates and taxes applicable to their property, but what are these municipal rates used for and how is the amount worked out? Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, says that municipal property rates are financial liabilities that owners of immovable property are required to pay monthly for basic services that their local municipality provide. Some of these services include maintenance of roads, street lighting, storm drainage, sidewalks, schools, fire fighting and so on. Utilities such as water and electricity do not fall under property rates and are charged separately. Goslett adds that the revenue received from property rates is used to fund services that will better the lives of those living in that particular community. 
“Since the introduction of the Municipal Property Rates Act on 1 July 2008, local municipalities are obliged to value and rate immovable properties within their area of jurisdiction. The objectives of the Act are to ensure that the local municipality has enough revenue to provide the public with the basic requirements to run the area, along with ensuring long-term sustainability, enhancing the developmental agenda of the municipality, and addressing some of the imbalances caused by past policy,” says Goslett. “Property rates provide the municipality will a reasonably reliable income that can be used to improve the local community and ensure it is well-maintained over the long term.”
All property owners, regardless if they own a freehold property or sectional title unit – must pay rates.
The property rates that the homeowner is charged is based on the market value of the property as determined by a town-appointed property valuer. Before the introduction of the Act, different methods were used to calculate rates in the different regions, with some areas not being charged at all. The Act brought about uniformity in how the rates were worked out by town councils. “Legislation required municipalities to appoint an evaluator and compile a valuation roll with the services of professional property valuers. Data was collected around the country to determine market-related property values. Through research and market analysis, property valuers assessed and verified the value of each property based on what buyers were prepared to pay for the home. Property inspectors did not visit each home but looked at the average sales values in and around a particular area,” says Goslett. “Once the valuation roll was certified and handed to the city manager, it was publically advertised for a period so that the people were able to put in any objections they may have had regarding the valuations. After the prescribed period the valuation roll was finalised and the rates implemented.”
For some, the introduction of the new rate structure meant an increase in their monthly payment, while for others it was a welcomed decrease. “Whether the homeowner’s rates went up or down - depended on how their home was valued by the local municipal office. Areas that had experienced high levels of appreciation during the boom years would have seen their rates increase substantially, while other areas not as much,” says Goslett.  “The Act does provide for the revaluation of property, which as a general rule of thumb should complete every four years to ensure that the rates charged are an accurate reflection of the property’s current market value,” he concludes. 
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Using a trust to buy a propertyThu 23 Feb 2017

Using a trust to buy a property
A trust is a legal entity created by a trust founder that can be used to purchase and own property. Once a trust is created, all assets are placed into the trust by either the trust founder donating the assets to the trust or the trust buying the assets. If the assets are donated to the trust, then a donation tax will need to be paid based on the value of the assets. If the trust purchases the assets, a transfer duty will be applicable. With the costs involved in setting up a trust, why do some people still use this entity to purchase property?
“While the cost of starting a trust can be significant, purchasing a property through a trust has certain advantages that many feel outweigh the cost,” says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa. “A trust is often used to protect the assets and ensure that the appointed beneficiaries, which are more often than not the trust founder’s children, get the benefit of using the assets if something happens to the trust founder.”
Goslett says that as soon as the trust is formed and the assets are transferred out of the trust founder’s name, the trust founder is no longer the owner of those assets. What this means is that if the trust founder passes away, the assets in the trust will not form a part of the deceased estate and will therefore not be used in the calculation of estate duty. The assets within the trust can also not be attached should the trust founder got into insolvency, provided the stipulated period has lapsed. A period of six months must elapse if the trust founder was solvent at the time of transfer of assets, or up to two years in the case of insolvency. A trust is, therefore, an excellent way to protect the assets by ensuring the beneficiaries get future use out of them while avoiding paying estate duty on the value of the assets. 
“If the trustees wish to purchase additional property, the property will be registered in the name of the trust and not the trustees. If the purchase of the property needs to be financed by a bank, the trustees’ must have the authority to purchase property in the name of the trust, borrow money for the purpose of buying property, and the authority to encumber trust assets as security for the duty of the trust,” says Goslett.   
While there are advantages to using a trust to purchase and own property, there are also disadvantages. In that, because the trust founder is no longer the owner of the assets, he or she does not have sole control over them. The trust founder appoints trustees to manage the trust and its assets in a trust deed or document. The trustees are often the trust founder’s attorney or their accountant. However, there are instances where the trust founder also appoints themselves, along with their spouse as the trustees. The duty of the trustees is to manage the assets in accordance with the terms and provisions of the trust deed. 
It is important to understand the tax implications of forming a trust, and how it differs from those of an individual. In most cases, a trust will pay a higher tax rate than an individual taxpayer. Any income received by the trust will be taxed at 41% per annum, and no rebates apply to trusts. A trust will also incur Capital Gains Tax (CGT) on any capital profit that it makes, which will be charged at a higher rate than that of an individual. On the plus side, the rate a trust pays on CGT is lower than the rate of estate duty. 
Goslett says that those who are considering forming a trust should ideally consult with a professional financial adviser before they proceed. “While a trust can be a highly effective vehicle to manage assets, it will not suit everybody's needs.  A financial adviser will be able to explain all the implications and assess whether it is the preferable route based on the individual’s personal criteria,” he concludes.
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Be prepared for the unexpectedTue 21 Feb 2017

Be prepared for the unexpected
Owning a home is a long-term commitment that can span a lifetime. While we all hope for the best, it is likely that at some stage during our lives, a home emergency of some kind will strike, so it is best to be prepared. “Being prepared for the unexpected is part of owning property,” says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa. “While it may be impossible to determine when it will happen, the eventually of something needing to be repaired on a home is a certainty that homeowners need to consider and  prepare for. Putting aside money each month in some kind of contingency fund will provide homeowners with a financial cushion and assist them in avoiding going into debt when a crisis strikes.”
He adds that on average the typical buyer of a single-family home will remain in the property for around 13 years – often longer. “I think it is fair to say that a lot can happen over a decade or longer.  Having a plan of action in place will help homeowners to tackle whatever life throws at them and keep going. The goal is to have the means to address the changes or emergencies that occur, without it jeopardising the homeownership or placing the homeowner under severe financial pressure,” says Goslett.
According to Goslett, there are emergencies that happen to the house itself, such as roof repairs or rising damp, both of which can be a massive financial expense, and there are the financial emergencies that affect the homeowner, such as job loss. “The question every homeowner should ask is if something like this happens, would I still be in a position to afford the home? For the majority of homeowners, the answer would probably be no, which is why a contingency fund is imperative as a homeowner,” advises Goslett. “While the idea of putting money aside can be a daunting task, especially with the constantly rising cost of living, the consequences of not having a financial cushion to fall back on will be far greater.”
Goslett says that in essence there are three basic steps that homeowners need to take to start creating an emergency fund. This will provide them with a safety net that will assist with any obstacles that come their way, regardless if it is something as big as losing their job or as trivial as a leaking toilet. 
One – Determine the required amount
As bare minimum homeowners should aim to save approximately one month’s salary, however, in an ideal situation, six months’ income in saving is preferable. “A six-month financial cushion should see homeowners through most crises that arise. That said, saving up half a year’s worth of income will be no mean feat, it will take a fair amount of time and planning to achieve. Setting smaller goals along the way will ensure that homeowners maintain focus and stay motivated,” says Goslett. 
Two – Choose a saving vehicle
When wanting to build up a significant amount of savings, selecting the right savings account is crucial for success. Interest rate yields will vary from one account to the next, so it might require some research to find the right product that will yield the greatest return while meeting the criteria. Often the savings accounts with the highest interest rates will require the account holder to lock their money away for a certain fixed period - this could be problematic to a homeowner who requires the money in an emergency.  The interest rate, as well as accessibility,  will be key factors to consider. 
Three – Automate the savings
Setting up a monthly automatic transfer will make the process far easier and will help homeowners remain disciplined with savings. If predetermined amount of money is transferred into a savings account automatically each month, it takes the decision-making process out of the equation and ensures that a contribution is made towards the contingency fund regularly with very little effort on the homeowner’s part.  
“Setting money aside each month is the best way for homeowners to prepare for and deal with an emergency situation without being forced into debt. A contingency fund will help homeowners be ready for the unexpected while building a solid foundation for their financial security and independence,” Goslett concludes.
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Plan to succeedFri 17 Feb 2017

Plan to succeed
Consumers who aspire to purchase a property during 2017 will need to take of their financial position into account and make adjustments where necessary to achieve their goal, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa. 
“The majority of the population is reliant on banks to purchase a home, and it is no secret that financial institutions have stringent lending criteria when it comes to bond approval. Prospective buyers have to keep their financial affairs in order and show the required affordability levels before they can be approved for finance. The same applies to consumers who are already homeowners and might require additional finances to undertake renovation projects or upgrades to their property,” says Goslett. 
He adds that taking a step back to assess their financial standing will provide consumers with the opportunity to measure the progress they are making towards attaining their financial objectives and see what needs to be changed if necessary. 
“When reviewing finances, consumers should revisit the foundation of their financial plan by looking at their resources, goals and priorities. During this time they can re-evaluate their situation and include any major life changes that may have happened in the last 12 months, such as a marriage, birth of a child, death or starting a new business feature. All of these factors will play an important part in how the financial plan is adjusted to meet the end goal,” advises Goslett. 
A major life change will change the perspective homebuyer’s needs and possibly their projected time frame to meet their financial goals. “A growing family who is living in a home that no longer meets their needs will want to make a change sooner rather than later. This would mean that more money would need to be set aside for the 10% -20% deposit and other costs associated with a property transaction. For time-sensitive goals, a professional financial planner would be a valuable asset who can provide strategies to meet the objective,” says Goslett.  
He adds that consumers who got married over the last year should also consult with a tax professional to determine how this may have impacted their tax status. SARS requires consumers to inform them of their marital status as the disposal of assets has capital gains tax implications in the joint estate of spouses married in community of property.  “Reviewing finances and having everything in order will make it easier for consumers to submit their annual tax return. It will also provide the consumer with valuable information about their spending habits. A financial review will assist consumers to determine whether they are getting value for money on expenses such as insurance, flexible spending accounts, cell phone plans and even investment fees,” says Goslett.
If the goal is to show the necessary affordability ratios to be approved for finance, then no financial review is complete without a plan to pay off existing debt as quickly as possible. “Eradicating or at least reducing debt levels are a vital part of any financial plan. Even a small additional payment of R100 a month can make a big difference in reducing debt levels and showing steady progress. Having an emergency savings fund can also help consumers to stay out of debt while preparing for a rainy day. A set amount should automatically be transferred to savings each month,” advises Goslett.
To remain motivated and stay on the right track, consumers should monitor and benchmark their financial plan and investments. There are several ways to measure an investment portfolio, but perhaps the most important is whether it is working towards the consumer’s personal goals. If the consumer requires their investment to grow by a specific percentage annually, the performance of the portfolio should be measured against this benchmark and be adjusted to meet this requirement where possible.
The sooner a consumer assesses their financial position and makes the required changes to met their goals, the better. Putting it off will just mean that it will take longer to achieve.  “Aspiring homeowners need to be aware of how they spend their money as well as what changes need to be made to reach their goal. They will need to review the changes that been made and anticipate further changes that may occur in the future. With the correct planning, nothing is impossible,” Goslett concludes.
 
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Is it possible to terminate a lease agreement without recourse?Wed 15 Feb 2017

Is it possible to terminate a lease agreement without recourse?
There are a number of possible reasons that could arise that lead to a tenant wanting to terminate their lease agreement before it has run it course, however, it is possible for them to get out of a lease agreement without being in breach of the contract?
According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, the answer to the question will depend on the cancellation clause within the lease agreement. “Unless there are grounds for cancellation of the agreement, which are stipulated in the cancellation clause, it can be rather difficult to get out of a lease agreement without any recourse. Even if the lease agreement doesn’t contain a cancellation clause, the tenant can still be considered to be in breach of the agreement if they decide to terminate the contract prematurely,” advises Goslett. “If the tenant has breached the contract, the landlord is within their rights to demand that the tenant pays the rental amount due to them for the remainder of the agreed upon tenancy period.”
Goslett says that if a landlord has met all the conditions of the lease, the tenant cannot simply terminate the lease agreement. They will have to discuss the matter with the landlord and possibly come to a mutual agreement, such as another tenant taking over the current lease agreement or subletting the property for the remainder of the lease period. It is imperative that any agreement made between the two parties is put in writing to avoid any confusion or backlash further down the line. 
The Consumer Protection Act (CPA) allows tenants to provide the landlord with 20 days’ notice if they choose to cancel their lease before it expires, however, this does not completely absolve the tenant of any responsibility. While a tenant has the right to move, if the landlord has met the requirements of the lease, they are within their rights to recoup reasonable costs that they may incur during the search for a replacement tenant. In certain cases, the tenant might be required to pay for the loss of rental income, advertising the property and letting agents commission. While the CPA does not stipulate what would be considered a reasonable figure, the landlord cannot make up exorbitant figures and charge the tenant what they feel like.  It is also illegal for the landlord to withhold paying the tenant their deposit unless there are substantial damages to the property which were caused by the tenant. 
“In the instance where the landlord has not met their end of the bargain and is therefore in material breach of the lease agreement, the tenant will be able to cancel the lease agreement early without them breaching the contract agreement and paying the penalties. Examples of this are if the property has become inhabitable or the landlord has failed to maintain aspects of the property that they have stipulated in the lease agreement that they would - the tenant is within their right to cancel the agreement,” Goslett explains. “However, in this situation, the onus is on the tenant to prove that the landlord is in breach of the contract and has failed to uphold their side of the deal.”
Goslett says that tenants who have reached the end of their lease agreement and are planning to move should check their contract to see whether it contains a renewal clause, which will stipulate the amount of notice time the landlord requires. “If the lease agreement has expired and the tenant is still living in the property, through their actions they have effectively already entered into a new lease agreement and will need to follow the right procedures to cancel the contract. If the original lease agreement does not include either a cancellation clause or a renewal clause, the tenant must give the landlord one month’s written notice before its expiration,” he concludes.
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Look out for restrictions on your propertyThu 09 Feb 2017

Look out for restrictions on your property
Owning a property does not mean that the owner is entitled to do whatever they want to the property.  Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, says that every property in South Africa that is privately owned is subject to certain control measures, which may restrict the owner from making the changes they desire.
“Before purchasing a home it is in the buyer’s best interest to check the title deed to see whether there are any restrictive conditions that exist on the property, especially if they plan on building on or changing the property in any way,” advises Goslett. “The aim of restrictive conditions in a title deed is to create a property or neighbourhood with specific characteristics that appeal to a certain demographic of resident. Some examples of restrictions include that the property may not be sub-divided, the buildings may not be higher than two storeys, no business use of the property, only 50% of the stand may be covered or built on, all exterior wall must be a certain colour and all structures must have a particular style roof, etc.”
According to Goslett, there might also be restrictions regarding the sale of the home and not just on the property itself. “In some instances, parents will stipulate in their will that the property that they left to their children cannot be sold until they reach a particular age. This stipulation will be registered against the title deed of the property,” he says. 
Goslett notes that control measures and restrictions are governed by several laws and regulatory bodies. If a statutory law or written law of the country does not deal with a particular situation, then common law will apply. “Each town will have a general plan or guideline as to how it has been set out with regards to residential, commercial and industrial areas.  The local authority plans will set certain rules in place where particular types of building can be built, such as shopping malls and residential developments. A property may not be used for purposes that contravene that of its initial intended purpose,” he explains.
A town planning scheme is created to ensure the general welfare of a community, as well as the overall appeal of the area. The town planning scheme will consist of a map showing the zoning of the land and scheme clauses, which should be read in conjunction with the map. Each municipality will have its own town scheme, which is available to the public for viewing.
The development controls within the town plan include the use of zones, which controls what is built on a property and what that property is used for.  It will also deal with density zones, which will dictate the minimum size requirement of a stand and the number of dwellings that may be erected on the stand. Other aspects include the number of storeys a building may be built, the total floor space that may be used for building, the percentage of the stand that is allowed to be covered, the minimum distance between the boundaries of the property and buildings and parking. 
“It is possible to have a restriction lifted on a property, however, this will entail applying to the High Court for an order authorising the restriction to be lifted. This is provided of course that there is a good enough reason for the High Court to grant the request. The buyer can stipulate that the are putting in an Offer to Purchase on the property subject to the restriction being lifted. Alternatively, they can accept the conditions and purchase the home with its subsequent restrictions,” Goslett concludes.
 
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Is your agent right for you?Wed 08 Feb 2017

Is your agent right for you?
Putting your home on the market for the first time can be an overwhelming experience, as often it is a person’s most valuable asset. Having the right real estate professional by your side will make the process far easier; however, with so many agents out there, it can be difficult to know which one to choose. 
Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, says that all sellers have the common goal of selling their property for the best possible price, within the shortest amount of time. He notes that to do this successfully, the seller needs to work with a skilled real estate professional who is passionate and knowledgeable about the area in which in the home is situated. “It is best to work with an agent who specialises in the area as they will understand the local market and know what buyers in that area want. Working knowledge of the area and target audience will help the agent to tailor their market approach,” says Goslett. “How the agent markets the property will have an impact on how many buyers want to view the property and how long it stays on the market. The longer a property is on the market, the less likely the seller will get their asking price.”
According to Goslett sellers should take into consideration whether or not the agent or the brand they work for lists properties for sale on national websites or just smaller localised ones, as the more exposure the property has, the more chance there is of finding a suitable buyer in the shortest possible time. Selecting an agent from a brand with a national network will also increase the odds of finding the right buyer for the home in minimum time.
“Once the search for an agent has been narrowed down, sellers should meet with each of the prospective agents to get a feel for who they are and how they intend to market the property. During this time the agent will also be able to have a look at the property to provide an evaluation. Although everyone wants a premium price for their home, it is important that the agent is realistic in their evaluation, which should be based on the location of the property, current market conditions and what similar houses have recently sold for in the area,” says Goslett. “An overpriced home will sit on the market for longer than it needs to and in some cases may not sell at all. Sometimes agents will give a high evaluation to secure a sole mandate on the property. However, if the listing price is not market-related, it will hurt the selling process and reduce the chances of the home selling for a good price,” he warns.
Goslett advises that to ensure a reasonable guarantee of service, sellers should ask these five questions:
1. What sales have you concluded in the area in the past six months?
2. What tools does your estate agency provide to assist you in effectively meeting your obligations to buyers and sellers?
3. How effective have your marketing campaigns been for other homes in the area?
4. What is your sphere of influence and how well known are you the area?
5. What buyer qualification process do you follow regarding getting finance approved for sale?
He advises that the commission percentage should be discussed and agreed upon upfront.  Commission rates will vary from one agent to the next depending on the agency they work, as well as the agent’s experience and services they offer. “Often an agent that offers their services at the lowest commission will also give the lowest level of service. It is also important to remember that agents from larger, reputable agencies offer the backing, experience, considerable marketing benefits and access to a bigger database of potential buyers that only a large company can offer,” says Goslett. 
To achieve the best possible price for a home, it needs to be in its best possible condition. A good agent will be able to provide sellers with advice on what should be done to the property to make it more appealing to prospective buyers. 
“An essential element to the agent and seller relationship is effective communication, as well as trust. The agent should work with the seller’s best interest in mind at all times. For that to happen, the seller must be able to feel comfortable with the agent and be able to discuss matters openly and freely,” says Goslett.
Once the seller has chosen the agent they would like to work with; they will need to discuss the type of mandate they will give them. The agreement should work for both parties. “The agent should provide the seller with a marketing plan that they believe will help them fulfil the obligations of the mandate and get the home sold in the shortest time and at the best market-related price,” Goslett concludes
 
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Dealing with defectsMon 06 Feb 2017

Dealing with defects
The Consumer Protection Act (CPA) was introduced to protect consumers engaged in commercial transactions with businesses to avoid the consumer being treated unfairly. Unless a property buyer is purchasing a home from a developer or speculator whose ordinary course of business is to sell properties, the CPA does not come into play and buyer will not fall under its protection. An ordinary property sale is seen as a transaction between two consumers, the seller and the buyer.
Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, says that the CPA will not have an effect on the voetstoots clause used in agreements of sale in an ordinary property transaction. “This is why is so important for buyers to have property thoroughly inspected before they submit their offer to purchase. There are instances where the buyer is protected if severe defects are found after the transfer has taken place. However, it is difficult to determine whether the seller deliberately concealed the defect or genuinely wasn’t aware of it,” says Goslett.
He explained that there are two kinds of defects. A patent defect is clearly visible on inspection of the property, such as broken window or cracks in the wall. All patent defects should be listed in the offer to purchase, along with who is responsible for fixing them. “Because patent defects are visible or obvious without professional inspection, the buyer has no recourse against these types of defects. It is up to the buyer to spot patent defects and then decide whether they would still like to proceed with purchasing the property,” says Goslett. 
The other type of defect is a latent defect, which is not easily picked up by a superficial inspection. Examples of latent defects include a leaking roof or faulty geyser. Common law states that the seller is responsible for all latent defects in the property for three years from the date of discovery of the defect. “Most sellers are aware that they are responsible for latent defects which is why they include the voetstoots clause in the sale agreement. The clause protects the seller against all defects – including latent defects that are unknown to him. However, if the seller was aware of a latent defect and deliberately concealed it from the buyer, the buyer has recourse against the seller. It is important to bear in mind that the onus will be on the buyer to prove that the seller was aware of the defect but deliberately hid it,” Goslett explains.
It will be dependent on the circumstances, but if a latent defect is found the buyer will be able to cancel the contract or claim a portion of the purchase price. The law prescribes that the buyer will not be allowed to simply obtain a quote for the repair and then deduct it from the purchase price, paying a lesser amount. The buyer can also not refuse to pay occupational rent or a portion therefore unless the defect seriously impairs the use and occupation of the property.  
Goslett says that any defects that are dicovered after the sale of the property but before the property is transferred into buyer’s name will be for the seller’s account, unless those defects are caused by the buyer during their occupation of the property.
“For buyers to ensure that they are fulled protected against any latent defects , they should enlist the services of a professional home inspection company to check the home thoroughly. The price of paying a professional to do the job properly will be far less than the time and hassle caused by dealing with hidden defects,” Goslett concludes.
 
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Things to consider before building a homeMon 06 Feb 2017

Things to consider before building a home
Instead of purchasing an existing property some buyers like the idea of buying a stand and building a home to their specifications. While this can be a very fulfilling experience with many benefits, there are a few things that need consideration before undertaking a project like this, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa. 
The stand
“A major factor to consider when wanting to build is the stand itself. Ideally, the stand should be easily accessible, as well as being the right size and shape to fulfil your needs. It is best to select a stand that will be easy to build on to avoid the cost of excavating and levelling the ground. Also look at the type of soil on the stand, as clay soil might require the services of an engineering design specialist to ensure that the structures will be stable – this will be a large additional expense,” says Goslett.
He notes that before purchasing a stand, buyers should check the title deed to ensure that there are no building or zoning restrictions, as this would impact the type of home they would be able to build. It is also vital that the stand is within a proclaimed township so that the home will have all the essential services, such as electricity, sanitation and water. According to Goslett, transfer of the stand into the buyer’s name will only happen if the stand is on proclaimed land, which means it has been given suburb status. 
The cost of building
The cost of the build will be determined by a few elements such as the finishes that the buyer decides to use and the shape of the home. A structure that is square in shape will cost less to build than a home with an intricate and complicated design. “Buyers should meet with several builders to establish an average building rate per square metre. This will help the buyer decide on the type of home they want and how big the can afford to build it,” says Goslett.  
Look at existing homes and take measurements
Whether it is their current home or that of a friend or family member, buyers interested in building should measure the size of rooms in the home to get an idea of the square meterage they want. “Take the length and breadth of a room and multiply these measurements by each other to get the size of the area in square metres. Do this throughout the home and then add the areas together to get the total size of the floor space. This will be an excellent way to picture the size of home required to meet your needs,” says Goslett. 
He adds that the thickness of the walls should be taken into account as square metre calculations are generally taken from the outside of the exterior walls of the home. 
Budgeting
Even with the cost per square metre and size of the home, budgeting can be a bit difficult due to possible unforeseen circumstances that may have an impact on the project cost such as delays in the schedule. Buyers should make provision for an additional 20% more than the original estimated cost of building the home. There are also other features that are not directly linked to the house to consider in the budget, such as the boundary walls, landscaping, a swimming pool and other such features. 
Homeowners association rules and regulations
If the stand is in an estate or development, there will normally be a prescribed set of building guidelines that the buyer will have to follow. These guidelines will deal with the style of home, the permissible size of the structures and the materials used, to name a few elements. Often a buyer will have to submit their building plans to the homeowner’s association for approval before they can commence with the project. 
Selecting a contractor
Whether it is building the home from the ground up or adding to an existing structure, selecting the right contractor for the job is imperative to the outcome. Be sure to investigate their artistry and contact references or previous clients to see if they were completely happy with the service they received. 
“Thorough research may take some time, but going into a building project fully prepared will save both time and money in the long run,” Goslett concludes.
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What happens to your rental deposit?Wed 01 Feb 2017

What happens to your rental deposit?
It is the general practice in today’s rental market for landlords to request a deposit from their tenants before they move into the property, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa. In fact, according to Section 5 of the Rental Housing Act, No. 50 of 1999 a landlord is legally entitled to request a deposit from their tenants. 
He adds that the amount that the tenant will be required to pay as a deposit is stipulated in the lease agreement, which the tenant will need to agree to and sign before they gain access to the rental property. “Conventionally the rental deposit amount was equal to one month’s rent; however, in more recent years landlords have started asking for two months’ rent as a deposit. The increase has come about due to defaulting tenants and the lengthy, expensive process involved evicting them,” says Goslett. “Tenants are protected by the Prevention of Illegal Eviction from Unlawful Occupation of Land Act, No. 19 of 1998, also known as the PIE Act. If the correct procedures are followed, it can take at least eight to ten weeks for an eviction order to be granted during which time the landlord is out of pocket.”
Besides the fact that the landlord is not getting a rental income from the defaulting tenant during that period, they will also have to pay legal costs. The cost may vary depending on the sheriff’s fees and whether the matter is opposed or not. An unopposed eviction could cost between R12 000 and R20 000 in legal costs plus disbursements, while the cost of an opposed matter will be substantially more. 
Goslett says that when a tenant pays the deposit, the landlord is required by the Rental Housing Act to place the money in an interest-bearing account, held with a financial institution. The tenant is within their rights to request a statement of the interest earned on the money at any time during their tenancy. “Even though the deposit is paid to the landlord, it remains the tenant’s money. The landlord is merely holding the money as a security measure, should the tenant default or breach the rental agreement. If the tenancy runs its normal course, the deposit along with all interest earned on the money must be paid over to the tenant at the end of the lease agreement period,” says Goslett.
The landlord is entitled to deduct from the rental deposit any expenses incurred repairing any damage to the property which occurred during the tenancy.  The remainder of the money must then be refunded to the tenant no later than 14 days after the restoration of the property as dictated by the Act.  “If repairs are completed on the home, the tenant can request to see all repair receipts to confirm that the money was spent to repair the damage they did to the property. The landlord cannot use the deposit for general maintenance or upkeep of the property,” Goslett explains. “If there is no damage to the property, the full deposit and interest must be paid to the tenant within seven days of the lease's expiration date.”
Goslett says that should any disputes arise between the landlord and the tenant regarding the rental deposit they can turn to the Rental Housing Tribunal. He notes the tribunal informs landlords and tenants of their rights and obligations, as well as assists to mediate and resolve disputes between the parties. “Before entering into a rental agreement, tenants should familiarise themselves with their legal rights regarding a tenancy and their rental deposit. Knowledge of the relevant procedures can help prevent unpleasant and costly disputes down the line,” he concludes.
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The ins and outs of a usufructFri 27 Jan 2017

The ins and outs of a usufruct
The definition of a usufruct is a legal right given by an owner to someone who is not the owner, to use the owner’s property for a certain period, usually for the remainder of that person’s life.  The person who holds the usufruct, also known as the usufructuary, has the right to make use of the property and enjoy its profits and benefits provided the property is not damaged or altered in any way. At the end of the stipulated period, the usufructuary must hand the property back over to the rightful owner or heirs. 
Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, says that a usufruct would come into play, where a husband passes away leaving his home to his children but stipulates that his wife has use of the property and contents in it for the rest of her life or until she remarries. While the property is transferred into the name of the children, the usufruct is registered against the new title deed in favour of the surviving spouse. He adds that a usufruct is often created because it reduces the amount of estate duty payable. However, it is important to be aware of the possible tax implications for the parties involved. 
“During the prescribed period, the usufructuary has the right to enjoy the property and all the benefits that come with it, but they are not obliged to live in the house. They are within their rights to let the property out to someone else and gain a rental income from it, provided the rental term doesn’t exceed that of the usufruct. While the usufructuary can rent the property out, they are not allowed to sell or leave the home to another party,” Goslett explains.
Although the children are ultimately the heirs to the property, Goslett says that while the usufruct is in effect, they will have no right or authority with regard to how the property is used or enjoyed.  The children must refrain from interfering with the use of the property. However, they do have the right to protect their interests should they feel that the usufructuary is using the property inappropriately.
He adds that while the usufructuary’s rights to the use of the home are protected, there are certain obligations that need to be fulfilled. For example, the usufruct must be used for its intended purposes, and the usufructuary is legally bound to act as a diligent owner that may not misuse the property. The usufructuary is also responsible for paying the assessment rates and general day-to-day costs of maintaining the home. He or she is not obliged to do any large-scale repairs that result from normal wear and tear or daily use. While there is no obligation for the usufructuary to insure the home against storm, fire or other such damage, it is advisable. 
“The heirs to the property are responsible for keeping it in a habitable state at all times, as well as paying for the repairs. Depending on the age of the children or their financial status, this could be a massive burden to carry,” says Goslett. “Ideally, provision should be made for the husband to leave enough money to their surviving spouse and children to ensure that the usufruct property is maintained and the monthly expenses such as rates and taxes are paid. A life policy could provide the financial means to ensure that this is done.”
If the heirs pass away before the infructuary, their portion of the usufruct assets is transferred to their heirs - however, the conditions remain subject to the existing usufruct which is in place.   
“A usufruct is a way to ensure a surviving spouse has a roof over their head and is looked after for the remainder of their life. That said, those who are looking at adding a usufruct to their will should consult with a professional tax consultant or financial adviser to fully understand its implications and how it can impact those involved,” Goslett concludes.
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Leave yourself some breathing roomThu 26 Jan 2017

Leave yourself some breathing room
Considering purchasing a property? First-time homebuyers should have a clear idea of what they can comfortably afford on their home repayment each month, before taking the initial steps towards ownership, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa. 
“It is important to remember that while it seems like the current interest rate hiking cycle is coming to an end, it does not mean that the homebuyer won’t have to deal with rate hikes in the future. It is for this reason that an allowance has to be made to buffer any future rate increases of at least 1% or R100 for every R100 000 that the homebuyer has borrowed from their respective lender,” says Goslett. “A homeowner extended to the financial limit is in a vulnerable position, especially if they don’t have a contingency plan in place.”
He adds that buyers can use an affordability calculator online or for a more in-depth accurate measure they can consult with a bond originator who will be able to assist them to determine what amount they can afford. “Because banks place a heavy reliance on creditworthiness, an originator can also pre-empt corrective measures for the purchaser to take before they submit a live loan application to the banks. This will ensure that the buyer has the best possible chance of obtaining the finance when they apply,” says Goslett.
According to Goslett, before submitting their bond application, prospective buyers should focus on reducing or entirely doing away debt and store credit accounts, reconsidering insurance policies with little or no value and ensuring that their credit record is favourable. “Ideally, there should be no late payments reflected on any accounts and the buyer should have some cash in the bank at the end of each month. Financial institutions will check buyers’ credit records as far back as six months, so buyers will need to ensure that their record is clean for at least this length of time – preferably much longer,” Goslett advises. 
Buyers who have checked what they can afford and are ready to move onto the next phase and look for a property need to consider and prioritise location. “Location directly impacts the home’s potentially growth in value, so buyers should look at the property’s proximity to amenities such as shopping malls, medical facilities, good schools and access to major transport routes. The orientation of the property should also be considered, with a north-facing property the better option. Orientation has an impact on certain elements such as the swimming pool, as it is better for a pool located on the western side of the property.  Other aspects for buyers to look at are whether there is room for improvement, extensions or renovations” says Goslett.
He notes that additional elements to look out for are pre-paid electricity meters which are good to have, as well as any solar installations which will reduce the energy costs associated with running a home.
“Before making a final decision or signing any offer to purchase, buyers should have the property thoroughly inspected to ensure there are no major defects. Aspects they should pay close attention to include the roof, load-bearing walls for structural cracks, sagging floors or ceilings and damp walls. Once the overall condition of the home has been assessed the buyer will be able to determine whether the required repairs are manageable and within their budget. If too many things need to be done to make the house liveable, the buyer knows it’s time to walk away from the deal,” says Goslett.
When the right home is found, and all the necessary paperwork has been signed, there will be some additional costs buyers need to consider during the transfer process. According to Goslett, buyers will need to be prepared for the bond costs and the transfer fees. “It is dependent on the purchase price of the property and type of property, but normally the transfer duty is the largest portion of the costs involved in the transaction. These costs are required to be paid fairly soon into the transfer process, so buyers will need to have it beforehand. Other costs include the attorneys’ fees, which are negotiable in some instances. The seller appoints the transfer attorney, while the bank appoints the bond attorney,” he says. “When the buyer transitions from tenant to homeowner, they will have the additional monthly cost of rates, water and electricity. Buyers should request that a reading of their water and electricity meters is taken on occupation. They should also take into account services costs, insurance, maintenance and furniture removals to name a few other expenses.”
Goslett concludes by saying that buyers should take their time and only buy a property when they are truly ready. He notes that buying a property is a long term investment with many advantages, but only if done in the right way.
 
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The interest rate and how it impacts the marketTue 24 Jan 2017

The interest rate and how it impacts the market
South African Reserve Bank Governor, Lesetja Kganyago, announced today at the first Monetary Policy Committee meeting of 2017 that the repo rate will remain unchanged at 7% with the prime lending rate staying at its current figure of 10.5%. Good news for consumers as the country heads into another year of predicted slow economic growth. 
According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, the majority of current and prospective homeowners are dependent on home loan finance to purchase a property. Because of this, any fluctuation in the interest rate will have an impact on consumers in one way or another. “Stability in the interest rate will build consumer confidence and give them more time to sort out their financial situation and prepare for the year ahead,” says Goslett.
He adds that the prime lending rate has a substantial influence on the property market and potential homebuyers’ ability to get their foot on the property ladder. “An increase in the prime lending rate widens the gap for prospective homebuyers to meet the criteria set out by financial institutions to obtain a bond. A higher rate means higher bond repayments for buyers or having to opt for a lower bond amount. In certain instances, this could potentially push lower-income earners out of the market completely,” says Goslett. “The interest rate directly affects the affordability levels of buyers wanting to purchase property. In turn, affordability ratios will have an influence on the amount that the bank is willing to give the buyer, which could impact on the kind of property the buyer will be able to purchase.”
Goslett says that the prime lending rate will be a driving factor behind the bank’s decision process when assessing what a buyer can or cannot afford. An increasing interest rate places more pressure on buyers to reduce debt levels. According to Goslett, lower debt levels will increase an applicant’s chance of bond approval and will make affording a home much easier. 
“Current homeowners are also impacted by rate fluctuations. However, this can be lessened to some degree if they have chosen to fix their rate. Homeowners with bond accounts linked to the interest rate will have to face either higher or lower bond repayments if the rate increases or decreases respectively. Where the rate remains stable and the homeowner’s income increases, it will give them the opportunity to pay additional funds into their bond account and reduce the term of their loan by several years.”
Goslett says that an additional R1000 payment a month on a bond of R1 million at the current prime lending rate of 10.5% will reduce the term of the loan by almost five years. That is a 25% reduction in the term of the loan for a monthly repayment that is 10% higher. “By paying extra into the bond and reducing the term of the loan, homeowners will be able to decrease the overall interest amount that they pay on their bond. The money saved on interest can be put towards retirement or perhaps a child’s education,” he concludes.
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Should equity in the bond be used for debt?Mon 23 Jan 2017

Should equity in the bond be used for debt?
Often car loans and credit cards accrue interest at a much higher rate than a home loan, which is why many people decide to take equity out of their home loan to pay off their other debts. Focusing on paying off debt with the highest interest rate is a very good financial strategy to implement, but is using a home loan to do it the best idea?
Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, says that the answer to that question largely depends on the term left on the home loan. “If the individual decides to pay off a big ticket such as a car by using the access facility on their home loan, they need to consider the fact that although the interest on a bond is generally the lower, the term of the loan in much longer. Essentially this could result in them paying more interest over the term of the loan,” says Goslett. 
He adds that while the interest on a car loan is usually higher than a bond, the term of the loan is much shorter. Typically, vehicles are financed over a 54 month period, sometimes 60 months depending on the agreement. On the other hand, most bonds will be financed over a 20 year period or in some cases a 30 year period. “It takes time to build up equity in a bond, so it is likely that a homeowner will only be able to use their bond account to pay off their car debt after a few years. Even so, unless the bond is only five years or less away from being fully paid off, the consumer has extended the term of their car loan, which could increase the total amount of interest paid. If the objective is to save on the overall interest paid, a lower interest rate over a much longer term is not the answer,” advises Goslett.
In the instance where the consumer has a 20-year home loan with an interest rate at prime being 10.5%, and they have ten years left to go, an additional R100 000 with cost them R1349 extra a month and accrue an interest amount of R61 922 over the term of the loan. However, if the consumer takes out vehicle finance for the same amount over 54 months at an interest rate of 12.5%, they will pay R2431 a month, but pay R31 254 in interest over the term of the loan. Using their bond account will cost them an extra R30 668 in interest. “While the monthly repayment is reduced, the overall interest paid on the debt is twice as much. If the consumer has longer to pay on their home loan, the overall interest amount is even higher,” says Goslett. 
He notes that for a consumer to benefit from the lower interest rate of the bond, they would need to add the total monthly amount they were paying on their vehicle finance to the bond repayment.  The additional monthly payments would reduce the outstanding bond amount far quicker, along with the total interest paid over the term of the loan. “The consumer would in effect be paying off their car in the same amount of time, but then they would see the positive impact of the lower interest rate. In fact, if the consumer keeps up with the additional payments for the remainder of their bond, they will reduce the term of their home loan and pay off their house faster,” says Goslett.
Before using home equity for any debt, it is best to go through the numbers and work out whether it will put you in a better financial position or a worse one. “Consumers should look at the long-term impact of their financial choices and do the necessary research and calculations before making any final decisions,” Goslett concludes.
 
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