Home Buyer FAQ

If you are getting ready to buy your dream home but get tripped up by the terms or how it all works our frequently asked questions will help you find some clarity

1. What is a buyer's market?

A buyer’s market is a situation in which supply exceeds demand, giving purchasers an advantage over sellers in price negotiations. In a real estate buyer’s market, houses tend to sell for less and sit on the market for a longer period of time before receiving an offer.  

2. How much deposit should I have saved up?

This varies depending on the price of the property you want to purchase, and while a deposit is not always required, try to put down 20% or more if you can, as the bank is more likely to offer you a better rate as the risk of the loan is reduced

3. What is an agreement of sale?

An agreement of sale is a legal document that outlines the terms of a real estate transaction. It lists the price and other details of the transaction, and is signed by the seller and the buyer.

4. What does buy-to-rent mean?

 – Buy-to-rent or buy-to-let properties are investment properties where a buyer purchases a property for the sole purpose of renting it out and earning rental income.

 

Things to keep in mind when buying-to-rent:

 

1. Investors should focus on the price ranges where the demand is highest.

2. Investors who do enough research about the area before making a decision are more likely to be happy about their buy-to-let investment.

5. What is an offer to purchase?

An Offer to Purchase Real Estate (the “Offer”) is a document that sets out the basic proposed terms and conditions between the Buyer and the Seller in a real estate transaction. Once the Offer is signed by the Buyer and the Seller, and the contained contingencies are met, it then becomes a legally binding agreement. 

6. What are conveyancing fees?

What is conveyancing

When you have bought a property the process of transferring ownership of the property from one party to the other is called conveyancing.

What are conveyancing fees

The conveyancing fees are what the buyer pays the attorney who conducts this legal process. The fees form part of the extra costs that come with purchasing a property.

What is the difference between conveyancing fees vs transfer duty

Conveyancing fees are separate to transfer duty, which is a tax levied on the value of any property acquired by any person by way of a transaction or in any other way.

What does conveyancing cost?

Fees are variable based on guidelines issued by the Law Society of South Africa. They are calculated on the purchase price of the property or the capital amount of the bond.

Add to that, the conveyancing attorney will charge additional fees for every service they complete, from requesting cancellation figures to preparing relevant documentation, applying for rates clearance, transfer duty, and conducting deeds office searches.

Who pays the fees?

The seller usually appoints the conveyancing attorney but their cost is covered by the purchaser. This can make the fees quite challenging for the purchaser to negotiate and is something to keep in mind when signing your offer to purchase.

What does the service include?

The conveyancer will ensure that the Deed of Sale meets all the legal requirements. They will also gather and produce all supporting documentation necessary to finalise the registration of the sale once it is lodged with the Deeds Office.

The information they will request includes details of the home loan, cancellation figures, and title deeds from the seller’s bank as well as a Rates Clearance Certificate from the municipality.

They will also need to draft certain documents. These include a Power of Attorney to Pass Transfer, signed by the seller, authorising them to transfer ownership of the property. The conveyancers will have to file a declaration of marital status and solvency of both parties, noting each of their identification numbers in the document.

The conveyancers must also prepare a declaration for transfer duty or VAT in addition to home loan registration documentation for the buyer, as required.

A conveyancing attorney is one of the most important people in the home-buying process and is responsible for ensuring that ownership is transferred from the seller to the buyer and that the buyer does not pay until the property is registered in their name.

 

7. How do you ensure enough time for paying a deposit?

-When taking an offer where the buyer intends paying a cash deposit, it is imperative that the buyer is given enough time to make payment of the deposit.

It is often found that buyers have the funds available, but do not take into consideration the time it takes to release the funds from investments and ultimately attend to the transfer into the Conveyancer’s trust account.

It is my suggestion to properly consult with a buyer to ascertain where the funds are held and allow them enough time to make payment. Typically a buyer will need between 3-7 days to effect the payment and in the event of a 30 day notice account it is necessary to cater for such notice.

It may be useful in a full cash sale to make the payment of the deposit (or full purchase price) a suspensive condition. In many instances this will allow the continued marketing of the property and also renders the agreement lapsed in the event that payment isn’t forthcoming.

By Louis Kruger from Kruger Attorneys & Conveyancers Inc

 

8. What are the important milestones after lodgement in the Deeds office?

ON PREP

In this stage the documents that were submitted for examination have been successfully examined and the Deeds Office will permit registration. The matter must typically be registered within 5 days.

PUT FORWARD

After the matter is on prep and all parties are ready to proceed with registration, the matter is “put forward” for registration. The matter will then register the day after being “put forward”.

REGISTRATION

This is the final step in the Transfer Process and confirms that the change of ownership has now been officially executed in the Deeds Office.

9. How much should you earn to afford a house in South Africa?

To afford a house in South Africa, the required income varies depending on the location, the size of the property, and prevailing interest rates. A general rule of thumb is that your monthly home loan installment should not exceed 30% to 35% of your gross monthly income. However, this is just a guideline, and each bank or financial institution may have its own criteria for assessing affordability.

 

10. What happens after signing an offer to purchase?

After signing an Offer to Purchase (OTP) in South Africa, the process of buying a property moves forward. Here are the typical steps that follow after signing the OTP:

1. Acceptance and Communication: The seller will review the signed OTP and either accept it as is or may negotiate specific terms. If there are any counteroffers or amendments, the parties will communicate until both buyer and seller agree on all the terms and conditions.

2. Payment of Deposit: The buyer is required to pay the agreed-upon deposit, usually held in trust by the transferring attorney or estate agent. The deposit amount is typically a percentage of the purchase price, as specified in the OTP.

3. Home Loan Application: If the buyer is financing the purchase with a home loan, they need to apply for the loan through a bank or other financial institution. The bank will assess the buyer’s creditworthiness, and if approved, issue a loan offer. You can streamline this process by getting prequalified for a home loan.

4. Property Transfer: The transferring attorney starts the property transfer process. They will obtain various certificates and documents required for the transfer and registration of the property. The buyer will be responsible for certain costs, such as transfer fees and conveyancing fees.

5. Property Inspection: The buyer may conduct a property inspection or valuation to ensure the property is in the expected condition and value.

6. Fulfillment of Conditions: If there are any conditions or suspensive clauses in the OTP, such as obtaining a home loan or selling an existing property, these conditions need to be met within the specified timeframe.

7. Finalizing the Sale: Once all conditions are met, the transferring attorney will prepare the necessary documents for the property transfer and registration.

8. Transfer and Registration: Both the buyer and seller, or their appointed representatives, will meet at the Deeds Office to sign the necessary documents. The property is officially transferred to the buyer, and the title deed is registered in their name.

9. Payment of the Purchase Price: On the day of registration, the buyer is required to pay the balance of the purchase price to the transferring attorney. The attorney will distribute the funds to the seller, settling any outstanding amounts and fees.

10. Taking Possession: After registration, the buyer takes possession of the property as per the agreed-upon occupation date.

It’s essential to work with experienced professionals such as estate agents, attorneys, and financial advisors during this process to ensure a smooth and legally compliant property transaction.

11. Who pays for transfer duty?

– The party responsible for paying the transfer duty is typically the buyer of the property. It is the buyer’s responsibility to cover this tax as part of the property purchase process.

The amount of transfer duty payable is calculated based on the purchase price of the property and is determined according to a sliding scale provided by the South African Revenue Service (SARS). The higher the purchase price, the higher the transfer duty rate applied.

It’s important for buyers to budget for transfer duty costs when considering purchasing a property, as this is an additional expense on top of the purchase price and other associated costs like legal fees and conveyancing charges. The transferring attorney or conveyancer handling the property transfer process will assist in calculating and collecting the transfer duty on behalf of the buyer and then submit it to SARS.

 

12. How much home can I afford?

– Buying a home is both exciting and stressful – determined by an infinite number of factors that vary depending on the lifestyle you want or the needs you have. However, everyone’s journey starts at the same place – how much you can afford to spend on a home.

Below we have set out 4 steps you should take to determine how much you can afford before you start your house hunt.

Step 1: Get Prequalified for a home loan

Imagine falling in love with a property after many months of searching. Picture the immense joy of discovering that your offer has been accepted. Now, imagine what it would feel like to have the rug pulled out from under you when you realise that you cannot qualify for the required home loan amount. The disappointment of losing out on their dream home often leaves homeowners unwilling to continue the search, delaying or even grinding the process to a halt altogether.

While acquiring pre-bond approval might seem like an unnecessary item of admin that you simply do not have the time for, buyers are regularly surprised by what they thought they could afford and what the banks would grant them when it finally reached that point in the process.

Financial institutions provide a pre-approval facility that allows consumers the opportunity to discover what they can truly afford. Consumers can either apply at banks directly or they can use a bond origination service, like the one provided by MyProperty Home Loans who will do the checks for you and will provide a pre-approval certificate.

Check out more frequently asked home loan questions

Step 2: Calculate all the costs associated with your new home

Keep in mind that the bank will give you a loan based on the number of monthly payments they determined you can afford – your debt-to-income ratio comes into play here. They are not taking into consideration all the new expenses you will have with your new home. You will need to calculate these costs to determine how much you will be needing every month apart from the loan repayments.

Costs for basic utilities such as electricity and water, maintenance, and improvements if the house needs some work should also be determined. If your new house is in a sectional title complex you will need to add the monthly levies as well, if you are upgrading to a free-standing home you will need to calculate the expenses of things that were covered by levies previously.

Step 3: Time for a serious budget review

If you don’t have a budget or you are not good at keeping yours up-to-date, now is the time to really get a better understanding of your spending.

Start by determining all your income sources and totalling these amounts into one number. Once you have this number, use your bank statements and credit card statements to determine how much you spend on fixed payments (such as car payments, school fees, medical aid, etc) and optional spending (everything that you don’t pay a fixed amount on every month) List all the fixed expenses, and the average you’ve spent on them for the past three months. Categorize each optional item in groups such as food, transport or petrol, entertainment, clothes, baby supplies, household, travel, transportation, etc. List each group on your spreadsheet, with the average you’ve spent on each over the past three months.

You will now have an idea of what you can realistically afford to pay on a home loan. A budget will also allow you to see reckless spending habits that you can adjust to ensure you are in a better position before you start house hunting.

Step 4: Analyse your situation

You have gotten pre-qualified and you have worked out what your new expenses will be along with your current commitments, now you can sit back and analyse the true amount of how much house you can afford.

Ask yourself if the number you calculated in Step 2 is a realistic number for you – are you overextending yourself a little or will you be able to comfortably afford to pay the amount? Remember that you will want to enjoy your new home and not have to stress every month about bills and payments. Think about your life over the next five years – are you planning on starting a family? Will the house still suit your needs in five years’ time?

The most important part of the process is, to be honest with yourself on what you can afford. Make your new home loan work within your budget, not the other way around.

Get pre-qualified

We can help you get ready to buy your dream home by getting prequalified and applying for a home loan

13. What is transfer duty?

– Whenever you buy a house valued at over R1 100 00 (as of 1st March 2023) fees are payable to the South African Revenue Service (SARS).

It is calculated as a percentage of the purchase price and varies depending on the purchaser’s legal status. The transfer duty is paid by the purchaser of the property prior to registration of the transfer, or within six months after signing the agreement.

14. How much home can I afford?

– Buying a home is both exciting and stressful – determined by an infinite number of factors that vary depending on the lifestyle you want or the needs you have. However, everyone’s journey starts at the same place – how much you can afford to spend on a home.

Below we have set out 4 steps you should take to determine how much you can afford before you start your house hunt.

Step 1: Get Prequalified for a home loan

Imagine falling in love with a property after many months of searching. Picture the immense joy of discovering that your offer has been accepted. Now, imagine what it would feel like to have the rug pulled out from under you when you realise that you cannot qualify for the required home loan amount. The disappointment of losing out on their dream home often leaves homeowners unwilling to continue the search, delaying or even grinding the process to a halt altogether.

While acquiring pre-bond approval might seem like an unnecessary item of admin that you simply do not have the time for, buyers are regularly surprised by what they thought they could afford and what the banks would grant them when it finally reached that point in the process.

Financial institutions provide a pre-approval facility that allows consumers the opportunity to discover what they can truly afford. Consumers can either apply at banks directly or they can use a bond origination service, like the one provided by MyProperty Home Loans who will do the checks for you and will provide a pre-approval certificate.

Check out more frequently asked home loan questions

Step 2: Calculate all the costs associated with your new home

Keep in mind that the bank will give you a loan based on the number of monthly payments they determined you can afford – your debt-to-income ratio comes into play here. They are not taking into consideration all the new expenses you will have with your new home. You will need to calculate these costs to determine how much you will be needing every month apart from the loan repayments.

Costs for basic utilities such as electricity and water, maintenance, and improvements if the house needs some work should also be determined. If your new house is in a sectional title complex you will need to add the monthly levies as well, if you are upgrading to a free-standing home you will need to calculate the expenses of things that were covered by levies previously.

Step 3: Time for a serious budget review

If you don’t have a budget or you are not good at keeping yours up-to-date, now is the time to really get a better understanding of your spending.

Start by determining all your income sources and totalling these amounts into one number. Once you have this number, use your bank statements and credit card statements to determine how much you spend on fixed payments (such as car payments, school fees, medical aid, etc) and optional spending (everything that you don’t pay a fixed amount on every month) List all the fixed expenses, and the average you’ve spent on them for the past three months. Categorize each optional item in groups such as food, transport or petrol, entertainment, clothes, baby supplies, household, travel, transportation, etc. List each group on your spreadsheet, with the average you’ve spent on each over the past three months.

You will now have an idea of what you can realistically afford to pay on a home loan. A budget will also allow you to see reckless spending habits that you can adjust to ensure you are in a better position before you start house hunting.

Step 4: Analyse your situation

You have gotten pre-qualified and you have worked out what your new expenses will be along with your current commitments, now you can sit back and analyse the true amount of how much house you can afford.

Ask yourself if the number you calculated in Step 2 is a realistic number for you – are you overextending yourself a little or will you be able to comfortably afford to pay the amount? Remember that you will want to enjoy your new home and not have to stress every month about bills and payments. Think about your life over the next five years – are you planning on starting a family? Will the house still suit your needs in five years’ time?

The most important part of the process is, to be honest with yourself on what you can afford. Make your new home loan work within your budget, not the other way around.

Get pre-qualified

We can help you get ready to buy your dream home by getting prequalified and applying for a home loan

 

15. How much home can I afford?

– Buying a home is both exciting and stressful – determined by an infinite number of factors that vary depending on the lifestyle you want or the needs you have. However, everyone’s journey starts at the same place – how much you can afford to spend on a home.

Below we have set out 4 steps you should take to determine how much you can afford before you start your house hunt.

Step 1: Get Prequalified for a home loan

Imagine falling in love with a property after many months of searching. Picture the immense joy of discovering that your offer has been accepted. Now, imagine what it would feel like to have the rug pulled out from under you when you realise that you cannot qualify for the required home loan amount. The disappointment of losing out on their dream home often leaves homeowners unwilling to continue the search, delaying or even grinding the process to a halt altogether.

While acquiring pre-bond approval might seem like an unnecessary item of admin that you simply do not have the time for, buyers are regularly surprised by what they thought they could afford and what the banks would grant them when it finally reached that point in the process.

Financial institutions provide a pre-approval facility that allows consumers the opportunity to discover what they can truly afford. Consumers can either apply at banks directly or they can use a bond origination service, like the one provided by MyProperty Home Loans who will do the checks for you and will provide a pre-approval certificate.

Check out more frequently asked home loan questions

Step 2: Calculate all the costs associated with your new home

Keep in mind that the bank will give you a loan based on the number of monthly payments they determined you can afford – your debt-to-income ratio comes into play here. They are not taking into consideration all the new expenses you will have with your new home. You will need to calculate these costs to determine how much you will be needing every month apart from the loan repayments.

Costs for basic utilities such as electricity and water, maintenance, and improvements if the house needs some work should also be determined. If your new house is in a sectional title complex you will need to add the monthly levies as well, if you are upgrading to a free-standing home you will need to calculate the expenses of things that were covered by levies previously.

Step 3: Time for a serious budget review

If you don’t have a budget or you are not good at keeping yours up-to-date, now is the time to really get a better understanding of your spending.

Start by determining all your income sources and totalling these amounts into one number. Once you have this number, use your bank statements and credit card statements to determine how much you spend on fixed payments (such as car payments, school fees, medical aid, etc) and optional spending (everything that you don’t pay a fixed amount on every month) List all the fixed expenses, and the average you’ve spent on them for the past three months. Categorize each optional item in groups such as food, transport or petrol, entertainment, clothes, baby supplies, household, travel, transportation, etc. List each group on your spreadsheet, with the average you’ve spent on each over the past three months.

You will now have an idea of what you can realistically afford to pay on a home loan. A budget will also allow you to see reckless spending habits that you can adjust to ensure you are in a better position before you start house hunting.

Step 4: Analyse your situation

You have gotten pre-qualified and you have worked out what your new expenses will be along with your current commitments, now you can sit back and analyse the true amount of how much house you can afford.

Ask yourself if the number you calculated in Step 2 is a realistic number for you – are you overextending yourself a little or will you be able to comfortably afford to pay the amount? Remember that you will want to enjoy your new home and not have to stress every month about bills and payments. Think about your life over the next five years – are you planning on starting a family? Will the house still suit your needs in five years’ time?

The most important part of the process is, to be honest with yourself on what you can afford. Make your new home loan work within your budget, not the other way around.

Get pre-qualified

We can help you get ready to buy your dream home by getting prequalified and applying for a home

 

16. What is transfer duty?

Whenever you buy a house valued at over R1 100 00 (as of 1st March 2023) fees are payable to the South African Revenue Service (SARS).

It is calculated as a percentage of the purchase price and varies depending on the purchaser’s legal status. The transfer duty is paid by the purchaser of the property prior to registration of the transfer, or within six months after signing the agreement.

17. What will my transfer cost be?

Transfer duty is calculated on the value – not the price – of the property, although, SARS will generally regard the purchase price of the property to be its value. However, if SARS believes that the purchase price does not correspond with the true value, which may be the case if, say, a property is sold to a family member and its value understated, transfer duty will have to be paid on the true or fair value.

Transfer duty is calculated on the total cost of the property to the buyer.

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