From bond negotiation to legal fees: Smart home buying tips you haven’t heard before
In constrained economic environments where interest rates are high, property markets favour the buyer. With careful planning, as soon as a prospective buyer is ready to go house hunting, they can find themselves in a strong position to negotiate with all of the role players in the buying process, from the moment they put in an offer, right through to the conclusion of the sale.
Carla de Abreu, Business Development Manager at proptech company, e4, says there are a number of touch points where buyers can negotiate better rates, prices, terms and conditions of their purchase, it’s just a question of being empowered and knowing what to ask which entity.
Negotiating the bond
“Pre-negotiating a bond even before you start looking for a property will always put you in a better position to negotiate with the seller,” she says. Having pre-approved finance will elevate your offer, as it gives peace of mind to the seller that the sale will not fall through because an application for finance is made after the offer to purchase is declined.
“Your bond application is your first opportunity to negotiate. With a substantial deposit, you are in a stronger position to discuss interest rates and the period of the loan. Even with a small deposit, these items are generally open to negotiation, although other Ts&Cs may be standard and therefore non-negotiable,” De Abreu says.
Pre-approved finance gives you leverage
Armed with your bank approval, you now have some leverage when you put in your offer to purchase (OTP). Yours is effectively a clean offer. “The estate agent will be able to advise realistically how much under the asking price you can go, but starting low gives you room for manoeuvre. It’s crucial not to exceed what you can afford,” she notes.
Get out clauses
In addition, do not be afraid to make stipulations in your OTP which the estate agent will draw up. These add-ins may include clauses relating to outstanding repairs to the property, or the inclusion (or exclusion) of certain removable items. There is no limit to the number of conditions you can attach to your OTP. De Abreu emphasises the importance of putting everything in writing. “In the event that you need to pull out of the purchase for any reason, you should have a condition that has not been met that gives you that exit without financial penalties,” she says.
Although the seller appoints the conveyancing attorney, their fees are for the buyer’s account. This is another opportunity for you to negotiate rates, although costs relating to their services, which include securing rates clearance and other compliance certificates, will be fixed. On the other hand, the bond attorney represents the bank and is responsible for registering your bond. If you feel your negotiations with the lending entity could have gone better, speak to the bond attorney and see if they can negotiate on your behalf for better terms and conditions. “Onboarding buyers is a very costly process for banks, and they are generally unwilling to let you go for want of finding a price, rate or fee on which you can all agree,” says De Abreu.
The entire home buying process involves an enormous number of documents requiring signature. If you are buying with a partner, or as a company or trust, all parties’ signatures are required on every contract. Getting everyone around a table or forwarding the documents from one person to another can simply take up extra, unnecessary time.
“Under the terms of the National Credit Act (NCA), if the purchase process is not concluded within 90 days of the bond being granted, the lending entity must repeat the vetting and verification process to ensure that the client is still able to afford repayments. Financial circumstances can be fluid and volatile, and the buyer's status may have changed over 90 days,” says De Abreu. While this is a good thing, and discourages irresponsible lending, starting over can cause significant delays or may even result in the loss of the purchase.
“e4 provides an entire digital ecosystem for the home buying process,” says De Abreu. “For consumers, we are very much ‘behind the scenes’, but our role is intrinsic to the smooth passage, tracking and management of documents between attorneys, the bank and the deeds office, and all this happens on one digital platform. e4 will make sure that there is no delay that sends borrowers and banks back to the drawing board.
“Knowing that the transactional process is being handled by e4 leaves the buyer free to worry about negotiating the best deals possible from their bank, the seller and the attorneys,” says De Abreu. “And making house buying (and selling) easier is what our role as a proptech company is all about.”