Advice for new home buyer in Cape Town

[Suurlemoen]

Need some general advice on the process of buying a house.
We are looking for a house to buy in Cape Town. Since this is the first time we are buying a house, the process is intimidating and frustrating. I've read a lot of advice articles but they don't seem to match up to how things really work.

People say you shouldn't rush the decision, but in the price bracket we are buying (under a million) there is so much competition! The estate agents give us very little time to put together an offer. Being inexperienced, we don't know what a reasonable offer is, and there doesn't seem to be anyone who can give us neutral advice.

Any advice would be much appreciated.

 

[AfricanTech]

Need some general advice on the process of buying a house.
We are looking for a house to buy in Cape Town. Since this is the first time we are buying a house, the process is intimidating and frustrating. I've read a lot of advice articles but they don't seem to match up to how things really work.

People say you shouldn't rush the decision, but in the price bracket we are buying (under a million) there is so much competition! The estate agents give us very little time to put together an offer. Being inexperienced, we don't know what a reasonable offer is, and there doesn't seem to be anyone who can give us neutral advice.

Any advice would be much appreciated.

1. Estate agents are only interested in making the sale so they will use every trick to pressure you into buying
2. Reasonable offer depends - if you like the house and the area, offer the asking price; if you're slightly unsure, put in 5% under; if very unsure, take a flyer at 15% under.

Recognise that demand is high, so if you really want the place, you might even consider putting in an offer that is higher than the asking price.

All of that said, the one thing you shouldn't do is rush into the decision.

Good luck - house hunting is a stressful experience.

Edit:

1. Which areas are you looking in?
2. How much 'free' cash do you have for renovations, etc
3. Don't forget about transfer fees and suchlike - that is over and above the asking price
4. Use a reputable Estate Agent

 

[JStrike]

Need some general advice on the process of buying a house.
We are looking for a house to buy in Cape Town. Since this is the first time we are buying a house, the process is intimidating and frustrating. I've read a lot of advice articles but they don't seem to match up to how things really work.

People say you shouldn't rush the decision, but in the price bracket we are buying (under a million) there is so much competition! The estate agents give us very little time to put together an offer. Being inexperienced, we don't know what a reasonable offer is, and there doesn't seem to be anyone who can give us neutral advice.

Any advice would be much appreciated.

Estate agents have an incentive to sell a property as quickly as possible. Usually this works to the disadvantage of a seller. So generally they will work in your (the buyers) favour.
However, don't get pressured into buying something. It is probably the biggest purchase you have ever made, and will probably be the biggest purchase you will make for some time to come. Buy a property you like for a price you feel comfortable with. And don't go outside that

 

[nicbst]

Need some general advice on the process of buying a house.
We are looking for a house to buy in Cape Town. Since this is the first time we are buying a house, the process is intimidating and frustrating. I've read a lot of advice articles but they don't seem to match up to how things really work.

People say you shouldn't rush the decision, but in the price bracket we are buying (under a million) there is so much competition! The estate agents give us very little time to put together an offer. Being inexperienced, we don't know what a reasonable offer is, and there doesn't seem to be anyone who can give us neutral advice.

Any advice would be much appreciated.

All I can say ito how much, is to see what the surrounding properties go for. I've seen estate agent commission rates of between 4 and 6% here in Pretoria, but they are VERY flexible... seen an agent cut off 10k from her (or her estate company) commission to close a sale. Might be different in Cape Town though.

The estate agents or private property should give hints as to how much it was bought and sold for in the past, important to detect strange price increases. One place I was looking at was in the market for R790k, while the owner bought it for R500k just one year prior, but did R250k worth of upgrades to it (She said). No way it's worth that price difference to me, and it was priced similar to much larger units in that area.

Then make sure you see the complex (if applicable) you're buying into has their finances in order, and regular maintenance is performed. Don't want to buy into a place that will look like crap in a year or two.

 

[OCP]

What AfricanTech said

+ if you have kids or plan to have, location is key for school catchment areas.

if you are new to CT it may be an idea to rent first to give yourself time to get to now the areas and where you would like to stay.

 

[Suurlemoen]

Thanks for all the excellent answers.
Most helpful.
So far I've found that some areas it's easy to find out the history of the house and nearby houses, how much they sell for, and other areas there doesn't seem to be any info available.

1. Which areas are you looking in?
2. How much 'free' cash do you have for renovations, etc
3. Don't forget about transfer fees and suchlike - that is over and above the asking price
4. Use a reputable Estate Agent

We are looking for somewhere in the Southern Suburbs - preferably nearish to Wynberg. So far we've seen properties in our price range in Ottery, Grassypark, Plumstead, Muisenberg.

We've saved up a deposit so we'll have to figure out how much of that we need to keep back for renovations.

 

[craiglotter]

1. Estate agents are only interested in making the sale so they will use every trick to pressure you into buying

This. They will throw every trick in the book at you. We were suckered by the classic, there is another buyer on the verge of signing, but if you come in this evening and do the paperwork, I'm sure that we can beat them!

 

[Pienats]

I disagree with the statement that the agent is only out to make the sale. While it is obviously to their advantage to make the sale, a good agent will never pressure you. We've only bought two houses in our life, but in neither case did I ever feel the agents were in it for their own advantage as opposed to mine. On the contrary, they did quite a lot of work to find a house for us based on what we wanted.

My advise will be to actually go to a reputable agency and talk to an agent directly. Tell them what you want/need. They will pull a list of properties that more or less match your criteria, and can often show you 3 or 4 properties in a day. That way you will also get a feel for the market. A good agent will also indicate to you how flexible a seller is with their asking price.
As for offering more than the asking price, be careful with that, once you put in an offer and it has been accepted, you are protected by that contract. The only way for you to be "upstaged" typically, is if the seller gets a higher _CASH_ offer.

Also be very careful of putting up all your savings for a deposit. Use a transfer cost calculator (something like https://www.rawson.co.za/transfer-cost-calculator) to get an idea of extra costs needed. Don't worry about who's calculator it is, the amounts are determined by SA property law. Things like transfer duty and attorney's fees need to be paid separately and can not be included in your bond usually. These amounts typically need to be paid long before bond registration anyway (which is when the bond money is paid to the seller). Typically on a R1,000,000.00 sale, this will be in the area of R55k (depending on your deposit & actual bond amount). This is the minimum of how much you need over and above your deposit.

Another thing to remember is that any fee you pay before hand (such as your deposit) is paid to the transfer attorney, who will keep it in a trust account. You will not be able to have access to that money before the sale is concluded. Also remember that any money paid in advance usually go through the transfer attorney. If anyone else (like an estate agent) asks for money to be paid elsewhere, first contact said transfer attorney to verify this. The trust account interest should be paid back to on the conclusion of the sale, but this is typically not a very large amount.

ALWAYS VERIFY ACCOUNT NUMBERS THAT YOU PAY MONEY INTO. Phone the recipient (after verifying said recipient through the transfer attorney) on a number found using a medium other than the requesting email to verify the account number in a separate channel. I'm not trying to be a scaremongerer, but on more than one occasion has a deposit been lost due to an email scam. And no-one will refund you this money.

 

[Pienats]

Just one side note. Be careful of using multiple agents. If more than one agent show you the same house and you decide to purchase that house, there might be legal issues around agent commission.

 

[Walkinseymore]

There is ALWAYS another buyer about to sign, if you believe the agent, so dont.

You can always source another house if this one falls through. In fact, make sure the agent knows you dont mind taking your time to find the right one for you, otherwise the greedy bastards will haunt you till next year Wednesday.

But also, CT is flooding with people from all over, so the prices IS very high compared to other cities.

Make sure:

- All Certificates to be done by reputable company, best to source your own, agents tend to have buddies that will sign off on anything for a few bucks.

- NB!! Sales Agreement must have a clause stating : The Seller must maintain the property in its current condition, otherwise you will have a 3 meter lawn when you move in. Transfer takes +/- 3 months to complete.

- BUILDING PLANS : Not a requirement for sale, therefor they are allmost always out of date, make sure you have updated plans as a condition of sale - very important this.

- Agent commission : No reason to pay more than 5%. Otherwise get another agent for same buy.

- Preferably hunt for your new house during winter months, so you can detect any possible leaks / water damage. People tend to fix cosmetics a few weeks before sale.

- Average Purchase Price : ask your agent for their report on the area, cant recall the software name, but everyone operates with it in CT, compares the area sales for past sales and recommended price now.

- And I cant stress enough, look out for low lying areas, proper drainage and WATER, WATER, WATER - your worst nightmare.

- And specify any fixtures you might want under Special Conditions, otherwise the aircon, swimming pool pump, burglar bars - everything - is gone when you move in.

And be prepared to renovate a LOT.

I just now had to cough up R 30k on a R 925k property, for selling it and the cost was towards electrical, plumbing and building plans that was up to shyte when I bought it in the first place. And your lawyer / transfer fees will amount plus minus R 55k for your price range.

Good luck.

 

[OCP]

I disagree with the statement that the agent is only out to make the sale. While it is obviously to their advantage to make the sale, a good agent will never pressure you. We've only bought two houses in our life, but in neither case did I ever feel the agents were in it for their own advantage as opposed to mine. On the contrary, they did quite a lot of work to find a house for us based on what we wanted.

Unfortunately having recently sold 2 and bought 1 property my experience was not positive overall.

One estate agent from one of the big "reputable" companies tried to sell us a house "in the catchment area" when it clearly was not.
(i confirmed with the school - took me 3min; something the estate agent should have done before making claims)

Another promised the earth for sole mandate and then did virtually nothing (even had a standy come and sit on Sundays)

There are good estate agents out them but just because you are dealing with one of the big companies does not guarantee it.

my 2.5c

 

[spiderz]

1. Estate agents are only interested in making the sale so they will use every trick to pressure you into buying
2. Reasonable offer depends - if you like the house and the area, offer the asking price; if you're slightly unsure, put in 5% under; if very unsure, take a flyer at 15% under.

Recognise that demand is high, so if you really want the place, you might even consider putting in an offer that is higher than the asking price.

You an't put in a higher offer.
CPT properties sell very fast. 1st offer get preference.
At the right price a property is sold, it's just a matter of who gets it first.


Also remember that you need money for the transfer/lawer costs.

 

[Pienats]

There is ALWAYS another buyer about to sign, if you believe the agent, so dont.

So what? If you really like and want the house, then you will put in an offer, if you're not sure about it, do your research. If there wasn't another buyer, then you can still get it if you want. If there was one, then simply go to the next house.

You can always source another house if this one falls through. In fact, make sure the agent knows you dont mind taking your time to find the right one for you, otherwise the greedy bastards will haunt you till next year Wednesday.

I agree with this, good advice.

But also, CT is flooding with people from all over, so the prices IS very high compared to other cities.

Also very true. If you're from Gauteng, drop your expectations of what you can get for your money by at least 30%.

- All Certificates to be done by reputable company, best to source your own, agents tend to have buddies that will sign off on anything for a few bucks.

Not sure if a buyer can dictate the company, as far as I know this is the sellers prerogative.

- NB!! Sales Agreement must have a clause stating : The Seller must maintain the property in its current condition, otherwise you will have a 3 meter lawn when you move in. Transfer takes +/- 3 months to complete.

Also good advice.

- Agent commission : No reason to pay more than 5%. Otherwise get another agent for same buy.

This is between the agent and the seller, the buyer has no say in this. Also, as stated previously, if you buy a house that was shown to you by more than one agent, you might run into legal issues. It is also extremely unlikely that two agents will list a house for a vastly different price, regardless of a difference in their commissions.

- And specify any fixtures you might want under Special Conditions, otherwise the aircon, swimming pool pump, burglar bars - everything - is gone when you move in.

Typically anything that is fixed to any structures are part of the sale. A good sales contract should have a space where the seller needs to explicitly indicate which, if any, fixtures are going to be removed.
Good idea to check for things that might not actually be a fixture. We have a cupboard in our kitchen that is loose standing which we explicitly pointed out was not part of the sale of our house.

And be prepared to renovate a LOT.

I just now had to cough up R 30k on a R 925k property, for selling it and the cost was towards electrical, plumbing and building plans that was up to shyte when I bought it in the first place. And your lawyer / transfer fees will amount plus minus R 55k for your price range.

This is more for selling the property.

 

[JStrike]

You an't put in a higher offer.
CPT properties sell very fast. 1st offer get preference.

It shouldn't happen, but it does. What quite far down the road on purchasing a property, just finished negotiating some changes we wanted to the property and specifying the air rights in the contract, sign the contract and the offer is pulled because someone else came along with a batter offer.

I also purchased a property where someone else had made an offer, however their offer had a clause where it was subject to a bond or that they had to sell their house or something. I came in with a cash offer, and beat them out. It does happen

 

[Pienats]

Unfortunately having recently sold 2 and bought 1 property my experience was not positive overall.

One estate agent from one of the big "reputable" companies tried to sell us a house "in the catchment area" when it clearly was not.
(i confirmed with the school - took me 3min; something the estate agent should have done before making claims)

Another promised the earth for sole mandate and then did virtually nothing (even had a standy come and sit on Sundays)

There are good estate agents out them but just because you are dealing with one of the big companies does not guarantee it.

my 2.5c

You had a terrible agent then. We also recently sold our house and bought another, and in both cases (the selling agent more so, I must admit) did exceptional work. We are being kept up to date about developments as things progress. We are at advanced stages, so updates have dwindled, but to be fair, things are really in the hands of the attorneys at this stage.

A good agent should also advise you very well about an accurate listing price. We were lucky that our house sold within two days, despite being listed at around R300k above the average area price, but that is also due to the agent doing a proper job in valuating the property.

Checking up on things like catchment areas is of course also a good thing to do yourself if that is important to you.

Unfortunately you can still get a bad agent from a good company, but I'm sure you're far more likely to get a good agent from a good company than from a bad company.

 

[AfricanTech]

I disagree with the statement that the agent is only out to make the sale. While it is obviously to their advantage to make the sale, a good agent will never pressure you. We've only bought two houses in our life, but in neither case did I ever feel the agents were in it for their own advantage as opposed to mine. On the contrary, they did quite a lot of work to find a house for us based on what we wanted.

My advise will be to actually go to a reputable agency and talk to an agent directly. Tell them what you want/need. They will pull a list of properties that more or less match your criteria, and can often show you 3 or 4 properties in a day. That way you will also get a feel for the market. A good agent will also indicate to you how flexible a seller is with their asking price.
As for offering more than the asking price, be careful with that, once you put in an offer and it has been accepted, you are protected by that contract. The only way for you to be "upstaged" typically, is if the seller gets a higher _CASH_ offer.

Also be very careful of putting up all your savings for a deposit. Use a transfer cost calculator (something like https://www.rawson.co.za/transfer-cost-calculator) to get an idea of extra costs needed. Don't worry about who's calculator it is, the amounts are determined by SA property law. Things like transfer duty and attorney's fees need to be paid separately and can not be included in your bond usually. These amounts typically need to be paid long before bond registration anyway (which is when the bond money is paid to the seller). Typically on a R1,000,000.00 sale, this will be in the area of R55k (depending on your deposit & actual bond amount). This is the minimum of how much you need over and above your deposit.

Another thing to remember is that any fee you pay before hand (such as your deposit) is paid to the transfer attorney, who will keep it in a trust account. You will not be able to have access to that money before the sale is concluded. Also remember that any money paid in advance usually go through the transfer attorney. If anyone else (like an estate agent) asks for money to be paid elsewhere, first contact said transfer attorney to verify this. The trust account interest should be paid back to on the conclusion of the sale, but this is typically not a very large amount.

ALWAYS VERIFY ACCOUNT NUMBERS THAT YOU PAY MONEY INTO. Phone the recipient (after verifying said recipient through the transfer attorney) on a number found using a medium other than the requesting email to verify the account number in a separate channel. I'm not trying to be a scaremongerer, but on more than one occasion has a deposit been lost due to an email scam. And no-one will refund you this money.

Very good advice above.

And yes, the Agents from reputable agencies are pretty good. There are some real stinkers out there though - one of the things to do (and sorry of the new ones) is to check how long they have been working in the area - speaks to reputation.

 

[nicbst]

You had a terrible agent then. We also recently sold our house and bought another, and in both cases (the selling agent more so, I must admit) did exceptional work. We are being kept up to date about developments as things progress. We are at advanced stages, so updates have dwindled, but to be fair, things are really in the hands of the attorneys at this stage.

I agree, also bought recently. I actually became friends with the agent, having dinner with his family tonight. And this was after the first option fell through, so it wasn't to close the deal. There are some great agents out there who care, but yes you will always have a bad apple here and there.

 

[Suurlemoen]

Thanks for all the excellent advice, very much appreciated.
Cape Town sales do seem to go very quickly.
For those of you with experience in Cape Town, what is a reasonable period for the agent to ask for an offer? We went to see a house yesterday and the agent want the offer before 1pm today, saying that there are already 4 other offers.

 

[AfricanTech]

Thanks for all the excellent advice, very much appreciated.
Cape Town sales do seem to go very quickly.
For those of you with experience in Cape Town, what is a reasonable period for the agent to ask for an offer? We went to see a house yesterday and the agent want the offer before 1pm today, saying that there are already 4 other offers.

Sometimes it's the truth, but don't allow yourself to be rushed.

I went to see a house at 10am once, the agent told me that another agent was bringing another couple around at 11 and that they were keen.

The wife and I were a bit unsure so we didn't put in an immediate offer - by 12 o clock the other couple had closed the deal.

So it goes.

We then rented for a year in the area to see whether we really liked it and eventually did end up finding a house in the area that we were happy with.

So don't feel pressured unless you really like the house.

 

[Suurlemoen]

That sounds like good advice, Africantech.