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Purchasing a house

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Faerie
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« on: May 11, 2011, 10:50:31 AM »

What a SCHLEP!!!

We've found a beautiful little home purely by chance last week Sunday which we instantly fell in love with. Impulsive people that we are, we made an offer which was accepted.  So Monday we bunk off work to go do the necessary paperwork.

What an eye opener.... Our current home was bought in the early '90's and it was a simple matter of signing a couple doc's, being granted a bond which covered everything (and back then I was POOR and paying it was gatskuur every month), and moving in.  Now, never mind being able to afford it quite comfortably, they grant a 90% loan, which means you have to dig out a couple hundred thousand as a deposit, and then you request an approximation of the attorney's fees.... which is another hundred grand or so....

Bloody hell, no wonder the housing market is in a slump, you have to be flipping well off with SAVINGS (or a few policies to cash in) before you can even consider buying a house.

We're average earners, and although affordability for the price range is not a problem for us, I'm just wondering how on earth does a normal person who needs to pay rent (we dont, current house paid up), save up an average of R300 000 for a house?Huh?
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Mefiante
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« Reply #1 on: May 11, 2011, 11:17:16 AM »

This is one market that is in dire need of a radical shake-up in SA.  As you say, there are many additional costs falling on the buyer that you only become aware of subsequently, chiefly deposits, attorneys’ fees, transfer duties, occupational rent and, if you sell your existing home, more attorneys’ fees and agents’ commissions.  Also, you have to deal with several different parties instead of just one (unless you’re wealthy enough to pay someone else to do this for you), which entails something of a tightrope act with schedules.

The only reason I can see that the process is so inordinately cumbersome is that it protects the interests of those who benefit from it, namely attorneys, the Deeds Office (i.e. state coffers) and the lending institutions.  As per normal, Joe and Jane Soap get the short end of the stick.  In the past, it was the case that a family rarely bought more than one house during their lifetime, so it would have been mostly a once-off thing.  These days, people tend to upgrade their homes periodically, which means that they need to wade more than once through the tricky mire that is property trading.

If one compares buying a new house to buying a new car, the latter is considerably less cluttered.  You speak to one, and only one, sales agent, saying, “This is the car I’ve got.  I’d like to buy that one.  My finances are thus.  Could I afford it?”  The salesman will soon give you an answer, detailing the deal: trade-in (if any), deposit, additional costs, instalment, terms, contractual obligations, etc.  Then, if you decide to do it, you sign the papers and get your new car very shortly thereafter.

Now why is it not possible for property trading to follow a similar model?  They get it right in New Zealand, for example.  There are far too many people standing in line with hands out, wanting their slice of the pie.  That’s why it’s not possible in SA.

This doesn’t change the fact, though, that the major lending institutions in SA are in a unique position to remedy the situation to a much simpler and more equitable one should they choose to do so.

'Luthon64
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BoogieMonster
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« Reply #2 on: May 11, 2011, 11:21:35 AM »

Quote from: Faerie
and then you request an approximation of the attorney's fees.... which is another hundred grand or so....

 WTF!!!!! I bought a house (just under a bar) recently and the attorney fees were ridiculous, but nowhere near 100k. It was a bit of a mess because there were 2 sets instead of 1, but I still got away with around 25k in attorney fees.

Also, the 90% thing everyone is told is a rule, but I actually got 100%, however my credit score had to be sterling and I bought "under my means". Which simply means I wasn't pushing that crazy threshold everyone else tries to push, I really didn't want to over-extend because I still have to get some furnishings, etc. sorted out and must still eat too. I was told I am a very, very big exception (and 1st time buyer too) with this, but it is possible.

The assumption is usually you get 90% as a 2nd time buyer because you can flog your previous place.

I agree that buying a house is no longer something a middle-class family can really look at without getting really, really depressed. I think affordability is going out the window, even while our market is supposedly in a slump. Mostly this is a symptom of not being able to get a 105% bond anymore and suddenly people have to ante up costs up front.
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Tweefo
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« Reply #3 on: May 11, 2011, 11:33:45 AM »

In the end it is supply and demand that determines the price. 100% loans to everybody and the prices will, as they did, skyrocket up. I think a 10% deposit is a good thing. Now the attorneys (my pet hate) and their fees...
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GCG
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« Reply #4 on: May 11, 2011, 11:55:16 AM »

my other half and i have, ironically, allso been having the 'house' conversation this weekend.
his folks have an awesome place, but will be at least 5mil.  he can flog his tiny, noisy, bottom floor apartment for a mil.  who knows how much the bank will give me.
at a push, we can get togehter 2 mil maybe, this will have to include transfers cost and shark fees.
we even said we are willing to get an old fall-apart, and fixing it up as we go along.  or buying on auction.
we both know absolutely jack-all about auctions. 
on my own, i will never, ever, be able to afford a home.  and greedy landlords all over the country is laughing all the way to the bank.
why isnt there some sort of governing body to regulate house-prices?  the rich keep getting richer, the poor rent, or squat.
i would have said, fine let's buy a flat. but i have two dogs, and between the two us,w e have 8 cats.  and desperately need my privacy, and a garden, and trees.  and quiet. 
have no idea how the hell we are going to figure this out.
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Faerie
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« Reply #5 on: May 11, 2011, 12:46:12 PM »

Quote from: Faerie
and then you request an approximation of the attorney's fees.... which is another hundred grand or so....

 WTF!!!!! I bought a house (just under a bar) recently and the attorney fees were ridiculous, but nowhere near 100k. It was a bit of a mess because there were 2 sets instead of 1, but I still got away with around 25k in attorney fees.

The bulk of course, goes to the guffernment.... I should have stated more clearly instead of lumping it all under "attorneys"

The quote I got was R66000 - Transfer duties ; R13400 - Registration and R5700 - Bond initiation fees, which comes to around R85 100, lovely.

Its not very amusing.
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Faerie
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« Reply #6 on: May 19, 2011, 13:53:10 PM »

Somebody loves me....  I just received notification of a 100% loan!!!!

 Grin Grin Grin Grin Grin Grin Grin Grin
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Brian
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« Reply #7 on: May 19, 2011, 15:20:03 PM »

Somebody loves me....  I just received notification of a 100% loan!!!!

 Grin Grin Grin Grin Grin Grin Grin Grin
You see! There is a god! Well done!  Grin
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GCG
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« Reply #8 on: May 19, 2011, 15:24:53 PM »

i went and did my own research, and anywhere in sandton/randburg/fourways (anywhere where i dont have to trek for hours to get to work),  i need to drop at least two mil.  repayment for that is lik R25 000 p/month.  then, as you said, there's lawyer's and transfer fees.  reconnection of lights and water.  occupational rent.  estate agent commisions.
then you get nice little surprises in the form of levies and taxes.  and insane utility accounts.
at the end of the day, you need R30 000 just to stay in the house, nevermind eat, buy toiletpaper and catfood, pay your creditcard and petrol.
how the flying freck are the middle class supposed to afford buying a home?
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Faerie
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« Reply #9 on: May 19, 2011, 15:41:03 PM »

Its a horrendous process, and I'm counting myself extremely fortunate for this little bit of news. I now only need to go dig up the attorney's fees etc, which makes life a little bit easier.

Fortunate thing about this particular house is that it is on pre-paid electricity already, so its only rates and taxes which will come from the council (I'm unfamiliar actually with the pre-paid electricity thing, so if anybody knows whether its worth-while or not, please inform me - I'm under the assumption that its a fortunate thing)

Anyone want to buy a bike?
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st0nes
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« Reply #10 on: May 19, 2011, 16:37:22 PM »


Fortunate thing about this particular house is that it is on pre-paid electricity already, so its only rates and taxes which will come from the council (I'm unfamiliar actually with the pre-paid electricity thing, so if anybody knows whether its worth-while or not, please inform me - I'm under the assumption that its a fortunate thing)


Prepaid electricity is great.  I've had it in CT for years and never had to worry about the council stuffing up bills.  You can see at a glance how much you're using and when I run low, I just top up from the web.  It's extremely convenient.
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Brian
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« Reply #11 on: May 20, 2011, 07:49:21 AM »

I had it in Dar es Salaam...it works great. I tried to convert to it on our farm here in KZN but was told that it's only for townships??? Neo-apartheid?  Huh?
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Faerie
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« Reply #12 on: May 20, 2011, 07:51:46 AM »

I had it in Dar es Salaam...it works great. I tried to convert to it on our farm here in KZN but was told that it's only for townships??? Neo-apartheid?  Huh?

Odd?  I know of a couple houses here that have it, and we're greater suburban Gauteng. Maybe go enquire at another counter.....  Undecided
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Faerie
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« Reply #13 on: May 31, 2011, 09:35:16 AM »

Bloody 'ell, this is an almost traumatic process.  So we've got the bond, almost have house, scraped together the attorney (and other) fees and then we get yet ANOTHER phone call - we both need life insurance, and no, the current insurance we have already is inadequate....  WTF!!

So the chap comes to see us, assures us that no medical needs to be done, just sign here....

Its a week later, both the S/O and I had to subject ourselves to a mosquito to check our HIV status (and my cholestrol), and today, we're supposed to go do a full medical (which apparently consists of a blood pressure test and being weighed like cattle). What annoys us though, is the fact that we were ASSURED that this would not be necessary, and then they come after the fact and disrupt our lives.

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GCG
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« Reply #14 on: May 31, 2011, 09:48:49 AM »

don't let it slide faerie.  phone that bloke, and take him on about it.  the more we stand up for our rights, and bring bullshitters to book, the less likely they will be to freck around with us. Shocked
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Faerie
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« Reply #15 on: June 13, 2011, 14:10:13 PM »

Damn, but I have a lot going on in my life right now.

All the drama is now done, attorneys paid, waiting for notification that its being lodged and 10 days after that it should be registered and dusted and ready for us to move in.

which brings me (foolishly at this point of time), to have a good little look at my monthly budget.....

Gark!!!!!

we're going to be piss-poor for the next year at least until the car's been paid off....  Embarrassed
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Hermes
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« Reply #16 on: June 13, 2011, 15:43:21 PM »

...and then we get yet ANOTHER phone call - we both need life insurance, and no, the current insurance we have already is inadequate....  WTF!!
Faerie, I vaguely recall that life assurance as a precondition for a home loan is illegal, but I could not find anything on this topic on the internet and cannot vouch for it. The bank certainly cannot force you to use their choice of assurance company.
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steveweiss
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« Reply #17 on: October 23, 2011, 09:17:05 AM »

If a person has life cover equal to or greater than the loan amount one can cede this cover to offset the loan balance without taking out new cover.  Many banks no longer require life cover in any case, but it is in the best interests of the borrower to have the protection of one's major asset in the event of death or disability rather than have the property repossessed.  Most South African are underinsured, and a reputable assurance will underwrite the risk prior to claim, so medicals will usually be the the case, and always an HIV test.  The question is how does the need for debt cancellation cover integrate with one's overall portfolio since cover for a home loan isn't the sole purpose of having cover in most cases.  It sounds like you need the advice of a financial planner rather than a bank employee or inexperienced representative.
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themyst1971
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« Reply #18 on: October 25, 2011, 06:27:11 AM »

As a single male earning a good salary, no matter what I do, I don't earn enough on my own to even start asking for a loan.
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steveweiss
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« Reply #19 on: October 25, 2011, 07:36:05 AM »

There are options.  1.  pay rent and invest the difference between what a bond payment would be versus the rental expense.  Then you have a cash fund and liquidity that you wouldn't have with a home loan.  2.  purchase a property in a partnership or with the assistance of parents.  On the other hand, renting avoids paying rates and taxes and maintenance costs as well as attorney's fees, transfer costs, and estate agent's commissions.  One also can change location rather more easily than in owning a property.  So, property ownership is not all one-sided.  Those who haved purchased properties over the last 3-4 years have been net losers from an investment point of view.  In addition, bond payments can increase rapidly and by large amounts when inflation is an issue or the currency is under pressure, but one would be limited in one's exposure to increases under a lease agreement. Many people have lost their properties when they haven't been able to keep up with bond payments, but renters have largely escaped from that crash.
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BoogieMonster
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« Reply #20 on: October 25, 2011, 09:45:13 AM »

Indeed BUT a property owner does not get yearly increases like a renter does. He pays a flat fee p/m for 20 years (in theory) plus or minus rate adjustments. The first 3 years or so is the real bitch. The trick is one must have enough income to surmount those 1st couple of years. And trust me as someone who bought a property in the last year, that first year is a b****. The transfer fees, lawer fees, rates, levies, utilities...  add up to a crapload really quick. As a single person, owning property is a very hard thing to do, and I don't see it getting easier in future. Sadly, I don't live in the time of my parents when these things were much more possible for middle-class families.
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Faerie
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« Reply #21 on: October 25, 2011, 10:55:34 AM »

Indeed BUT a property owner does not get yearly increases like a renter does. He pays a flat fee p/m for 20 years (in theory) plus or minus rate adjustments. The first 3 years or so is the real bitch. The trick is one must have enough income to surmount those 1st couple of years. And trust me as someone who bought a property in the last year, that first year is a b****. The transfer fees, lawer fees, rates, levies, utilities...  add up to a crapload really quick. As a single person, owning property is a very hard thing to do, and I don't see it getting easier in future. Sadly, I don't live in the time of my parents when these things were much more possible for middle-class families.
I agree with Boogie.  I bought my first house at age 23, and managed subsequently to upgrade every 7 - 8 years.  My last house I paid up within 7 years and I didnt intend to buy again until the S/O waltzed into my life and upset everything. Not that I mind.  It was a much more complicated process this time around, and far more expensive than any of my previous homes cost (I'm not referring to the actual purchase price here).  It is still, imo, a worthwhile investment, paying rent never did it for me, and the knowledge that "home" will remain so until I decide differently brings a sense of security to my life. Nobody can give me notice and I dont have to abide with anybody else's rules either. If you can afford any type of home at this point of time - regardless of how small - go for it, pay it off as fast as possible and upgrade.  The interest rates are the lowest its been for years, and you can fix it for two years which would give you some security initially.  If you're  a first time buyer, you'll most likely be considered for a 100% loan, and you'll only need to scrape together attorneys/transfer fees. Go have a look at the various bank's sites for "distressed" properties, some good bargains there.
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steveweiss
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« Reply #22 on: October 25, 2011, 13:14:41 PM »

There are advantages to "homeownership" over time, but one is also exposed to fluctuating interest rates, increasing rates and taxes, changing neigbourhoods, maintenance costs, economic recessions and illiquidity.  Being a financial adviser with Discovery I think that one should also include the cost of bond cancellation cover in the event of death and disability as part of the cost picture.  Every individual is different and has different priorities, so one must weigh one set of values against others.  I personally prefer ownership (shared with the bank which lent me the money) but that is not a one size fits all prescription.  One's age, income, family responsibilities, health, job stability and other factors may result in one option being preferable to another.   
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GCG
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« Reply #23 on: October 25, 2011, 13:29:39 PM »

i would love to own a house.  what i can afford, is a matchbox.  matchboxes dont allow dogs, cats, rats, etc.  thus, rental it is for me.
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BoogieMonster
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« Reply #24 on: October 25, 2011, 14:27:02 PM »

Almost forgot to mention, you get to keep a portion of the money. Yes as you point out, in an illiquid asset. But still. It helps to pay for your dwellings in the future too.
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« Reply #25 on: October 25, 2011, 16:05:08 PM »

Do you mean that you create equity in the property over time?  Yes, but one must not be misled.  One needs to do an accurate evaluation compared to renting an equivalent property including all of the expenses pertaining to homeownership and attribute a time value to those amounts and compare that total to having invested the difference at the same rate of return minus rental costs.  The tax issue is also a factor to include.  An unsalable property can be a burden in poor real estate markets or if one's tenants do not care for the property. 
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