Property 24/10 - 152

Estate agents' commission explained
With countless property websites out there, many people are opting to privately sell their homes, thinking that the property will sell itself, and ultimately, avoid paying a real estate agent commission. However, what a number of sellers do not understand, is exactly what it is that an agent will do for the sale of their property and why going the agent route will result in a more efficient sale process. 

This is according to Chris Cilliers of Lew Geffen Sotheby’s International Realty, who explains what an estate agent does for their commission and what the seller will get in return. 

Determining the commission percentage
The average estate agent’s commission usually ranges up to about 7.5 percent, however, there is no regulation in South Africa as to how much commission an agent should be paid per sale. 

Cilliers says it is best to see the commission and services of a realtor as an investment rather than a cost. He says in most cases it will lead to a faster sale and better price for your house. 

The fee should be clearly discussed at the start of the marketing campaign, he says, as the agent’s fees do vary according to certain circumstances. Cilliers advises that it is never a good idea to choose your estate agent based on the commission rate that they charge. 

The property market influence
The answer on whether buying or renting is better largely depends on your personal profile and how current property market conditions influence the decision to buy or rent.

When house prices and interest rates are low the monthly cost of owning a home is more affordable, which makes it a Buyers Market. Low interest rates also dictate a low rental bracket, but as this raises so will rental costs.

The interest rate can have a considerable affect on the property market and particularly consumers who are already homeowners.If a Homeowner has been offered a fixed interest rate amount then their monthly bond repayments will be less affected by the interest rates fluctuations whether positive or negative.

An interest rate which isn’t fixed will have its benefits when the interest rate is low as this result in lower bond repayments, but in contrary they are just as affected when interest rates are high as this will result in higher bond repayments.

It's almost always better to buy a home than to rent because both a Tenant and Homeowner are subject to interest rate hikes, but the Homeowner is always paying into their own investment and a Tenant receives nothing tangible at the end of the duration of paying a lease. Buying a property is seen as a good asset as it offers the possibly of financial gain.

Pay off your bond before you retire
If you’re dreaming of a carefree retirement, one of your major aims should be to make sure you will be living rent and bond free. “When you retire and become dependent on a fixed income, the last thing you need is a surprise increase in home loan repayments or rent,” says Braam de Jager, national operations manager of Aida, SA’s best-known estate agency group. 

“And yet we find that many people planning for retirement overlook their home loan commitments – especially if the repayment is currently being automatically deducted from their salary. 

"They forget that once they stop earning, that repayment will have to come out of their monthly pension.” 

To avoid this, Aida suggests that anyone nearing retirement should make it a priority to pay off their home loan beforehand. “That will ensure that one of the biggest cost-of-living items is reduced to the cost of municipal rates and services, and that there can be no nasty interest rate shocks in the future." 

What landlords and tenants should know
With South Africa’s banks still adopting a cautious stance regarding bond grants, demand for rented accommodation increases month by month. This is according to Lorraine Dellbridge, Rental Co-ordinator for Rawson Rentals, who says this, in turn, is leading to steadily improving rentals and the return for many investors in the buy-to-let property market. 

However, she says, it is also leading to an increase in the volume of problems between landlords and tenants. 

In almost every case, these problems arise because either the landlord or the tenant, or both, are unfamiliar with the Rental Housing Act, she says. 

Dellbridge says this relatively uncomplicated piece of legislation supersedes and takes precedence over any verbal or written agreement drawn up by the landlord and tenant. If any clause in the agreement contradicts or varies from the act, it will be deemed invalid if challenged.  

Major accounting lease changes
Over 52 percent of South African executives are unaware of pending changes which will affect the reporting of leases and which will markedly alter balance sheets, thereby inter alia impacting debt-to-equity and return-on-investment ratios.  That’s according to Grant Thornton’s 2013 International Business Report (IBR), which surveyed 3 450 businesses across 44 economies regarding the proposed new lease accounting standard set to come into effect in 2014.

“Amendments to this leasing standard will have far reaching consequences for a large proportion of SA businesses particularly companies in the airlines, manufacturing, mining or retail sectors - industries where many equipment and property leases are held,” says David Reuben, partner and head of assurance at Grant Thornton Johannesburg.

The new Lease Accounting Standard, which is currently in its draft format, is expected to require that companies reporting under International Financial Reporting Standards (IFRS) will now need to record billions of rand of new assets and liabilities.

Built environment and dispute resolution
It’s a fact of life that disputes have the potential to cause damage to finances, reputations and relationships, and resolving them as quickly and cost effectively as possible is increasingly important to individuals and the business sector.  This is according to Dr John Fletcher, head of dispute resolution services of the Royal Institution of Chartered Surveyors (RICS).

Dr Fletcher addressed the annual conference of the South African Council for Project and Construction Management Professions in Johannesburg on 11 April 2013.

“When it comes to disputes in the built environment, these are often very complicated and involved issues at multiple levels which would take an enormous amount of time and money to resolve in the courts or through arbitration,” he says.

Dr Fletcher says the growing international trend is to use adjudication, which provides quick interim decisions which resolve the problems in the majority of cases - or in countries where that is not available, by using a built environment expert to evaluate the situation or to provide expert and robust mediation.

Joint bond ownership: Pros and cons
Getting into the property market is something most people aspire to.  Sometimes a property requires the ‘money power’ of two salaries, whether it is to get a home you both need or as an investment.

A joint bond may then be the only viable way of getting into the market.

While it is possible for two people to have a bond issued jointly in their names, problems can occur if relationships end or circumstances change.

If the time comes to change a joint bond arrangement, both parties naturally want solutions that are equitable.

People looking to end a joint ownership should remember that from a bank’s point of view, a joint bond means that all parties to the agreement are liable for the full debt jointly and severally.

7 ways to increase property value
Buying property is one of the largest investments you will make in your lifetime.  This is according to Craig Hutchison, CEO of Engel & Volkers Southern Africa, who says maintaining your investment is therefore important, especially if you want to increase its re-sale value. 

Hutchison shares a few tips on how to increase your property’s value once you’ve decided on what your budget will allow. 

  1. Spruce up the landscaping
  2. Create atmosphere

  3. Add modern touches

  4. Upgrade the security

  5. Live green

  6. Use the garage space

  7. Make roof repairs



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