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Don’t overpay when you buy

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Every property has its price and it depends on a lot of factors, some of which are difficult to put into practice, but every buyer should be careful not to over pay for a property.

But that is not to say you must not pay more than has been paid before, it is just that the extra price must be justified.

Things that increase or decrease the value of a property could include any of the following:

Position: Often thought as vital when buying a property. There is an old adage – position, position, position.

Think about it.

The actual cost of building a new property is just about the same wherever you build it.

So, in Bloemfontein’s context, building an identical property in Pentagon Park and Mangaung is likely to result in a property that has a different value.

But what about a property built one behind the other where the one property is on a very busy main road while the other is on a quiet street immediately behind it?

These identical properties would have quite different selling prices.

With sectional title units, being on the top floor, ground floor or next to the swimming pool can have an effect on the likely selling price.

Condition: Let’s be fair – a neat, well-maintained property with modern furniture and fittings will always sell quicker and for a better price than a dirty, untidy one. 

The furniture is not part of the sale – it just sets a better scene.

Would you buy that dirty, untidy, poorly maintained unit?

Well, yes, if the price was right, and especially if you have the foresight and skills to refurbish and upgrade the unit at a reasonable cost.

Market: The market means what is going on generally with property sales in your area.

Is there a lot of inflation resulting in rising prices (there is less room to negotiate?

Is there a shortage in properties for sale in the area?

Sometimes there might be an oversupply of properties that keep prices down.

What is happening in the area?: While this might take longer to have an influence it can be a very big reason why people want or don’t want to buy properties in that particular area.

Prices are likely to drop in a high-crime area compared to a peaceful suburb.

Where commercial properties are creeping into a residential area there will be less demand for people to buy homes there.

Knowing what is going to happen in an area makes a huge difference to the future value of a property (up or down).

Many years ago when I bought my offices, Zastron Street was a dirt road.

But I knew that it was going to be tarred and made into the main entrance for Bloemfontein.

Management: In sectional title schemes good management is vital.

You need to see copies of the current and annual financials and feel comfortable that things are being well run.

Where a body corporate owes money for water or electricity, you will not even be able to get transfer of your individual unit unless somebody settles the arrears owed by the body corporate.

But apart from that, a well-managed building is a happy one.

Things work, the buildings are well-looked after and clean. 

Why would you pay a good price for a unit in a badly run scheme?

  • Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia.

Property

Bigger can be best

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MAJOR UPGRADE NEEDED . . . Many of the original sectional title schemes were existing buildings that were converted

I want to be very brief in this article so that those interested may have more time to think about my discussion point.

We have previously discussed shortcomings with the Sectional Titles Schemes Management Act (STSMA), which are many.

I want to focus on just two of them today.

The STSMA was signed into law and became effective on October 7, 2016.

Ideally, the STSMA was introduced in order to provide for the establishment of bodies corporate to manage and regulate sections and common property in sectional title schemes.

Its main purpose is to apply rules applicable to such schemes – establish a sectional title schemes management advisory council and to provide for any related matters.

The two biggest problems have been, firstly, the age of buildings that were converted to sectional title schemes and the size of many of the early schemes.

Buildings have a practical lifespan.

Many of the original sectional title schemes were existing buildings that were converted.

Some of these buildings are now approaching 80 years and need major upgrading – particularly piping and wiring – and modernisation and owners just don’t or have not made provision for these upgrades, especially in less affluent areas.

The second problem is that these schemes have a small number of units and are uneconomical for a managing agent to administer.

The reality is that the larger the scheme, the easier it can be managed.

I wonder if it would be worthwhile to have two schemes combining for admin purposes.

Food for thought . . .

  • Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia. You can contact him via email: mike@platinumglobal.co.za

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Property

Fix and protect your building from rain damage now

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FIX ROOF LEAKS . . . Protect your building from rain damage

Last year saw some very good rains but this year has been exceptionally wet.

At regular times more than 50mm of rain was received in a single day.

We have just had some rains in Bloemfontein and the surrounding areas which have left the ground thoroughly soaked with open water lying around.

Lawns remain verdant green!

If your building was going to have any roof leak problems, I would suggest that it be fixed by now, though it is possible that there could still be damp problems.

Of course, the rainy season is well behind us now but we could still experience occasional rains during the rainy season.

I would really recommend that now is the right time to do a full building inspection.

Many of you will know of my dread of overgrown trees.

Well, this year they have grown like weeds – my pecan nut tree in the garden has grown its branches by nearly two metres this year!

Trustees could do well to investigate the entire property for overgrown trees that need to be trimmed and to make sure that none are leaning against buildings or walls.

Trees in gardens belonging to individual units should be attended to by those owners – after all they planted these trees or left them to grow.

It might be a good idea to have one contractor remove/trim the problem trees and share the cost if owners don’t have the time to do it for themselves.

But do it they must.

The cost of removing whole trees can be expensive but trimming must be seen as maintenance.

Also, check for damp in walls caused by overgrown flower beds – the best way is to ask owners and tenants to report any serious damp problems.

It’s also advisable to buy a set of drain rods and clear your drains, especially stormwater drains that can easily be blocked with soil or sand.

Check for water leaks as these could have been hidden by the wet conditions that we have experienced.

  • Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia.

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Property

Banks now hesitant to lend to property buyers

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BOND RISK . . . It has now become near impossible from a cost and time point of view for banks to sell a property in execution

Banks make most of their money when they lend to customers and charge interest.

That is essentially how they get money to run their businesses and generate profit.

In other words, no lending, no profit.

When a bank lends you money to buy property, it allows you to purchase a property that otherwise you would never have the money to buy.

It is the best investment you will ever make.

Over time, property values rise and you get the benefit, as banks don’t participate in your profit.

It used to be that banks lent 70-80 percent of the price of the property and you had to find the cash for the balance.

You also had to find the bond and transfer costs.

That means the banks risk was about 75percent.

So, if you defaulted and the banks sold the property as their security on the bond.

If they achieved 75 percent or more of the current market price of the property, they would get their money back.

But times have changed.

The Consumer Protection Act (CPA) and a whole raft of other “consumer-based” legislation have changed the situation.

While the CPA was introduced in a bid to “promote a fair, accessible and sustainable marketplace for consumer products and services and for that purpose to establish national norms and standards relating to consumer protection, to provide for improved standards of consumer information, to prohibit certain unfair marketing and business practices, to promote responsible consumer behaviour”, among others, it has brought with it some challenges.

It has now become near impossible from a cost and time point of view for banks to sell a property in execution – ie when a client fails to service their bond.

Just getting a magistrate to agree to the sale, despite the lender being years in arrears, is a nightmare and the costs involved are horrendous.

Further, bonds are mainly 100 percent nowadays, so banks are unlikely to recover the outstanding bond and interest.

Arrear levies and rates need to be paid by the buyer so the price achieved is often half of the real value of the property.

If it was my money, the last place that I would lend it would be as a 100 percent loan for somebody to buy a home.

Times need to change.

  • Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia. You can contact him via email: mike@platinumglobal.co.za

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