Archive | August 2014

How to buy a house when sellers are in charge

A-Kaizen-Leaders-Role

When there’s a shortage of well-priced housing stock as there is in SA now, buyers have to learn to deal with more competition for those homes.

“For several years after the 2009 recession, there were more homes for sale than buyers,” says Shaun Rademeyer, CEO of BetterBond Home Loans, SA’s biggest mortgage origination group, “and buyers got used to being able to pick and choose between several options and being able to take their time over purchasing decisions.

“But historically low interest rates and steadily rising demand have absorbed just about all the excess stock, and with developers having been so cautious about bringing new projects to market for the past few years, a clear shortage of homes for sale has now arisen in many popular areas. And the result is that an increasing number of buyers are finding themselves in the unfamiliar position of having to compete with other prospective buyers for the properties they want.”

However, he says, a home purchase is still a complex transaction, and they should take care not to make mistakes in the heat of the moment that could cause them many years of financial regrets. “The most common mistakes that buyers in a competitive market make, is to go into that market without enough cash.

“A lot of lower-priced homes are now being sold for cash to buyers who have spent the past few years preparing for home ownership by ruthlessly eliminating debt and saving up every spare rand so that they won’t have to take out a home loan. It is very difficult to compete with such buyers unless you, too, have cash in hand – at least for a sizeable deposit and all the transaction costs.”

BetterBond also strongly suggests, he says, that buyers who do need home loans to finance their purchases clean up any blemishes on their credit records and work with a reputable bond originator to obtain pre-approval for a home loan before they go house hunting. “This definitely helps to give sellers the confidence that if you do make an offer to purchase, you will be able to obtain the necessary loan and go through with the transaction.”

Another mistake that prospective buyers make, says Rademeyer is to put the car before the home. “Your debt-to-income ratio is one of the first things lenders look at when it comes to assessing how well you’ll be able to afford mortgage payments, so it’s very important to have as little debt as possible before you go looking for a home to buy.”

Next, he says, prospective buyers should be sure to actually visit the areas they are interested in, and find agents they can work with who are familiar with these markets and the actual selling prices that are being achieved there – before they start going to show houses and making offers.

“Being able to go through home listings online is wonderfully convenient, and enables you to narrow down your choices to homes that look like they will meet your needs and your budget. But just as it’s wise to visit an area at different times of the day and week to get a feel for what it’s really like – there really is no substitute for a trained and reputable agent who really knows the local property market and is prepared to share this expertise.”

Then, no matter how competitive the situation is, Rademeyer says, buyers should take their time when viewing properties – and not hesitate to call in a professional home inspector if they have any doubts or questions. “It’s all too easy to miss things that could be very expensive to repair in the excitement of finding a home you like and the heat of a ‘bidding war’ with other buyers.

“But you should never, ever let yourself be pressured into making an offer unless you are absolutely satisfied that the property is sound and in good condition.”

And finally, he says, homebuyers should try to leave their emotions out of things when viewing properties and making offers. “For one thing, this is a major financial decision that will undoubtedly affect their lives for many years, so they should try to make it with a clear head. And for another, it is worth bearing in mind that most sellers are hoping for an offer from someone who is calm and collected and serious about buying their home.”

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How to pick the right agent

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There are very few things we buy and sell that are worth more than a property, so whether you are selling your lifetime home or an investment apartment, finding the right estate agent to work with is essential.

And research is a critical first step when making that choice, says Shaun Rademeyer, CEO of BetterBond Home Loans, SA’s biggest mortgage origination group.

“There are many different agencies, and you should look at a few to get an insight into how they work. Since the agent you choose is going to represent you and your property, it is important to check that he or she knows your area well and what other properties there have sold recently or are currently for sale.

“An agent who really knows the local scene will be able to assess your home as it sits in the market, alongside similar properties, and give you invaluable help when it comes to setting an asking price. He or she will be able to give you a thorough snapshot of the market in your area and surrounding areas, and will also know about schools, transport and other features that will be appreciated by prospective buyers.”

Secondly, he says, you should only work with an agent with whom you feel comfortable. “You will need to be very honest with your agent during the selling process so need to choose someone you feel you can communicate with easily and who is ‘in tune’ with your expectations.”

Thirdly, Rademeyer says, you should always check results and references before you decide to work with a particular agent. “Ask for the hard facts about properties the agent has sold recently, including actual prices achieved compared to asking prices, and how long the homes were on the market. You should also contact recent clients and ask for their feedback on the agent’s performance.”

BetterBond says buyers are still keen, despite rate increases

Home soldThe latest statistics from BetterBond Home Loans, SA’s leading mortgage origination group, show that the number of home loan applications received in July was actually 2% higher than the number received in July last year – despite the two interest rate increases that have been announced this year.

“This speaks to the ongoing strong demand for housing as the backlog built up after the 2008/09 recession continues to spill into the market,” says BetterBond CEO Shaun Rademeyer.

“There is more evidence for this as home prices continue to increase in the face of dwindling supply. According to our statistics, the average home price showed a year-on-year increase of 10,75% in July when it reached R906 407. In the same period, the average home price paid by first-time buyers rose 7,63% to R639 071.”

The Betterbond figures also show that the total number of bonds approved in the 12 months to end-July was 3,34% higher than in the previous 12 months, and that the total value of bond approvals showed a year-on-year increase of 6,46% at end-July to some R38,8 billion.

In addition, the average approved bond size has increased by almost 3% in the past 12 months to R755 586, and the average bond approved for first-time buyers has increased by almost 1% to R585 287.

And at the same time, the average percentage of purchase price required as a deposit has shown a 3,62% decline year-on-year, while the average percentage of purchase price required by first-time buyers has declined by 7,17%.

“Nevertheless, we are expecting to see some contraction in the market in the remaining months of this year as affordability issues begin to bite, especially if there are additional interest rate increases, as predicted.”

Such increases obviously make it more difficult to qualify for home loans in terms of the household disposable income required by the banks, says Rademeyer, and also tend to make consumers wary of committing to any new debt such as a home loan.

“For now, though, it is worth noting that the number of applications initially declined by one bank but subsequently approved by others showed a 4,34% year-on-year increase in July – and that the number of applications declined by the borrowers’ own banks actually rose 7,88% in the same period.

“It is thus becoming even more important for buyers to work with a mortgage originator that will not only motivate individual applications, but is able to submit them to multiple banks, in order to secure the best result for the prospective home buyer.”

BetterBond’s overall bond approval ratio in the past 12 months has been 75%, and the total value of applications “rescued” after initially being declines was R18,44bn.

Homes that film and television have made famous

Cinema and television has brought us experiences rich with iconography over the years, but one of the most iconic – and yet least explored – fixtures of the filmmaking process is the finding of an actual house for the fictional heroes to call home. Do these homes really exist? Are they owned by real people? And if so, where are they? Read on for more.

Breaking Bad

The home used for Walter White in Breaking Bad borders on being an American landmark these days. It’s a testament to the show’s popularity that, in the lead-up to the final ever episode of the AMC show, thousands of fans flocked to Albuquerque in New Mexico to see the famous house in person.

Guess what? It’s a real home, owned by Fran and Louie Padilla. They’ve lived quiet lives in the house since 1973, but in the last five years, they’ve gotten used to seeing Breaking Bad fans stopping their cars outside to have a closer look at the ‘White House’.

Fran Padilla is grateful for the exposure, though, because it’s enabled her to meet interesting people from all over the world. Still, she might just be relieved the show has wrapped now.

Did you know?

Vince Gilligan originally wanted the Padilla pool in the backyard to be covered up. The production team refused and the poolside scenes were written in to the script.

Modern Family

This popular Emmy-award winning sitcom is all about the family, which makes the family home of Phil Dunphy and co. an important aspect of the story.

The real-life house is situated in L.A. and recently went up for sale. Asking price? Only $2.3 million. It’s over 2, 500 square feet and has 4 bedrooms and 5 baths. Best of all, you’re getting a prime spot that, on television at least, the Dunphys call home.

Did you know?

Should the new owners refuse to have their home filmed for the show, the Dunphy family will be forced to move.

Fight Club

Not every home on set is a real house, and in Fight Club the production crew actually built an entire house on an empty lot in California to capture some of the movie’s most iconic scenes. If you’ve seen David Fincher’s masterpiece, you’ll recognise this degraded home which is the abode in which Brad Pitt and Edward Norton’s characters take up residence.

Did you know?

The house looked pristine when it was first built. Over the next few days, the crew actively degraded it to give it its signature weathered look.

The Godfather

As Godfather and leader of a powerful New York crime syndicate, the novel about the fictional Vito Corleone depicts a man living the life of luxury. So when it came time to direct the film incarnation, a suitably grand abode needed to be chosen as Vito’s base.

The real home is situated in Los Angeles and is 50, 000 square feet, with 20 bedrooms and 40 bathrooms. It also sports a home theatre and a nightclub. Not bad at all, and it can be yours to rent, providing you’re prepared to part with $600,000a month. Alternatively, you can buy the home for nigh-on $100 million.

Did you know?

JFK and his wife once stayed at the home on holiday.

Batman Begins

Image credit: www.epr.co.uk

Image credit: http://www.epr.co.uk

When Chris Nolan decided to reboot the Batman franchise, he needed a suitably grand estate the Caped Crusader could call home. After location scouting, it was decided Mentmore Towers in Buckinghamshire would do the trick, a 19th century mansion styled in the image of Jacobean and Elizabethan homes. The house is listed as a Grade I home in its native England, meaning it is “of exceptional interest”, and should be preserved at all costs.

Did you know?

The previous owner of Mentmore, Simon Halabi, was declared the 14th richest person in Britain in 2007, with a net worth of $4.3 billion. Three years later he went bankrupt.

Don’t let those student loans linger too long

dream home loan

The students of today should be the homeowners of tomorrow, but unfortunately many of them are now getting into such debt by the time they qualify that it may be years before they can even think about buying property.

“Young South Africans are generally committed to the idea that education is the best investment they can make in their future, but the high costs of obtaining a tertiary qualification are driving more and more of them to rely on student loans from the banks or the National Student Financial Aid Scheme (NSFAS),” says Shaun Rademeyer, CEO of BetterBond Home Loans, South Africa’s biggest mortgage origination group.

“However, if they don’t want to damage their home-buying prospects and be burdened by debt long after they have qualified, they really also need to learn how to manage those loans and commit to paying them off as soon as possible.”

The growing student debt problem, he says, is reflected in the fact that adult children now often continue to live with their parents for many more years than previous generations did, while they try to repay their loans – and that, as BetterBond’s statistics show, the average age of first-time homebuyers in SA has advanced from 27 or 28 in the 90s, to 34 or 35 now.

“And the extent of it becomes clear when one considers that the NSFAS is currently making about R9 billion worth of loans to 400 000 students a year, but only receiving about R400 million in repayments a year.”

The major reason for all this lingering debt, Rademeyer says, is obviously the difficulty that many new graduates currently have in finding employment – because those who receive loans from NSFAS don’t have to start repaying those loans until they are employed and earning at least R30 000 a year.

“However, what many don’t seem to realise is that the interest on those loans continues to accrue at 4% a year, so the longer they take to find a suitable job or to make another plan to start making repayments, the bigger the total debt grows. We know of several cases, in fact, where it has taken borrowers twice as long to pay back their loans as it took to get their qualification.”

Lifestyles have changed, too, he admits, with many graduates preferring to rent rather than buy a home in order to “keep their options open” to travel or work overseas, and people generally waiting longer to marry and start a family than in years gone by.

“But increasingly we see that old student debt is a significant obstacle for many who are ready to buy their first homes, because it prevents them from being able to qualify for home loans and may result in them having to delay their purchase plans by months, if not years.”

On the other hand, Rademeyer notes, students and recent graduates who quickly meet all their student loan obligations are laying the foundations for a good credit rating, which will undoubtedly mean easier and quicker access to mortgage finance – and to their own homes.

“And because the benefits of home ownership are enormous and lifelong, we seriously recommend that all those who are considering taking out a student loan first ensure that they are properly informed about the total they will have to repay – which is the amount borrowed plus all the interest – and how long that will take.

“Our stance is that the reason for taking the loan must be important enough to justify the extra money they will have to pay back in interest, and that if it is not that urgent, they may actually do better to work and save for a few years and then fund their own studies.”

As for those who are currently studying with the aid of a loan, he says, they should be very careful to keep the total amount borrowed as low as possible, by keeping a tight rein on their budgets.

“They should use public transport whenever possible, for example, or join a lift club instead of using their own car. If living away from home, they should try to share accommodation and food costs. They should also watch their expenditure on books and especially on cellphone and internet costs.

“If it is at all feasible, they should also get some sort of a part-time job – not only for the extra money they will earn but for the work record and experience they will gain. This will undoubtedly make it easier to find proper employment once they qualify so that they can start repaying that loan as soon as possible.”

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