First time home buyer? You need to read this
Cape Town - South Africa's property market is being driven by an influx of first-time buyers as the historically low interest rate makes it (possibly) more affordable to buy property, rather than rent.
Homeowners insurance is mandatory to qualify for a bond as it covers the financial institution's investment. One of the factors determining the monthly premium is the replacement value of your property. Most financial institutions offer this coverage; however, it is advisable that you shop around for an offer that suits your needs and your pocket best.
Marius Steyn, Personal Lines Underwriting Manager at Santam – SA's leading short-term insurer – says it is important to note that homeowner's insurance, otherwise known as building insurance, does not cover the contents of your home. Therefore, you will need to also apply for home contents insurance should you wish to insure your personal possessions.
He adds, "Everything inside a house that can be taken with you the day that you permanently move is known as its contents, and everything that is fixed - from any built structure like the main dwelling, garage, walls and fences to fixtures like an air-conditioner, pool pump, intercom system and geyser – will be covered under building insurance. Most insurance companies will offer reduced insurance premiums if you combine your home contents, vehicle and building insurance."
Some important things to consider
Steyn suggests conducting a home inspection prior to purchase, then putting in a clause that an offer to purchase is subject to stipulated repairs.
"Remember, your insurer is only responsible for damages occurring from the date of registration of your new home at the deeds office onwards – not for any prior problems. This means you need to have any damages fixed by the seller, as a condition of your offer. Otherwise, these could become big issues down-the-line."
So, what essential checks should a first-time buyer conduct?
Steyn says you need to know your property is structurally sound, safe, damage-free and up-to-code.
"Remember, you are fully entitled to include a home inspection clause in your contract, which makes your offer conditional on a home inspection being conducted and the property being found to be in a satisfactory state. However, it's worth noting that including this clause can sometimes make an offer less desirable for a seller – especially one who knows there are things that need fixing!"
Here are five areas of the home to potentially focus on:
- Check the geyser: Have the geyser inspected by a registered plumber in order to establish the general condition and the adherence to regulatory requirements. The general replacement cost of a standard size geyser amounts to approximately R8 500. When bursting or leaking it has the potential to wreck a room, so you need to be sure you're getting one in tip-top condition.
- Check the roof: Are the tiles cracked? Have the roof inspected by a registered builder to determine its condition. The state of a roof and gutters can indicate a lot about the general maintenance of the home as a whole.
- Check the ceiling: Most ceilings have secrets. Look especially hard for mould or maybe fresh paint jobs to hide said mould or damp.
- Check the garden: If this is lush and green, be careful. How much will you need to spend to maintain it? Is it drought-friendly given certain aspects of SA's ongoing water issues?
- Check for electrical faults: Electrical faults will be identified with the issuing of the electrical certificate, which is the responsibility of the seller. Any repairs or shortcomings identified in this investigation would also be the responsibility of the seller.
Steyn advises having a professional inspection and taking a family member or friend along, who has experience and knowledge in spotting potential structural problems.
A few insurance considerations from Steyn for first-time buyers:
- Make sure you get homeowners insurance (this covers the building) and house contents insurance (this covers the contents within your home) a few days PRIOR to moving in. Your first seven days in a new house are when you're most vulnerable, because you're usually still figuring out security and all your things are in boxes. So, make sure your insurance is already in place. You can also request to have certain security features installed before moving in – especially those that are essential to meet your insurer's stipulated conditions – like burglar bars, an alarm, etc.
- Make sure your home contents insurance is adequate and the equivalent to the new current replacement value of all your items.
- Remember you have a duty of care as the policyholder. Should a theft occur, you need to do everything you can to limit the damage – so ensure your front door is fixed and secure if it was damaged through forced entry, for example. Additionally, report any items stolen to the police and your insurer. With the approval of your insurer, you do have a prescribed time to do a proper inventory of everything taken.
Steyn stresses the importance of making sure that all damage is fixed up before you move in, as a condition of your offer. "Do not purchase a property (home) with damage. Rather include a clause in the purchase contract that seller must repair the specified damage before registration can take place."