Archive | April 2015

You don’t need to say a word…

shutterstock_171921911Every agent worth their salt knows how important it is for prospective clients to understand that they are trustworthy – but not many know that those they meet will decide on their trustworthiness in just one-tenth of a second.

This was just one of the results of a recent survey by Princeton university aimed at showing just how quickly people decide what to think about others they have just met, including their status and intelligence.

During the survey, researchers at the university gave one group of students 100 milliseconds to rate the attractiveness, competence, likeability, aggressiveness, and trustworthiness of actors’ faces.

Members of another group were able to take as long as they wanted and while the assessment of other traits differed depending on the time spent looking at the faces, the assessment of trustworthiness was basically the same for everyone – one-tenth of a second.

What is more, it takes the average human twice as long as this to consciously recognise a face, which suggests that the assessment of trustworthiness (or threat) in others is something that people still do almost sub-consciously – and certainly long before any verbal interaction has taken place.

Meanwhile it is interesting to note the outcome of similar studies conducted around different characteristics over the years. These have found, for example, that people wearing name-brand clothes are generally perceived to be of higher status than those wearing non-designer garments, and that those wearing tailored clothes are perceived as being more successful in business and more likely to get promoted than those in casual attire.

A study at Loyola Marymount University found that looking people in the eye when speaking resulted in a better rating for intelligence as well as credibility, while a University of Pennsylvania study found that men with shaved heads are perceived to be more dominant than similar men with full heads of hair.

Psychologists call this type of instant decision-making about others “thin slicing” and it underlines the importance of practicing and perfecting non-verbal communication skills that will give people the right micro-clues about your personality.

How much home can you afford?

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The excellent value appreciation on their assets that homeowners enjoy is what most often convinces a tenant to take the plunge and invest in a home of their own.

But the burning question for many of these first-time buyers is how much they can afford to pay so that their monthly bond instalment will remain manageable – and the rule-of-thumb followed by most lenders and originators is that a new home should not cost more than 2 to 2,5 times your annual household income.

If, for instance, your combined annual salary is R360 000, you should be looking at houses in the R720 000 to R900 000 range at most in order to ensure that you can comfortably afford the monthly home loan instalment.

At the current base home loan interest rate of 9,25%, and assuming you paid a deposit of 10% of the purchase price, this home price range would give you a monthly instalment on a 20-year bond of between R5935 and to about R7420.

However, in terms of the National Credit Act, lenders have to take several factors other than your monthly income into account before they can approve your home loan application.

For example, they will usually also consider income ratios and stipulate that your monthly bond payment, including the principal, interest, tax and insurance, should at most not exceed 25 to 28% of your household monthly income before tax deductions.

Then they will look at your discretionary income (what is actually left after taxes and your regular expenses) and your personal debt-to-income ratio. Generally they would prefer to see that all your monthly debt repayments, like the instalments on your car or credit cards, do not add up to more than 36 to 38% of your income.

In the light of all this, the easiest way for you to determine your limits is to establish your monthly after-tax income and subtract all your expenses, excluding rent but including debt repayments and other essential and regular items such as groceries, school fees, transport, utilities and medical expenses.

The amount left over is what you would have available to cover a monthly home loan instalment as well as home maintenance and you will be able to calculate if it equates to 25 to 28% of your gross income. (Ideally, it should be much more than that, so you will be able to pay more than the minimum instalment every month and get your home paid off much faster.)

On the other hand, this exercise will give you a good handle on whether your debt repayments are eating up too much of your income every month – and whether you will need to cut down your debt load before you can think about buying a home.

Meanwhile, you should also make some provision for fluctuations in interest rates. Rates in SA have been at historically low levels for many years now, but it is predicted that they will start to rise towards the end of this year, and this will push up the minimum monthly instalments on home loans, so you need to ensure that you would still be able to afford your repayment if this should happen.

How to get the price right

shutterstock_57594769OK so you’ve decided to move, maybe to another suburb or town, or maybe just to a bigger or smaller place in the same area. But before you can carry out your plan, you have to sell your existing home – and in order to do that, you have to put a price tag on it.

And this is the exact point at which a lot of home sellers come unstuck, because they don’t understand that potential buyers just don’t care about certain things – like how you found the perfect flooring for the kitchen or why you chose yellow tiles for the bathroom instead of beige – even if you think they should.

The fact is that these people have no emotional attachment to your home so all they care about is that it is in the area they want to live in, that it is well-maintained and in good condition, and most of all, that it is priced right in their estimation.

In short, price is king and when it comes down to it, your asking price will be the one thing that determines how long it will take to sell your home. Setting the price too high will reduce the number of prospective buyers who are interested in even taking a look at it because they will immediately see it as being too expensive for the area.

This will cause the property to “stick” in the market and when that happens, it can create the perception among other buyers that there is something wrong with it – and lead them to think that they can offer you much less than it is actually worth because you are probably desperate by now.

On the other hand, if you set the asking price too low, it will probably attract lots of prospective buyers – most of them skeptical about why it is so cheap. You may well get multiple offers but you will be in trouble if they don’t drive the price of your home up to its true market value.

So, you have to price right from the outset, using tangible factors. Here are four top tips for doing so:

Get a comparative market analysis (CMA).
Ask a reputable local agent for a CMA which compares your house with similar properties that have recently been sold in the area and gives you the asking prices, sold prices and time on the market for those properties. You can also draw suburb sold price reports from property websites like Property 24.

Be fair when you compare.
For example, the age of a property may also come into consideration when buyers are looking in your area because it can affect the condition. Buyers generally expect to pay more for brand-new homes so you probably can’t expect to get as much for your 20-year-old house as people have recently paid in that new development down the road – even if the homes there are similar in size and layout.

Consider the market.
The CMA may show that similar homes to yours were initially listed at higher prices than you have in mind – but that they were on the market for a very long time and then were actually sold for much less than you would expect. If the market is quiet and you’re looking to conclude a sale quickly, you may want to lower your asking price somewhat. On the other hand, if there is high demand in your area and a shortage of supply, you may feel justified in sticking with a slightly higher asking price.

Be realistic about improvements.
If you’ve recently renovated the bathrooms and repainted the whole house, you may feel justified in increasing your asking price. But be aware that you are very unlikely to recoup the whole cost of any improvement when you sell – especially the really pricey ones like adding on a room or putting in a new kitchen. Most likely these will just make your home more attractive to more prospective buyers and help you achieve a faster sale at market value.

Why you should polish up your bathroom before selling

shutterstock_130480508As every estate agent will tell you, spotless bathrooms are key selling points when putting your home on the market – coming a close second to an attractive kitchen – and it may not be as difficult as you think to put a sparkle in your buyer’s eye.

While luxury homes sometimes offer bathrooms on the scale of a Roman bath house, with stretches of marble and impressive columns, under-floor heating, steam showers and even fridges and fireplaces these days, even a modest update of an ordinary bathroom can increase the appeal of your home and bring about a quicker sale.

What is more, homeowners can expect to recover at least 70% of the cost of any bathroom renovation once they sell, according to the latest Cost v Value report from Remodelling Magazine.

If you can afford it, you should consider replacing the old bathroom suite, having the floor and walls tiled and installing a vanity. Home improvement guru, Bob Vila, has some great DIY options to check out for inspiration.

But if you’re on a very tight budget, or need to sell urgently, try just repainting the bathroom in a neutral shade and installing a large new medicine/makeup cabinet and some additional lighting for a quick fix

Then make sure all surfaces, especially mirrors and fittings, are polished up to a sparkle, hang some new towels and add attractive extras such as flowers, candles and bottles of bath oil for a luxurious look.

For more budget-friendly bathroom update ideas, take a look at these tips to keep your budget in check.

Tips for avoiding terrible tenants

shutterstock_29218306Managing agents are the “first line of defence” for landlords when it comes to keeping problem tenants out of their properties, so they need to ensure that they have the systems and knowledge necessary to do so.

“As the laws governing the relationships between landlords and tenants become ever more complicated, rental property owners are increasingly turning to professional managing agents to help them find tenants that are not going to default on the rent, damage their property, or involve them in lengthy court proceedings,” says Shaun Rademeyer, CEO of BetterLife Home Loans, SA’s leading mortgage origination group.

In addition, they are looking for help with lease documentation, and the consequences of getting things wrong can be just as serious for an agent as for the landlord, so here are some tips for steering clear of the “tenants from hell”:

Check the credit records of all potential tenants.
Even if you can see that they will be able to afford the rent on their salary, you need to establish whether they have a history of paying their debts on time and how much outstanding debt they have, because those repayment obligations obviously also have to come out of their monthly cheque.

Check their rental history with their previous landlords.
If that is not possible, look out for warning signs such as a history of moving around a lot. Most landlords prefer tenants who will commit to longer leases.

Interview potential tenants in person.
It is never a good idea to let a property to people you have not met and taken through the property yourself. Even more importantly, never give the keys of a rental property to a prospective tenant who has not paid the required damage and utilities deposits in full.

Make sure your paperwork is impeccable.
Keep copies of tenants’ identity documents or passports as well as their proof of income such as a contract of employment and most recent pay slips. You will also need their written permission to obtain a copy of their credit record and, of course, a copy of the lease and any supplementary documents.

Subscribe to a good online rental property management system.
This will help you track the rental payments, municipal account payments, inspection dates and lease renewal dates for each property in your portfolio, and to alert you immediately if something goes wrong. If a tenant defaults, you need to be aware of it as soon as possible so that you can inform the landlord and start taking action to remedy the situation right away.

Listen to your instincts.
If you feel uncomfortable renting to someone even when all the information and documentation they provide seems fine, don’t give them they keys until you’ve run a few more checks. If you’re an experienced agent, the chances are that your instincts were right and that you will find out not all was as it appeared to be – and be saved from a potentially costly mistake.

Downsizing now not a definite for seniors

shutterstock_113426698Downshifting now does not always equal downsizing among homebuyers of retirement age, according to a new study by Bank of America Merrill Lynch conducted in partnership with Age Wave.

The aim of this research was to explore the priorities and concerns of retirees and pre-retirees when choosing the homes and communities they hope to live in during retirement, and it found that as people approach the age of 61, they feel increasingly free to choose where they most want to live, without any constraints related to work or family responsibilities.

Also, those who have already retired by this age are more than twice as likely to say they are free to choose where they want to live when compared to pre-retirees (67% compared to 30%).

The study, entitled Home in Retirement: More Freedom, New Choices, also found that 64% of retirees are likely to move at least once during retirement, with 37% of respondents having already moved and 27% anticipating doing so – often to a new part of the country as well as to a new home, with the aim of “downshifting” to a slower paced life in a peaceful environment.

The top motivations for retirees to move include being closer to family (29%), reducing home expenses (26%), and changes in health (17%) or marital status (12%).

However, although the common assumption is that retirees will also always downsize when they move, the study revealed that almost half (49%) of the retirees who had already moved had not downsized at all – and that 30% had in fact moved into larger homes.

Their top reasons for upsizing in this way were to have a home large enough to accommodate family members on extended visits (33%) or one that would comfortably accommodate a multigenerational living arrangement.  One out of six (16%) said they had at least one “boomerang” child who had moved back in with them.

Meanwhile among those retirees who did downsize, the main reasons for doing so were greater freedom from the financial (64%) and maintenance (44%) burdens of a larger home.

Commenting on these results, David Tyrie, head of retirement and personal wealth solutions for Bank of America Merrill Lynch, said that with increasing longevity and greater freedom, it was not surprising that so many retirees were striving to make their homes even more fulfilling – but noted that that achieving your dream home in retirement required careful forethought and preparation.”

Indeed, says Shaun Rademeyer, CEO of BetterLife Home Loans, SA’s leading mortgage origination group, whether retirees intend moving or staying put, and downsizing or upsizing, they need to carefully consider the expenses associated with their current goals and future priorities, including potential challenges during later years.

“This is why we always advocate that homeowners do their best to pay off their home loans as soon as possible and free up funds for the future, whatever that may hold for them.”

The surest and easiest way to achieve this goal, he says, is to start paying a more than the minimum monthly bond instalment as soon possible. This will ensure that bond is paid off in far fewer than 20 years and deliver a surprisingly large saving in interest charges over the life of the bond. “What is more, it may enable you to supplement your retirement savings for five or even 10 years by the amount that you would otherwise have been paying off your home loan.”

Get a better interest rate and save for your future

shutterstock_178575596Even in the current property market when there is less supply than demand in most popular areas, you would probably be very reluctant indeed to pay R50 000 or more over the market value when buying a home.

“But if you don’t take as much care when ‘shopping’ for a home loan as you do when selecting the property you want, you could easily end up paying at least that much extra for your home in the long-run,” says Shaun Rademeyer, CEO of BetterLife Home Loans, SA’s leading mortgage origination group.

“On the other hand, if you can cut just 0,5% off your home loan interest rate at the start, the savings on the eventual cost of your home could give your retirement savings a significant boost, or perhaps help to put a child through university.”

Although the current prime rate is 9,25%, he notes, most borrowers are only able to secure home loans these days at interest rates that are one or even two percentage points above this – or an average of around 10,75%.

“And at that rate, the total interest payable over 20 years on a R1m bond, for example, is around R1,44m. At an interest rate of 10,25%, however, the total interest payable over 20 years drops to R1,36m – or by R80 000.

“What is more, the lower interest rate will make your monthly bond repayment more affordable, creating the opportunity for you to pay more than the minimum and generate even bigger interest savings over the life of the bond.”

Of course, Rademeyer says, you will need to be in great financial shape to be granted a home loan at a preferential interest rate – and even then are not likely to succeed without the help of a reputable mortgage originator who will personally motivate your application and submit it to multiple lenders if necessary.

“And there is no ‘quick fix’ for a blemished credit record, so you should start polishing yours several months or even a year before you apply for home loan pre-approval.

Deal with any bad debt judgments against your name, and try to pay off any remaining debt until all your balances are down to 30% of your available credit. Don’t open any new accounts and, most importantly, pay all your bills on time, every month.”

In addition, he says, you need to save cash to cover a substantial deposit on your new home and the additional costs of purchase such as bond registration, legal fees and transfer duty if applicable. (There is no transfer tax payable on pre-owned homes priced at R750 000 or less.)

“Third, you need to work out home much you can comfortably afford as a bond repayment every month, then go through all this information with your bond originator to get an indication of how much you should be able to borrow – and whether you’re ready to apply for pre-approval at a beneficial interest rate

“After that, you will be able to go house-hunting with much more confidence, and secure in the knowledge that your dream home is not going to cost you more than it should in interest over the next 20 years.”

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