Property industry terminology unpacked - Part 2

What is voetstoots? Do you understand home loans and bonds? We take a look at more property terminology that you should know and understand.

Read Part 1 of our Property Terminology 

When buying a home, emotions play a big role, in fact probably the most important role. You can envision yourself living in the house, start placing your furniture, which room each child will get, how the study furniture will fit, are the lounge curtains going to be suitable,  etc.  This is all very exciting, but we do not focus on any defects this property might have. Generally the serious defects are not noticeable and only once you have moved into the now empty house, do you become aware of specific defects.
“Defects may be visible or invisible. Defects are typically rising damp which has been hidden under a coat of paint or it may also be alterations to the house without the necessary approval from the local municipality, making them illegal structures.” says Craig Hutchison, CEO Engel & Völkers Southern Africa. Illegal alterations may result that the entire structure has to be demolished and reconstructed in accordance with approved building standards.
As explained by attorneys MacRobert Inc, if you have bought your property with the voetstoots 'take as is' clause present in the sale agreement, you agree to buy the property in its current state and the seller cannot be held liable for any patent defects. For a buyer to escape the provisions of the voetstoots clause he needs to prove that the seller deliberately concealed the defects or the lack of building plans approval with the intention to defraud the buyer. The purpose of the voetstoots clause is to protect the seller against liability for defects of which he or she is unaware.
Home loans/Bonds

When an offer to purchase a property is accepted by the seller, the bond application should immediately be submitted to a bank because the transaction can fall through if the buyer does not comply within the period stipulated in the agreement of sale, noted as a suspensive condition. Once your application is approved the bank will quote you their terms, you sign the necessary documents and your commitment to them for your home loan is then official.
Riaan van Deventer, Head of Real Estate of Engel & Völkers Southern Africa points out that home buyers need to be alert that until such time as this property is registered in the purchaser's name, the banks may still cancel the approved home loan if they establish irregularities in the interim.  As a word of caution he advises that buyers should not incur additional debt concerning a property until registration in their names is concluded.
There are certain regulations applied by most of our SA banks, and some of these are:

- In terms of the National Credit Act, an early termination fee is charged by the banks when a home loan is cancelled without giving 90 days written notice.  The fee is calculated on the outstanding balance at your current interest rate.  To avoid this you should advise your bank that you wish to cancel your home loan when you decide to sell.
- Your transferring attorneys should automatically notify the bank of your intention to cancel the bond (subject to a penalty fee).
- Even if the loan is settled, the bond still has to be cancelled in the Deeds Office. The cancellation of the bond will be effected simultaneously with the transfer of the property in the Deeds Office.
- Bonds cannot be transferred from one property to another, and every application for a home loan is considered in isolation.
- If the applicant has been advised by their bank that the home loan application is approved, and the applicant feels at that point that they cannot afford the loan, they need to establish exactly what cancellation costs they will be liable for – to the bank, the seller, the agent, the attorney, etc.
Riaan would like to remind buyers to calculate properly whether they can in fact afford the property:  the deposit, transfer duty, bond registration costs and legal fees, the monthly home loan, on-going monthly running costs etc.  Don't over-extend your cash flow.
Mortgage Originators

Sandy Reddy, Head of EV Finance mortgage originators, is confident that when they apply to the various banks on behalf of a client, they will get the best offer on each home loan.  This is due to their many years of experience and full understanding of the banks' requirements.  There is no charge for this service.
“Whether you're buying your first home or your fifth one, you have a much better chance of being approved for a home loan if you apply through a mortgage originator than if you try to handle things alone”, says Shaun Rademeyer, CEO of BetterBond Home Loans. 
If prospective buyers are pre-approved by mortgage originators they will know more accurately in which price bracket they qualify to view properties and therefore speed up the search process. You may qualify for more than you think if you apply with a reputable originator.

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