Property Investor Advice: Part 5 and 6
The Right Price
Use a comparative market analysis to judge the market when selling your home.
Anyone looking to buy a home wants affordability and value for money. Sellers, on the other hand, are hoping to achieve the highest price they can.
These are competing goals, but as with any market-related transaction, there is a point where they meet. Fortunately for people wanting to put their home up for sale, there is a tool that can help guide you to that price.
The comparative market analysis or CMA compares any property to similar ones that have recently sold in the area. It shows not only the final selling price, but also the initial asking price and the time between the listing and the final sale.
This provides a good idea of how the market views property in your area. A long time between listing and selling will indicate where prices have been set too high, as will a big difference between what a home was originally listed for and how much it eventually fetched.
Agents should be able to help sellers determine a fair price by using homes with the shortest listing times as a guide. You can assume that those that sold quickly were most appropriately priced in the first place.
You must, however, be careful that the CMA is comparing apples with apples. Each property, even if it is in a complex, has unique features or blemishes that will influence its market value. It is therefore important for every seller to ask an estate agent to inspect your property before deciding where to set the price. An experienced agent will be able to use the CMA as a benchmark before taking into account the condition and features of a particular property to arrive at a selling price that is right for the market. As the seller you can, of course, still go against the agent’s advice and list the property at a higher asking price. However, you must then be prepared to wait longer for a buyer who will be willing to pay that premium.
Should you follow this route, you must also take into account your monthly holding costs on the property. These include expenses such as rates, taxes and bond repayments.
It is important to know how long you can wait before these costs cancel out the benefit of obtaining your higher price. For example, if monthly holding costs are R10 000 and your asking price is R50 000 above the recommended market value, then you have five months to sell the property before the benefit of the higher price is eroded.
Tip:New homes are likely to need very little by way of maintenance for the first few years
A New Deal
Should you buy a newly built home or a second-hand property? There are pros and cons to both types.
Everybody likes to own something new. There is the excitement that comes with knowing that what you own has never belonged to anyone else.
It’s the same with a new home. There is definitely something to be said for moving into a house that is just waiting for you to stamp your individual style on it.
However, does this always make the most sense? Anyone looking to buy property should think carefully about the different factors involved in buying a newly-built home versus an already established property.
Apart from the excitement of owning a new home, there are other real benefits. Newly built properties come with better warranties, easier finance, lower transaction and ownership costs and, possibly, better security.
The National Home Builders’ Registration Council prescribes that builders and developers must provide five-year structural guarantees on new homes, as well as a one-year guarantee on their roofs. That offers some peace of mind.
If you are buying from developers, they will also usually have a financing plan in place, which will make it easier for you to obtain the necessary home loans. They may even pay the bond registration and conveyancing costs, which could save a lot of money that you could use on other aspects of the property.
New homes are likely to need very little by way of maintenance for the first few years, which can be very appealing to first-time buyers on a strict budget. In addition, the security incorporated in most new housing developments forms part of the buying price.
While this might all sound very attractive, older homes have benefits too. Foremost among those is that you are likely to get more for your money in terms of what you pay per square metre.
Older properties are also more likely to have bigger stands. While there is a cost consideration in maintaining a big garden, having room for a young family to play or for outdoor entertaining could be very important.
Large stands also allow room for building on and modifying the house to suit your specific needs or as your family expands. This could be less expensive than buying and moving to a bigger house at a later stage.
Something else to keep in mind is that upgraded older homes may offer finishes of a better quality than the standard-grade finishes in new developments.
Established homes may also offer much more attractive settings than those on bare or just-landscaped stands. Gardens take time to establish and moving into a home where one is already blooming can be worth more time and money than most people realise.
Your final consideration is that most newly built properties are marketed by developers at set prices. Older homes, on the other hand, are sold on the open market, which means that you might just be able to negotiate a better deal for you and your family.
Next issue: Voetstoots and the Consumer Protection Act; and the ins and outs of plot finance