Keep a cool head, even in a soft real estate market

The banks are keen to lend, homes are selling more slowly and owners
are keen to negotiate, so now is definitely a good time to buy, but 
that doesn't mean you should throw caution to the winds, says Rudi 
Botha, CEO of BetterBond, SA's leading bond originator.

"There are some golden rules for home buyers and investors to follow 
- in any market conditions - and they risk getting stuck with a bad 
investment if they deviate too far from these."

For a start, he says, buyers should by all means try to negotiate 
price on a promising property but should in most cases avoid the 
home that's on offer at a remarkably low price. "It may appear to be 
the opportunity of a lifetime, but closer inspection before you snap 
it up will probably reveal that it is in need of major repairs that 
the owner cannot afford or is heavily encumbered in some other way."

Next, buyers should focus on location. "There is a much bigger variety 
of favourable locations these days than there used to be, including 
properties close to decentralised commercial hubs and those located 
in self-contained estates as well as those in the tried-and-tested 
central suburbs, but you should still focus on those where there is 
good demand and prices are rising, rather than being tempted to buy a 
property in a less desirable area just because is a 'bargain'.

"Falling into that trap is likely to cost you a lot more, in the long 
run, than the savings you make on the initial purchase."

Third, says Botha, you really need to do your homework on pricing 
before making any offer. "Get help from an experienced local estate 
agent who can provide you with a comparative market analysis (CMA) 
showing how many sales there have been in the area recently and the 
actual selling prices of these homes, as well as the length of time 
they were on the market and what their original asking prices were.

"And don't be embarrassed to walk away from a property if the results 
of your research are less than favourable. As with any type of 
investment, professional advice is very important if you want to 
maximise your potential returns, but it is also vital to keep a cool 
head and make your own decisions."

As for finances, Botha says that while cash might give you something 
of an advantage in negotiations with keen sellers, it is probably not 
the best idea at the moment to empty out your savings account and 
spend all your cash on a property purchase, because the rate of 
property price growth is generally lower than the rate of interest 
you would get on that money in the bank.

"A much better idea is to consult a bond originator like BetterBond 
and get pre-qualified for a home loan before you start looking for 
properties to buy. This will also give you an advantage in negotiations 
because it lets sellers know that you are a serious buyer and have the 
financial means to complete the transaction.

"You can then use some of your cash to pay a deposit and qualify for a 
lower interest rate on a home loan, especially if you apply through 
BetterBond, which makes use of a multiple lender application process 
to ensure you get the best available rate. This will lower your monthly 
bond repayments and make your home more affordable while also cutting 
the total amount of interest payable over 20 years by thousands of rand.

"By gearing the purchase in this way, you will only have a share in the 
risk in the property but get all the benefit of any future growth in 
its value - and you will still have most of your cash available for 
emergencies, or perhaps to use as a deposit on a further property 
purchase."

Source:  BetterBond