So you submitted your offer and you are finally on your way to moving into your new home!
You might think that the hard work & stress are over and that the fun can start, but unfortunately, there are still a few more things that you have to overcome.
Failing to overcome these buying obstacles might result in bigger problems in the future, but identifying them and sorting them out, can lead to years of happiness.
Here are a few points of consideration for you to check & double-check before turning the new keys to your new home:
Home Buying Obstacle #1 – Home loan application is negative
A homeowner’s worst nightmare: your bond has not been approved, yet you have already found your dream home.
Even though you might think it’s the end of the world, not all is lost. It is advisable for you to get pre-approval from the bank with a written loan confirmation letter that you can show the seller of the home, if this is possible.
However, this still doesn’t mean that you are necessarily going to be approved for the bond. Certain factors could change in the meantime that could result in the bond being lost like job loss or change of employment.
Home Buying Obstacle #2 – Bank appraisal is below the purchase price
The bank providing the loan will send an appraiser to value the property to ensure that it covers their invested interest in the particular home.
The value of the home must be at least as much as you are willing to pay for it or the mortgage amount must be at an acceptable ratio to the value of the house. The bank wants to ensure that if there are any financial losses at any stage, that they can reclaim the losses and not lose out on any money.
It often happens that the bank’s appraisal is lower than the offer of the purchase price of the house, which means that a price negotiation can be implemented to whereby the seller will be asked to reduce the price of the house!
If this is not a successful negotiation, you need to pay the difference in cash. If you are unable to persuade the seller into lowering the price of the house and you are unable to afford the difference of the price in cash, it could mean a deal breaker and you’ll have to start searching again.
Home Buying Obstacle #3 – Defects are found during the home inspection
According to South African legislation, a house is sold as it is which protects sellers against any defects that might be found after the sale.
However, if the seller knew about the defects and withheld it, this clause, called ‘voetstoots’, does not protect him. Proving this, however, is very difficult.
If your offer has been accepted, you may report serious defects to the bank and they will withdraw their financing and the deal will fall through. For minor defects, it would be best to seek help from an attorney who could (re)negotiate the price.
Home Buying Obstacle #4 – Tempted to walk away from the deal
If the purchase price is less than R250,000 the OTP should contain a cooling-off period that allows you to step away from the transaction.
The Consumer Protection Act (CPA) creates an opportunity for buyers to use their right to withdraw their offer as long as the sale is a result of direct marketing. The CPA is also only applicable to transactions where the seller deals with property in the normal course of business.
You can, however, try to negotiate the cancellation of an offer. However, if these negotiations are unsuccessful, you will be charged with contract breach and you will have to pay the damages and the agent’s commission.
Take time to research pitfalls before you send through the offer on a home!
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