Things to consider when buying a house

Monday, June 24, 2019

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BUYING a house, especially when it's your first home, can be quite intimidating. It is probably the biggest purchase you will ever make, and instead of relishing the moment as you inch closer to accomplishing your goal, you are often left feeling burdened by legalese, which makes the entire process a bit overwhelming.

Fortunately, realty associate at Golden Gates Realty, Leah Carter, said you don't have to navigate this process alone.

“If you are thinking about making the step to owning your own home, then you are taking a step in the right direction. Acquiring a house can be tedious and so the general recommendation is that purchasers use a realtor and attorney-at-law to achieve same,” Carter advised.

She said that once the purchaser engages the realtor and attorney, they will be tasked with assisting with due diligence to ensure that everything checks out with the property that interests you.

“They will check to make sure that you are not buying properties from persons who have no authority to sell, which would save you from the heartache of being scammed. They will make checks to ensure the property is registered, taxes are paid, and also guide you in inspecting the property and completing other processes such as submitting an offer on the property that you want to purchase to the owners, along with your eligibility letters,” Carter explained.

Should the offer be accepted, Carter said the process of acquiring the house commences.

A sales agreement is then drafted by the vendor's attorney and sent to the buyer's attorney to be reviewed, signed by the purchaser, and returned, along with a deposit to the vendor's attorney. The attorney will continue to track the progress of the sale and will keep the buyer informed, including notifying him or her when to sign documents pertaining to the sale.

Below, Carter offers a breakdown of the things to consider when buying a house:

What can you afford?

One of the first questions you need to ask yourself is, 'What can I afford?'

“You may have had the dream to live in specific areas or a specific house, but bear in mind that your first home may not be your dream home or location,” Carter advised.

She said that you may want to be open-minded and broaden your search to match your budget.

Real estate value

“Don't just buy a house anywhere because it's available; seek advice from a realtor or real estate agent on the possibility of the property value increasing or decreasing,” Carter recommended.

Owing to the fact that many first-time buyers eventually resell as their needs and status change, having an expert opinion on the matter will save you in the long run or position you to save some top dollars.

Security

“Don't just buy because it's fairly affordable; think about the security of you and your family,” Carter cautioned.

Location

Location of the property is not only important for resale purposes or for security, but Carter said that you also need to think about the proximity to work and/or school, and access to public transport system, health care facilities and recreational areas.

Consider the type of property you desire

We all have preferences and, of course, this includes the type of house and/or property that you want. Carter said there are a number of options including National Housing Trust schemes, town houses, single units, strata or apartments, and gated communities.

Knowing what you want or will choose is important since some of these homes come with monthly maintenance fees.

The process

Just like any other goal, owning your home should be done in a SMART (Specific, Measurable, Attainable, Realistic, Time-bound) manner.

There are many costs associated with purchasing property, however, there are six major costs in the transactions:

1. Agreement of sale: An estimated $60-100,000 or 0.4 per cent + GCT, usually shared equally between the seller and buyer.

2. Stamp Duty: This was previously four per cent of property value. However, it is now a flat rate of $5,000 shared equally between the parties.

3. Transfer tax: This was five per cent of property value now reduced to two per cent and is paid to the vendor/seller.

4. Registration fee: 0.5 per cent of property value, shared equally between the parties.

5. Agent's/realtor fees: This is five per cent of sale price + GCT.

6. Legal fees: This is three per cent of the sale price + GCT.

Payment options

You can use cash or choose to go the mortgage route. If you are one of the lucky ones and have enough cash to make the purchase, you should consider these guidelines:

• Use a realtor/real estate agent;

• Get an attorney, one who practices conveyance;

• Get a letter from your financial institution stating that you are able to buy the property you are interested in;

• Valuators cost (usually a percentage of property value);

• Surveyors report cost (usually a percentage of the value of the property, some surveyors have a flat rate for different parcel sizes);

• You will need to have your 10 per cent deposit ready.

Not everyone has the money to pay for their house upfront and as such, other means of payment are generally explored. Carter said that one of the common options is mortgages. If you happen to be using this option, then you might find the following general tips helpful:

Get pre-approved: Set a mortgage appointment. To adequately prepare yourself for this meeting, you will need to take the following items with you:

• ID (photo ID: driver's licence, voter's ID, passport);

• TRN;

• A job letter;

• At least three months' payslips;

If you are self-employed, you will need:

• Audited financial statements;

• Bank statements for at least the last 12 months;

• Cash flow statements;

• Income tax returns for the last two years;

• List of monthly expenses, including loan — it would be great if you could get a status letter on outstanding loans and credit cards.

You will also need to bear in mind that you will be responsible for:

• Valuators: Some mortgage institutions pay half or all of this;

• Surveyors' report: Some institutions stand this cost also;

• You will need to have your 10 per cent deposit ready.

Importantly, whether you are making mortgage or cash purchases, the purchaser will incur “closing costs”. Closing costs are expenses incurred to complete the sale. They include legal fees, realtors/real estate fees, mortgage commitment fees, stamp duty, transfer tax, registration fees, sales agreement, and letters of possession.


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