Q: We are buying our first home but seem to be losing out to other buyers in what is becoming a bidding war. We are offering close to the asking prices but are still not having our offers accepted. How do we ensure that, when we next make an offer, we come out on top?
A: Low interest rates and a growing shortage of properties for sale in the sub-R1 million price category have led to a huge surge in first-time home buying over the past year.
This is one of the reasons behind an increasingly competitive purchasing environment in which an offer from another prospective buyer can quickly result in the dream home you’ve just found becoming nothing more than a mirage.
Read the latest Property360 digital magazine here
Most buyers prefer a home that is ready to move into, and many are willing to pay a premium for this advantage at the moment, in order to make the most of the low interest rates. This can easily result in a full-price offer, and perhaps even one that exceeds the seller’s asking price, if there is another buyer in the picture.
Alternatively, delaying your decision to make an offer while you consider a few properties may well create the opportunity for another buyer to jump in and snatch up the one you liked best.
However, there is much that you can do to ensure that your offer is favoured in this environment, starting with a pre-approved home loan obtained through a reputable bond originator. This reassures the seller that you will be able to obtain a bond and that a sale to you is unlikely to fall through.
Second, you need to be honest with the seller if you have a genuine interest in buying the property. Third, you need to make it clear that while you are prepared to negotiate your own offer and terms with the seller, you will walk away if anyone tries to push you into a bidding war with other potential buyers because the one thing worse than losing your dream home to another buyer is paying more than you intended as a result of a bid and counter-bid battle.
Always keep in mind that every increase in the price paid results in an increase in the amount of cash needed to cover the deposit and the transfer costs, as well as an increase in the size of the bond needed – and thousands of rand of additional interest payable over the next 20 years. In addition, buying at an inflated price following a bidding war means a slower build-up in equity – which means if you are forced to sell before the house realises significant appreciation, you may even have to pay in more money to settle your home loan. This is not a situation you want to create in the current uncertain economic climate. – Gerhard Kotzé, managing director of the RealNet estate agency group