We have a peculiar set-up in South Africa when it comes to buying a house. Buyers and sellers are represented by the same agent, who is incentivised purely by the sale of the property at the highest price. This makes it impossible for an estate agent to act in the best interests of the buyer.
Purchasing a home is the largest investment we will ever make, yet we sign a standard document drawn up by the seller’s agent and get no legal counsel of our own.
In the United Kingdom, it is common for the buyer and seller to be represented by different agents. There are people called vendors, who will actively look for a property for a buyer based on specifications, and their contractual agreement is with the buyer.
Moreover, the agents are required to disclose all fees and commissions that they make in the process, including referral fees to conveyancers and bond originators.
This disclosure is not required in South Africa and agents can make up to 10% of the value of a transaction as a result of additional undisclosed fees. With the authorities fighting the financial industry over “undisclosed” fees, it is surprising that estate agents have not yet been made to come clean.
Until the authorities catch a wake-up, it is worth getting your own representation when buying a home. You can use an attorney to look over the sale agreement before signing it and call in home inspectors to check for structural damages.
There is also a company called Powerhouse, which offers legal and financial advice for buyers. The company will not actively look for a home for you, but once you have found a house you like, it becomes your representative when dealing with the estate agent and seller. Powerhouse also uses registered valuers to get a second opinion on the price to make sure the buyer is not paying too much for the home.
When buying a house, it will save you money and peace of mind to do some research. Allister Long, MD of Powerhouse, has some suggestions for would-be buyers:
l Before signing the offer to purchase acquaint yourself with the title deeds. Check for any endorsements. For example, the property could have been used as collateral for another loan, which could complicate the sale. Or there may be other conditions — for example, some homes in Houghton, Johannesburg, require permission from JCI before they can be sold. This is because JCI owned many of the houses in the area and the requirement is still in the title deeds.
What many people do not know is that the title deeds of properties along the Vaal river specify that Sasol is permitted to do open cast coal mining on the property. While this is an outdated condition, it’s best to have it removed from the title deed.
l The offer to purchase is always loaded in favour of the seller and agent. It is important to realise that the buyer is king — he or she is the one taking all the risk and needs more protection. Be wary when signing a voetstoots clause on what is in effect your biggest investment. Get a home inspection and make sure you know what you are paying for. You should also appoint your own electrician to ensure that the electrical certificate is valid.
l Although it is standard procedure for the seller to appoint the conveyancer, the buyer should try to change the clause and appoint their own conveyancer as the buyer is the one paying all the costs. Offer a fee of about R500 to the seller to appoint their attorney to monitor the transaction.
l Buying a home is your biggest personal investment and will have the biggest impact on your financial wellbeing. Remember to look at the total cost. Apart from the price, there are transfer fees and relocation costs that must be factored into the budget.
There are also a variety of issues which could impact on you personally, such as your marriage status, the risks associated with your business, as well as tax implications. Someone married in community of property who has their own business may prefer to use a trust structure, but then there are additional tax and legal implications.