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Property 24/10 - 173

12 September 2013

Should I tell a buyer about roof leak?
A Property24 reader asks:
I am selling my house and I have a leak in the roof that you can only see in winter, but I have no money to do the repair. Should I tell the potential buyers about this? What if no one then wants to buy my home?

Francois Venter, Director of Jawitz Properties advises:
You may think that admitting to faults on the property could mean putting a buyer off, or that you won’t get offers if you don’t have the leak fixed, but some buyers may be open to negotiating with you. Perhaps they will ask if you will accept a slightly lower offer in return for you not having to fix the leak before they move in.

You must also realise that some interested buyers may bring in professionals to do their own inspections, so the leak will be discovered one way or another.
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Buying a house? Read before you sign
If you’ve found a house, you’re probably eager to sign the purchase agreement and move in. At the same time, the estate agent selling you the property is probably pushing you to sign disclosure documents, which may contain a Voetstoots clause, to tie you up in legal jargon.

These documents might look simple enough but, once signed, they mean you will have no recourse if the house has any serious defects.

Think about it – you buy the house, probably with a large bond, and then discover serious structural flaws that result in thousands of Rands worth of repair work, all from your own account because you signed documents that state that you were happy with the condition of the house at the time of purchase.

Whether the seller deliberately hid the defects from you or not, with phrases like ‘in the utmost good faith’, ‘to the best of my knowledge’ and ‘as far 'as I am aware this is a true and honest appraisal of the property as I know it’, you are stuck with the problem if you sign. Such phrases are typical of all disclosure documents and often mislead the buyer.
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Cape Town office rentals & vacancies
The Cape Town office property market is showing constricted demand for new and sizeable office space with noticeable minimal activity in the first half of 2013 driven by small enquiries where occupiers continue to look for value.

Report writers, Ndibu Motaung, head of research at Jones Lang LaSalle and Dave Russell, director of commercial leasing and sales at Baker Street explain that the past few months saw few deals driven by the consolidation of large tenants to newer and more efficient buildings, a trend seen in vibrant office nodes.

This leaves concerns about the vacancies left in the buildings being vacated.

Cape Town office property market
According to the report, office stock in the Cape Town market increased to 2 255 182 square metres in the first half of 2013 from 2 187 000 square metres as recorded by the South African Property Owners Association.
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Are you an investor? Read this
In the first half of 2013, investors experienced a stark reminder that adopting a short-term focus can lead to tears: a global sell-off of bonds contributed to a depreciation of the rand.

The South African 10-year bond yield spiked from 6.2 percent to 7.7 percent in about 60 days during May and June 2013, resulting in capital losses for bond investors of some 8 percent, according to Marriott Asset Management.

According to the managers, this highlights the risks associated with overpaying for an income stream and the unpredictable nature over the short term of an investment’s capital value.

At the same time, somewhat expectedly given the high correlation between bond and property yields, investors in local listed property experienced similar capital losses, with the sector down approximately 9 percent.

Warren Buffet elegantly sums up the need for a long-term horizon when investing:
“Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, ten and twenty years from now.
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Know your landlord-tenant obligations
Anyone involved in letting or renting residential property will attest to the fact that dealing with a difficult landlord or an unhappy tenant is a recipe for a bad day at the very least.

As renting property is often a relatively long-term arrangement, establishing and maintaining a healthy landlord-tenant relationship is key.

It’s important that landlords are aware of and live up to their obligations to their tenants, and equally important for tenants to be aware of and fulfil their responsibilities in renting property. If each party abides by their respective set of guidelines, it’s likely that the relationship will remain a positive one.

Marlon Shevelew, Director of Marlon Shevelew and Associates Inc. – a firm specialising in Landlord and Tenant Law, Contractual and Consumer Law – is witness to the difficulties that ensue when these responsibilities are not fulfilled.

“Whether you are a landlord or tenant, it is vital that you are aware of your legal rights and obligations,” says Shevelew.
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Commission disputes and negotiations
There are certain dangers in working with more than one agent on a property and in the case of agents’ commission, this risk is even more relevant, explains Craig Hutchison, chief executive officer of Engel & Völkers Southern Africa.

The rule of thumb is that the commission is earned by the agent whose efforts were the “effective cause” of the sale. Where do commission disputes come in?

As you can imagine, this can become a very problematic situation because two or more agents can claim that they introduced the buyer to a property and the case can end up in court or going to arbitration and being dragged out for months.

The other side of negotiating commissions
Estate agents have been encouraged over the years to rather negotiate on such disputed commissions and no-one disagrees about the reasons for that.

There is, however, another side to the argument that is not heard often enough.

Any agent, who at the start of the listing is willing to cut their commission, must be treated with caution.
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Property sales commission explained
In previous decades, when the property market was booming, people became estate agents because they thought it was an easy way to earn money by selling property as a pastime.

This negatively impacted on the image of the real estate industry as service levels were low and homeowners saw an agent as someone who made a lot of money for minimal work, and because these types of agents were truly only interested in quick income, explains Craig Hutchison, chief executive officer of Engel & Völkers Southern Africa.

However, once the recession hit, sales dropped and the property market became more difficult, most of the fly-by-night agents were filtered out.

This left experienced and dedicated individuals who took up real estate brokerage as a career and had to work very hard in order to make a living out of selling property, he says.

According to Hutchison, the real estate industry has come a long way from the local housewife selling homes in her spare time, to now being a professional career choice for many and stringent qualifications required ensure that a high standard is upheld.
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