First time home buyer

[soltyrei]

Hi guys, we are looking to buy our first house, However it seems that banks don't want to lend you money based on what the owners are asking for obvious reasons.

but for me the question is... why is there such a big difference in what the owner wants and what the bank is willing to finance?

 

[Lupus]

Either the owner doesn't know the true value of the home, or they are trying to get as much money as possible, did you do research to see what the other houses values are in the area? Did you see them to compare them to the one you are interested in, is the value difference a certain % of what the bank is offering? Can you cover it with a deposit?

 

[soltyrei]

We did some research in the area and the area seems that it will maintain its value for a long time. but if I for example look at the rates the owner is paying and even based on that calculation the owner wants double the value.

Just to give some idea.. the owner wants 1 580 000, and the transfer costs and fees is another 100k on top of that.

I remember a while ago banks even offered you money to furnish the place and make it comfortable for you. Am I still thinking old school here?

 

[Dolby]

but if I for example look at the rates the owner is paying and even based on that calculation the owner wants double the value.

Just to clarify :

You're looking at what he pays in rates, to determine what the council says his house is worth?

I don't think you can do that. Up until 18-24 month ago, the council had valued my house at R800,000.00 while three independant agents put it at R1,200,000.00. They have since adjusted to a closer figure - but it's still out by around 10%

 

[Shred]

We did some research in the area and the area seems that it will maintain its value for a long time. but if I for example look at the rates the owner is paying and even based on that calculation the owner wants double the value.

Just to give some idea.. the owner wants 1 580 000, and the transfer costs and fees is another 100k on top of that.

I remember a while ago banks even offered you money to furnish the place and make it comfortable for you. Am I still thinking old school here?

That's until the US sub prime issue scared the cr@p out of them and now they want a deposit to cover the a$$es so that if you default they can get their money back. So yes, those days are over.

Unless anyone knows of other reasons for their strict nature?

Also, the prime rates are much higher than they used to be. One cannot get a good prime - 1.5% anymore. I think it has to do with collusion if you ask me. The banks are making huge money with the new lending rates and that probably covers their shortfall for rejecting more "risky" home owners; but now I am getting off the point.

 

[wetkit]

Look, currently it is a buyer's market.
You tell the seller what you willing to pay and they can take it or leave it.
It all depends on how deep in the **** they are.

 

[etwylite]

Get a copy of the title deed, have a look at what previous owner paid and when, allow for improvements etc. Also check what bond is registered over the property, this will give you an idea of the outstanding, and the position the seller is in.

 

[Dr Who]

In days gone by Banks used to give out 108% bonds ( this includes transfer duties costs etc ) those times are long gone due to 2 main reasons:

1) The sub prime bubble that killed the property market world wide
2) The fact that debt levels are now higher and Banks are risk adverse due to the sub prime headache that is still a close memory

We also have a situation where supply is greater than demand due to tighter lending by banks and due to over supply of new houses, due to all the property developers jumping into the band wagon during the 2005 property bubble and most of these developments only being finished during the second great depression.

In short the rule of thumb is that at best a bank will lend you 80% of the value of the house, this is so you never have a negative equity situation ( bond > Value of house ) and that a buyer normally pays 15% less than what the seller wants ( Buyers Market ).

Just a tip: I was told by a leading estate agent principle that in the next 5 years we will have low to no real housing price growth ( ie: House prices - inflation = close to zero ), and it is better renting now for a few years and saving the difference between rent and a normal bond and investing this in equity and in 5 years time take that money ( which should have had at least a 10% year on year return ) and buying a place.

Also please note that even thou I was told his I never listened as I find that I struggle to be as diligent as I would need to be, but with a bond I have no choice in the matter. Good luck and also remember we are at the lowest prime rate and probably at the bottom of the downward trend, so factor up to a 50% increase in bond payments as to ensure that you not in trouble when we start the upward cycle of interest rates.

 

[soltyrei]

Get a copy of the title deed, have a look at what previous owner paid and when, allow for improvements etc. Also check what bond is registered over the property, this will give you an idea of the outstanding, and the position the seller is in.

You know something i picked up.. some people purchased their houses for like 250 000 . And now they still want like 6 times that. :erm:

I do understand yes its an investment and all, but i think some people are just pushing it to far and sadly the agents has allot to do with it because they get commission and of course if I was an agent I would try and squeeze every sent from you (not really ).

I hope the idea of property changes so radically that its just seen as a house and not just a money making scheme. Maybe I'm just sour because its hard for me to get the house we want I want to go back to the old days(6 years ago), where luxury things like cars cost more than things you need like a house.

 

[Icarium]

We did some research in the area and the area seems that it will maintain its value for a long time. but if I for example look at the rates the owner is paying and even based on that calculation the owner wants double the value.

Just to give some idea.. the owner wants 1 580 000, and the transfer costs and fees is another 100k on top of that.

I remember a while ago banks even offered you money to furnish the place and make it comfortable for you. Am I still thinking old school here?

Can't you find out what the bank valued the property at? If all they did was look at the valuation roll, they're lazy and you should talk to another bank. If they actually did a bit of research and still came up short of what the seller is asking then chances are the seller is simply asking too much.

 

[Lupus]

You know something i picked up.. some people purchased their houses for like 250 000 . And now they still want like 6 times that. :erm:

I do understand yes its an investment and all, but i think some people are just pushing it to far and sadly the agents has allot to do with it because they get commission and of course if I was an agent I would try and squeeze every sent from you (not really ).

I hope the idea of property changes so radically that its just seen as a house and not just a money making scheme. Maybe I'm just sour because its hard for me to get the house we want I want to go back to the old days(6 years ago), where luxury things like cars cost more than things you need like a house.

People seemed to have forgotten that house prices took a plunge in 2008 and it hasn't fully recovered yet, my wife and I bought a little starter home in September in a complex, we looked at a few places there and some people were asking 60 to 70k more for their places then the one we settled on. Put in an offer to the owner and see, he might actually accept due to the fact that his pricing is unrealistic etc... Also 6 years ago cars weren't more then houses, maybe 10 years ago

 

[ToxicBunny]

I've just managed to get 145k off the price of a house that I've bought.....

Buyers very quickly realise that what they want for the property and what people will offer are two very different figures.

 

[TKD01]

In short the rule of thumb is that at best a bank will lend you 80% of the value of the house

No - I got a 95% loan a month ago... Getting 100% or more is close to impossible though.

Just a tip: I was told by a leading estate agent principle that in the next 5 years we will have low to no real housing price growth ( ie: House prices - inflation = close to zero ), and it is better renting now for a few years and saving the difference between rent and a normal bond and investing this in equity and in 5 years time take that money ( which should have had at least a 10% year on year return ) and buying a place.

Like all estate agents, this one was sucking bull out of his/her finger... ALL of Cape Town city bowl's suburbs had considerable growth (some close to 10% increase) from same period last year - that was while we were still in recession - the article was a couple of weeks back on Property24.com