What is a Fair Deal When Buying a Property?
Buying an apartment or house is one of the biggest investments that people make. It is, therefore, important to ensure that you are getting your money’s worth. There are already many articles on how you can select the right real estate agent; this article will focus on what to expect when buying a property and discuss whether or not the deal is fair. Although there are no hard and fast rules, here are some basic guidelines that you should follow when you are buying a property.
Sticker Price vs Purchase Price
Real estate agents have an unwritten rule that they will always price their properties at the maximum possible value. If the house has been on the market for several months, the price is meant to be reduced. However, this does not mean that you should always go for a lower-priced property. If the house has been on the market for several months, it means that there are no buyers. Therefore, it probably has defects or requires some repair work. In such cases, you should consider coming up with an offer that is lower than the asking price.
Introduce an Escalator Clause
When you are negotiating with a real estate agent, introduce an “escalator clause” into the contract. This clause would allow you to automatically increase the purchase price of the house by some percentage if it doesn’t require any repair work or has no defects. If you make this clause contingent on a home inspection from a licensed real estate agent, it might put some pressure on the seller to make the property saleable.
Include an Inspection Period
It is also advisable that you include an inspection period in your contract. This period should be at least 7 days. During this time, you can appoint your own inspector to look at the property. If you do not have an inspector or are not sure of what to expect, ask your real estate agent for guidance.
An Inspection Report is Critical
Once you receive the inspection report, it’s time to consider three things: repair work required, cost of repair and labour costs. Appraisers use these three elements in valuing properties. If the cost of repair is negligible, go ahead and accept the house. However, you may want to get an idea of how much repairs are likely to cost before making a final decision.
Be Aware of Cosmetic Issues
A home inspection does not usually extend to cosmetic issues with the property (for example, smudgy walls or peeling paint). Therefore, if these issues are vital to you, it might be better to negotiate for what you want. For instance, if you are buying a house because of its spacious rooms but most are small and dark, negotiate for larger windows. Remember that any changes to the property would be at your own cost.
What Is A Fair Deal?
You may have heard about properties being sold for as low as one rand. This is possible but highly improbable. When you are buying a property, you must purchase it for a fair price or slightly higher than what you can afford. If the seller is adamant about selling below market value, this might be a sign of desperation and should be taken as such.
Be Wary of Cash Deals
If the deal is too good to be true, it probably isn’t. If there is no mortgage involved and it sounds like you can buy a property for cash, think again. There could be many issues with the property that need to be sorted out first or there might even be tax issues.
A Real Estate Agent You Can Trust
How can you tell whether or not your real estate agent is trustworthy? Here are some of the most important things to look for:
- A good real estate agent will be willing to put in the time and effort needed to get their client a fair deal.
- A reputable real estate agent would usually provide a detailed and complete inspection report
- A good real estate agent should be willing to give their client the benefit of the doubt and support negotiations
You can also check whether your real estate agent has any complaints against them. Finally, research the company they work for. This should be a quick search online. It is also advisable to check whether your estate agent and their agency are registered with the Estate Agency Affairs Board of South Africa.
Don’t Assume Everything Is Fine
When buying an apartment or home, it’s easy to assume everything is fine with the property you are purchasing. However, there might be some issues that only show themselves when you move in. For instance, if your new house has a garden or is in an area that has a musty smell, it could be because the soil is unable to drain properly. As such, you will need to get appropriate drainage installed before living there. While this may seem like an unimportant issue, the cost of repairs would affect your decision to purchase the property in the first place.
If You Have Problems With The Property
If there is a problem with the property you purchased, it’s best that you address this immediately rather than wait for major issues to arise.
Repair or Negotiate
During the inspection period, you have the right to ask the owner for repairs. If they do not respond to your request, send them a formal letter citing your concerns. Generally, you should be open with the seller about any issues with their property rather than being evasive. For example, if you don’t like the colour of the kitchen, say so as soon as you can. This will prevent any problems down the road.
If the seller refuses to do any repairs, you have a few choices:
- You could consider cancelling the deal and going back to looking for another property. If you choose this option, you should get a lawyer involved or ask your real estate agent what would be the most appropriate next step.
- You could try negotiating with the seller, offering to pay less for them to do the repairs. However, you should not expect this would work in every case. You could decide to accept the property as it is. If the problems are minor, this might be a good option for you. However, if there are major structural issues that need to be repaired, then this solution could cause more trouble down the road.
Fair Deal or Not?
After considering all the factors, if you feel that the house is worth the price asked (or offered), go ahead and accept it. However, if there are some problems with the property, make sure that you negotiate until you are both satisfied with the deal.
What To Do Before You Sign The Contract
Once you have finally found a house and made an offer, you might be tempted to sign the contract immediately. However, you must wait for a few days before signing any deal. This buying guide recommends asking your real estate agent or lawyer questions about anything you do not understand before signing the contract.
It’s Your Call
These are just some of the things you should keep in mind when buying a property. It is ultimately your decision to make whether or not to buy the house after considering all these issues. Just remember that it is an investment and probably one of the biggest investments you will make in your life, so take your time before signing any deal.
It is important to be aware of all the aspects of a deal when purchasing a property, to make sure that you are getting a fair one. By understanding the concepts discussed in this blog post, as well as doing your own research, you can feel confident in making an informed purchase.
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