If a prospective homeowner has not kept up to date with their credit bureau reports, they may be in for a surprise when they apply for finance. According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, a large number of potential buyers are referred by their estate agents to attorneys, if they have a blacklisting against their name that is preventing them from obtaining a bond. 

Goslett says anyone who has ever applied for credit will be listed with the various credit bureaus. Any credit provider that subscribes to a credit bureau will have access to the applicant’s credit history. The majority of companies and financial institutions assess their risk based on the information provided by the credit bureaux. If there is any negative information on the applicant’s credit history, it is highly unlikely that they will be approved to receive finance. This emphasises the importance of checking one’s credit reports on an annual basis. 

“In some instances, the buyer has already been home shopping and found the home they want to buy, only to be turned away from the bank because of a blacklisting against their name. It is possible for the buyer to rectify the situation and clear their name so that they don’t lose the property to another buyer. However, this will depend on the blacklisting against their name,” says Goslett. “Removing a blacklisting can be an arduous, drawn-out process which differs from one case to the next depending on the circumstances. How long the process will take to rectify will depend on the parties involved, type of blacklisting and possibly the courts, in the case of a judgment.”

According to Goslett, a default is a listing of a party who has failed to pay a creditor an outstanding amount. A default or adverse listing will remain on someone’s credit record for two years. If the debt has been settled, a request can be made by the creditor to the bureaus to amend the listing to reflect that the outstanding debt has been paid in full. “As a golden rule, when settling an outstanding debt with a creditor that has listed a default against you, obtain in writing that they will amend or remove the listing. It is also advisable to seek legal advice from a specialist consumer law practitioner who can provide guidance and a clearance service,” advises Goslett.

A judgment is more complex than a default listing, as it is a court order compelling the defaulting party to pay a debt. A Magistrates Court will deal with matters up to R100 000, while any debt that exceeds R100 000 will fall under the jurisdiction of the High Court. If the debt is not settled, it will remain on the credit profile for five years before it is automatically removed.  In order for the judgment to be removed from a credit profile before the five year period has lapsed, the New Credit Regulations provides that the debt must first be settled. Once settled, an attorney can then apply to have the judgment rescinded. The creditor will need to provide their consent before the judgment can be rescinded. 

Goslett says that keeping a clean credit record is less costly and time-consuming than dealing with adverse credit information. He provides prospective homebuyers with tips to avoid blacklistings:

• Read all clauses before signing a contract with a creditor

• Make regular payments to creditor by the 7th of each month

• Keep a list of all creditors, the basis of credit and amount to be paid

• Keep a record of all payments made to creditors

• If you relocate, notify all creditors of the change of address

• Attend to all correspondence from creditors or their legal representation

• If you are unable to pay your creditors, make a written arrangement to restructure the payments where possible.

 

You have been looking for the ideal property to purchase for months and finally find it, but there is a catch, there is a tenant who is currently renting the property. What now? 

Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, says that because the lease agreement is legally binding and was in place before, it stands - regardless if the owner of the home decides to sell. 

“The lease agreement goes with the home. Essentially this means that purchasing the home automatically makes the new owner a landlord, whether they planned to be or not. If the property is being bought as an investment or as part of a rental portfolio, the fact that the home is occupied might be seen as a drawcard. However, if the property has been purchased as a primary residence and the new owner intends to live there, it could be a problem,” says Goslett. “The new owner will only be able to take occupancy of the home once the lease agreement has expired and the tenant vacates the property. For this reason, it is best for the buyer to go over the details of the lease agreement and see how long the tenant can stay in occupation before they decide whether it is worth their while to purchase the home.”

He notes that there is also the matter of brushing up on the legal rights and responsibilities of a landlord. “There are respective obligations imposed on both the lessor and lessee in a lease agreement, so it is important for the purchaser to understand the implications of buying the home from the outset. For example, if there was a security deposit paid at the initiation of the tenancy, this will need to be refunded back to the tenant at the end of the lease. The buyer must ensure that they get this money from the seller. Otherwise, they will find themselves out of pocket,” advises Goslett. “Another aspect to check is whether the landlord is required to pay back any money that the tenant has paid for improvements to the property during the tenancy – this is money that should also be recovered from the seller during the sales process.”

If all goes according to plan, the new owner will only have to wait until the lease expires to move into their new home. However, this is provided that the tenant plays along and vacates the property when they are supposed to do so. “There are cases where the tenant has refused to move out, even once the lease agreement has run its course. Apart from having to deal with the delay, the new owner may also have to take legal action to have the tenant removed, which will cost money,” says Goslett. “If possible, before purchasing the property it is advisable to speak to the tenant and see what their intentions are, as this could save both time and money in the long run. A communicative, obliging tenant will make the process far smoother and pleasant,” he concludes. 

Unless you have the cash saved up, constructing a home is going to require getting a loan from a financial institution called a building loan. Essentially, a building loan can be used to finance the construction of a home, additions to an existing property or renovations. 

According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, once an applicant has been approved for the finance, the loan lump sum amount is not paid to the applicant but is rather managed by the bank and paid to the contractor as required. “A loan account will be created by the bank from which they will pay the contractor as the work on the home progresses, these payments are aptly referred to as progress payments. The progress of the construction will be assessed by an assessor from the bank who will determine the amount of the loan that will be paid to the contractor,” Goslett explains. “The bank will not charge interest on the unused portion of the loan. However, interim interest will accrue on the money that has been paid out.  Applicants will need to make provision to pay the interest charged, to avoid a shortfall when the final pay-out of the loan is made.”

Goslett says that when it comes to building or renovating a home, there are always unforeseen costs that rear their head, so it is important to prepare for this in advance.  “Several aspects could have an impact on the cost of the project such as delays in the schedule caused by weather or labour strikes. It is not uncommon for a project to cost an additional  20% more than the original estimated cost of building the home,” he says. “Much like saving for a deposit to purchase an existing home, those who decide to build will need to have some cash set aside. It is also important to bear in mind that there with be an initiation fee and other costs charged on the loan itself.”

When applying for a building loan, applicants will be required to provide the bank with the following documentation:

• Copy of the Offer to Purchase on the stand, along with a building contract

• Schedule of planning and finishing dates

• Either provisional or approved plans for the home so the bank’s assessor can determine its estimated value

• Detailed quotations which include all specifications regarding materials and finishes

• Copy of the builder’s National Home Builders Registration Council (NHBRC) certificate

• Written waiver of the Builder’s Lien, which is the right the contractor has to retain the keys until full payment of the contract is received.  The bank becomes the preferred creditor if this right is waivered.

Goslett says that in some instances the bank may have special conditions that they require the applicant to adhere to, such as commencing or finishing the project within a certain time frame. Other conditions could be that the plans for the home comply with the bank’s minimum requirements and regulations, the builder is registered with the NHBRC  or that the stand is located within a proclaimed residential area.  “If the applicant meets the bank’s criteria and adheres to the special conditions, a building loan can provide the means for an applicant to construct and live in their ideal home,” Goslett concludes. 

 

Owning a rental property portfolio that provides an income is much like owning a business, and as such there are tax implications and dues that need to be paid to the South Africa Revenue Service.

According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, landlords are required to declare the total amount of rental income received as gross income and they will be taxed at the marginal Income Tax Rate, applying to the owner of the home. The below table is a guideline of the personal tax rates that are currently applicable in South Africa:

Goslett notes that while landlords are required to declare the total income acquired through letting out their property, there are certain deductions that can be made, such as a non-capital expense. A landlord is obliged to incur expenses during the period that the property is let out. “Deducting the non-capital expenses from the landlord’s tax return will reduce the taxable income and possibly put the landlord in a lower tax bracket, which will be of benefit to them,” says Goslett.

He notes that examples of non-capital expenses include the following:

Goslett says that expenses that are regarded to be of a capital nature cannot be deducted. These would include any expenses incurred while renovating or adding on to the property.  “If the tenant has moved out of the property and the landlord decides to make repairs to the home to sell it, these expenses cannot be deducted as they did not happen while the tenant occupied the property,” he adds.

If the total of the deductions exceeds the rental income received by the landlord and they wish to declare a net rental loss, the Income Tax Act contains a ring-fencing provision that may come into play depending on the circumstances. If the provision does apply, the landlord will not be able to offset their rental losses against income received from other sources.

Goslett warns that evading paying tax on rental income will see the landlord in deep financial water. “Rental agents are obligated to provide SARS with a record of the rental income received and paid over to the landlord. As a result, it is very easy for SARS to find any discrepancies in the landlord’s tax return. If found out evading tax after notification of an audit, the landlord could be facing a hefty penalty or worse - imprisonment,” he explains. 

In conclusion, Goslett says that all rental income should be included in the landlord’s taxable income. However, reducing it by the relevant expenditure will assist the landlord to reduce the amount of money that leaves their back pocket. 

Making a move from a large freestanding home to a smaller, lock-up-and-go unit in a retirement estate has several advantages for consumers entering their golden years, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa. “For one, a smaller home is far easier to maintain and costs less money. The homeowner can spend the time that would have been taken up by maintenance doing things that they enjoy,” he adds.

A family home with a swimming pool and large garden is perfect for homeowners who have growing children. However, as homeowners get older and their children fly the nest, there is less need for a large property. Selling and downsizing to a smaller property will give retirees more time and freedom to travel and pursue other interests. Additionally, they will enjoy the benefit of significantly reducing the monthly costs of rates and taxes, utility bills, insurance, security and repair costs.

Goslett says that while there are several advantages to downsizing, it is not without its challenges. “Downsizing will mean that not every item in the home can make the move. Over the years people will collect things and buy furniture that fits their home. Moving to a smaller space means reducing the number of items in the home and possibly purchasing smaller more appropriate furniture.”

According to Goslett, there are few tips that homeowners can utilise to assist with downsizing and preparing for the move: 

Have a plan for moving day 

As soon as the homeowner knows the date they are moving, they should start to prepare by putting a plan into action and working up until the set date. “In an ideal situation, the homeowner should give themselves around three months to prepare for the move. Three months will give the homeowner enough time to focus on one room at a time, rather than pushing to finish the entire house in a shorter time,” advises Goslett. 

Separate items into yes, no and maybe

If it is possible, it is best just to have a yes and no pile, as a maybe pile will mean dealing with certain items more than once. Rather try to deal with each item once and make a decision regarding keeping it or getting rid of it. “For those who struggle to let go this will be a difficult task as first,” says Goslett. “However, when making the decision, ask whether it is something you can’t do without and how often it gets used.”

More is less…not when downscaling

Often more is just that – more. Get rid of duplicate items and things that are being kept in case something else breaks. It is better to get rid of the duplicates than take up space for something that may never happen. The same applies to clothing - get rid of items that no longer fit or that is being held onto for ‘one day’.

Scale down collectables

“Whatever the reasoning behind it, cutting down a collection can be very upsetting, especially if it has taken years to build it up. However, limited space may require that only a few favoured items are kept. The number of items to be kept will be based on the amount of display space available in the new property,” says Goslett.

Turn unwanted goods into cash

Selling things is an excellent way to make some money to put towards the move while getting rid of unwanted items. However, it is important to stick to the three-month time frame and start early. While some items could sell rather quickly, others could take longer than expected, so it’s better to be prepared for this.

Make use of an auction house

Goslett says that homeowners who have an assortment of valuable items could consider using an auction house. An auction house is an ideal avenue to sell items such as antique furniture and artwork. An appraiser would come to the home to assess and value the items in the lot before taking the items to auction; this provides the owner with an estimate as to how much they can expect to receive on the day of the auction.

Give to the less fortunate

There are multiple charitable foundations countrywide that do amazing community work, which would benefit from a donation of household items. Most non-profit organisations cannot operate without the donations that they receive from the public. “Making a donation is a way to reduce household items and provide assistance to members of the community who are less fortunate. Knowing the items are going to people in need will make it far easier to part with them,” Goslett concludes.

 

The change of ownership of an immovable doesn’t happen when the Offer to Purchase is signed, or even when the purchase price is paid to the seller. Rather, for ownership to change hands, the property needs to go through a registration process at the deeds office, where the home is transferred into the new owner’s name – this process requires the services of conveyancing attorneys. 

“Each time a property is sold it will go through the conveyancing process and a new title deed will be issued in the name of the new owner. Part of the process is also to remove the property from the seller’s name,” says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa. “The title deed ensures the certainty of the owner’s title to the property that he or she has purchased.”

According to Goslett, three attorneys are used in the conveyancing process, the registering attorney, the cancellation attorney and the transferring attorney. The transferring attorney is appointed by and will represent the seller. “As the seller, there are some things that can be expected of a transferring attorney during the process. First off, the attorney should do is always protect the interest of their client, being the seller. Except for the course issues of the law, the client’s interests should be a priority.  Another thing that the attorney should do is keep the seller updated with the progress of the transaction. The attorney needs to communicate with the seller on an ongoing basis and keep them informed about the conveyancing procedure,” he adds. 

Goslett says that the conveyancer must advise the seller on the content of the Offer to Purchase, especially if the contract contains certain suspensive conditions, such as the offer being subject to the buyer’s bond approval or selling another property. With regard to the Offer to Purchase, the attorney must also keep the seller informed of their obligations to ensure that the transfer of the property is not delayed. “The attorney will meet with the seller to go over all documentation and explain anything that the seller does not fully understand. Once the seller has been informed of everything and all has been clarified, the seller will then sign the necessary documentation to conclude the transaction,” Goslett explains. “Once all the document is ready, the attorney will lodge them with the Deeds Office.”

He adds that the attorney will be in contact with the seller’s bank so will inform them once their bond has been settled and cancelled. The attorney will also be able to tell the seller whether there are any penalties or administrative charges that need to be paid, which would impact the eventual settlement balance. Certain notice periods may need to run their course before the money is paid over to the seller. “Before any guarantees are issued in respect of the transaction, the attorney must obtain the seller’s instruction,” advises Goslett.

To ensure that the process runs as smoothly and as quickly as possible, the conveyancing attorney will do everything in their power to expedite the registration of the property. Ideally, they will aim to close the transaction on the date that was agreed upon in the Offer to Purchase, provided there are no unexpected delays. Bearing in mind, they are heavily dependent on several external parties such as banks, city councils and the such - this is no mean feat.  

On the day that the property has been registered in the new owner’s name, the attorney will inform the seller. “Once everything has been concluded, and the home has been successfully registered, the attorney will account to the seller for any fees that relate to the transaction. Sellers can expect to receive this account within two days of the property’s date of registration,” Goslett concludes.

Homeowners who are looking to rezone their property for business use or subdivide to sell a portion of their land may be in for a longer ride than they initially expected, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.

“Whether applying to rezone or subdivide a property, the application will need to follow a number of procedures before it is considered, which takes time. The application will need to be submitted to the relevant local authority and can anywhere from two months to two years to be either approved or denied. Aside from the fact that the process is time-consuming, it is also a very arduous and complicated affair. The documentation required by the local authority is complex, and the fees that need to be paid can expensive,” says Goslett. “Because of the complexity of the matter, most people that decide to go ahead use the services of an attorney or town planner to assist them through the process. The advantage here is that the application is handled by a specialist who understands all the aspects of the procedure - this will expedite the process to some degree.”

Goslett explains that zoning refers to the rights of the property, regarding what you can do with that property.  Property zoning is divided into levels of residential, business and industrial, each with its own set of rules and restrictions. When would rezoning be necessary?  Goslett answers: “If a homeowner is running a small business from their property wth only two or three staff members and the occasional client visit, there is no need for them to look into rezoning their home. However, if the home business grows to the extent that the traffic from clients and the activities on the property begin to impact the lives of the neighbours, they will need to apply for rezoning.”

He notes that subdivision and rezoning often go hand in hand because of the restrictions that come into play. “For example, if the owner of a large property of 2000m2 decides to divide his land into four separate plots, he will be required to convert from a Residential 1 zoned property with only dwelling per stand, to a property zoned for one dwelling per 500m2,” says Goslett.  

What does the process involve? Goslett says that the first thing a homeowner will need to do if they wish to rezone their property is submit a detailed report to local council motivating their reasons for wanting to rezone.  “Once the motivational report has been submitted, the homeowner will be required to advertise their application in the provisional Gazette, giving members of the public the opportunity to submit their objections,” Goslett explains. “The local town planning department will consider the consider the information that has been submitted, along with any objections that they receive. The town planning department will then refer the matter to the council committee and the provisional committee for the final decision.”

With regard to subdividing a property, Goslett says that the homeowner and their architect will be required to meet with a town planner. Plans will need to be drawn up and submitted to the city council, along with a detailed report. The homeowner is then required to inform their neighbours of their intention to subdivide via register letter, and they also need to advertise it calling for objections. Once the neighbours have given their approval, the plans will need to be approved by the council.

“Pay down short-term debt and consolidate long-term debt,” says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.

The rating agency, Standard and Poor’s downgrade of South Africa to sub-investment will have a negative impact on the housing market and consumers as a whole. “We managed to avoid a downgrade last year but were not as lucky this time around. While only one of the rating agencies at this stage, it is likely that Moody’s and Fitch will follow suit and take the same view as S&P,” says Goslett. “Homeowners with high debt levels should brace themselves for interest rate increases. They will need to focus on reducing their short-term debt as soon as possible and consolidate long-term debt by increasing repayment installments to eat into the outstanding capital debt faster.”

What does the downgrade mean for the country? Goslett answers that in simple terms the cost of credit will increase. “A junk status means that it will cost more for the government to borrow money, which in turn will have a knock-on effect on the consumer. Financial institutions will need to hold more money in reserve, which will make it more difficult to obtain credit, and the credit that is granted will come at a higher cost,” he explains. “A marginal mitigating factor is that to some degree financial institutions have already made provision and priced in the effects that a downgrade would have on credit costs.”

Needless to say that increased cost of credit will dampen consumers’ desire to purchase large-ticket items such as property and motor vehicles. “Over the last while prospective homebuyers have already been subjected to interest rate hikes, drought-driven food price inflation and rising electricity tariffs. An increased cost of credit would be too much to bear for consumers who are already struggling to deal with the growing cost of living,” says Goslett. 

Another downside to the downgrade is the fact that it will scare away foreign investment, as the country will be perceived as far too risky. Investors will shy away because of policy uncertainty and the government's policy regarding foreign investment in land being discouraged. “If demand from foreign investors dwindles, the prices of assets will depreciate, along with the currency. A fall in the rand will increase inflation and place pressure on interest rates, as well as the cost of imported goods. The result of all of this is that the country will be in a “catch 22” situation struggling to claw its way back out of junk status,” says Goslett.  “It is far easier to maintain an investment status than it is to improve the status once downgraded. The research concluded by Rand Merchant Bank reveals that on average it takes approximately seven to eight years for a country to recover from a downgrade.” 

The downgrade will slow the economy further, which will impact the government’s ability to maintain and upgrade infrastructure. The higher cost of credit will also slow the building sector as developers struggling to get the financial backing they require to initiate further projects. 

Goslett says that if there is an upside to the downgrade, it will be for consumers who have cash. “Investors with access to cash will be able to benefit from the predicted price stabilisation or decrease and will have more negotiating power in the market.  The tourism sector will also benefit from a weakening rand as travel to South Africa becomes cheaper for those with foreign currency,” says Goslett. 

He concludes by saying that South African consumers are urged to prepare themselves financially by reducing debt levels and putting away savings.

While many may think that a sale of execution and a repossessed property are one in the same, they do differ, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa. 

“If a homeowner can no longer pay their bond and are in substantial arrears, the bank will take legal action by serving the owner with a summons, taking judgment and eventually attaching the property. If the homeowner is still in arrears by the time the property has been attached, the bank will instruct the sheriff of the court to provide with selling the property at a public auction,” Goslett explains. “A representative from the bank is entitled to attend the auction and purchase the home if the bidding amounts are not substantial enough to cover the outstanding balance owed to the bank. The home will become a repossessed property or property in possession once it has been ‘bought back’ by the bank at the sale in execution.”

Once the bank has purchased the property at the auction, it becomes the legal registered owner. “At this stage, one of two things are likely to happen. Either the bank will sell the property to recoup their losses, or in some cases, they may allow the previous owner to rent back the property from them on a month to month lease agreement,” says Goslett. “If the bank decides to sell they will advertise the property for sale. Certain banks will also provide lists of repossessed properties to real estate companies for them to sell.”

As a buyer, there are several benefits to purchasing a repossessed home – especially if the amount owed to the bank is less than the home’s market value. “Banks are not looking to make a profit on the sale, but merely recoup their losses, so buyers could find themselves a bargain by purchasing one of these homes. Another benefit is that because the bank is a VAT vendor, there is no transfer duty payable on a repossessed property. And the bank will need to ensure that the municipal accounts are up to date, so no need to worry about taking on someone else’s municipal debt,” says Goslett. 

On the flipside, repossessed homes are often in poor condition and will require renovation. “Buyers will need to factor in the cost of the renovation on top of the purchase price to see whether they are really getting a bargain or buying a money trap. As with all property purchases, location is vital. It is best not to compromise on location just to get a perceivably good deal,” advises Goslett.

Another possible disadvantage is that if there are tenants in the property, the new owner will be responsible for vacating them. It could be as simple as giving the occupants notice, or it could entail going through the process of a legal eviction.  “While purchasing a repossessed property does have its perks, buyers need to be aware of the possible hassles and decide whether the purchase is still worth their while,” Goslett concludes.

 

Despite some economists suggesting that we might see an interest rate cut for the first time in four years, the Reserve Bank has decided to keep interest rates at their current levels with the repo rate steady at 7%, and the prime lending rate is staying at 10.5%.

“While a rate cut would have brought about some financial relief to consumers, the fact that the rate has remained steady for a year now should have helped many to sort out their financial affairs to some degree,” says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa. “The Reserve Bank is currently at the end of its hiking cycle. However, this does not mean that consumers should see this as an opportunity to incur further debt, but rather an opportunity to reduce debt and put money aside,” he advises. 

According to Goslett, debt is financially crippling so many prospective buyers who want to get into the property market. “Too much money is spent by consumers servicing debt. Debt is a vicious cycle.  If consumers incur debt, banks incur more debt, which means the Reserve Bank has more debt, and the country has more debt. Essentially, this means that the country has less money to take care of its people and the poorer everyone gets, which results in people needing to borrow and start the cycle again. Reducing or eradicating debt will increase disposable income and improve consumer’s financial situations,” says Goslett.

He adds that for consumers who are already homeowners, proper planning when interest rates are steady or low will assist them to survive financially during hiking cycles. “Where possible homeowners should pay more than their minimum bond repayment to reduce the outstanding balance faster and save on the interest paid over the term of the loan. If the interest rates are hiked in the future, the homeowner would have benefited from their decision to pay more, and they would not feel the impact of the increase as much as those who have paid the minimum monthly instalment,” advises Goslett.  

 

Once an Offer to Purchase has been signed by both the buyer and seller, it immediately becomes a legal and binding Sale Agreement, warns Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa. “In fact, the buyer will generally have already signed the contract before it is presented to the seller, which means that buyers need to be certain that they want to purchase the property before they sign the agreement,” he adds. 

According to Goslett, many people are under the misconception that the Consumer Protection Act (CPA) gives them a cooling-off period when entering into a Sales Agreement. However, this is only applicable in certain instances. “Sometimes buyers will sign offers on several homes in the hope that one of the sellers will accept, but if more than one offer is accepted they could find themselves in some hot water,” warns Goslett. “It is best to submit one offer at a time and work from there.”

The Alienation of Land Act states that residential property transactions of R250 000 or less are subject to a cooling-off period of five working days from the signature of the Offer to Purchase. The cooling-off period does not apply to residential homes that are sold for more than the R250 000 threshold. Considering that this provision is still in place and not impacted by the CPA, only a very small percentage of property sales will be subject to the applicable cooling-off period. 

Goslett says that regarding the CPA, a purchaser has the right to cancel the purchase of a property within five business days – only if the sale is a result of direct marketing.  Direct marketing means that the person has been approached directly either in person, by mail, or by electronic communication for the purpose of promoting or offering to supply goods or services. The cooling-off period will not apply to any sales that are a result of any other type of marketing, such as print advertising and show houses. It will also not apply if the purchase is made by a client that the estate agent is already working with. 

The Act offers consumers protection if they enter into a transaction with a supplier in the ordinary course of the supplier’s business. However, this excludes regular property sellers who do not earn a living from selling or buying property.

The CPA states that if the cooling-off period does apply, the five days do not start from the date that the offer is signed, but rather the day the property is transferred into the buyer’s name. Considering that transfer can take between three and six months after the offer is signed, cancellation of the agreement at this point could prove to be extremely problematic for all parties involved.

“If a buyer has signed an agreement, but would no longer like to purchase the property, it is best for them to be upfront with the seller and let them know as soon as possible, rather than breaching the contract. The seller might be willing to let the buyer of the hook and look for another buyer, rather than drawing out the situation longer than necessary. It is possible for the seller to pursue the matter legally, which could leave the buyer with a very expensive impulse purchase on their hands,” advises Goslett. “Buyers need to be 100% sure that they want the property before signing any contract,” he concludes.

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.

 

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.

 

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.

 

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.

 

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.

 

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.

 

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. 

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.

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.