Homes

Eyeing your first home? How to get your offer approved first time

Buying a home and gutting your offer approved can be daunting. Follow the below advice for a positive experience.

There are many benefits to purchasing property right now, especially for first time buyers, says Samuel Seeff, chairman of the Seeff Property Group.

 

The interest rate is expected to come down over the next few months and the banks are still keen to lend. Although putting down a deposit has many benefits, first time buyers can secure mortgage loans of 100% of the purchase price, and even up to 105% to cover the transaction costs.

 

The average purchase price for first-time buyers is around R1.123 million according to mortgage originator, ooba. This average purchase price for first-time homebuyers was just R900,000 before the onset of the Covid pandemic and R750,000 some ten years ago. The implication is that properties are not getting cheaper, and the sooner you purchase, the better.

 

First-time property buyers as a percentage of all buying peaked in mid-2020 at over 50% when the prime interest rate dropped to a record low of 7%. Despite the higher interest rate, first time buying has only declined marginally to just over 48% of all mortgage applications.

 

Affordability is an important aspect, and Seeff says first-time buyers should always get a formal mortgage loan pre-approval done to ensure they know exactly how much they can purchase for. They should also have some cash funds available.

 

The next step is to find your dream home and to put in an offer which will be acceptable to the seller. Buyers are often interested in knowing whether they can negotiate the price. Sellers might be more amenable to looking at a lower offer if it is a cash deal or a “clean” offer with no conditions. If you have a pre-approved home loan offer, that could also sweeten the deal.

 

When you put in your offer to purchase, you would want to try and get the property at the best possible price. Whether a seller will accept an offer lower than their asking price, depends on the circumstances of the seller.

 

Properties which are priced accurately tend to fetch better prices, often close to, or the full asking price, especially in the sub-R1.5 million price bands where there are more active buyers.

 

Buyers should not assume that all sellers will be open to discounting their asking prices. Start by looking at what other similar properties are advertised for. This information is readily available online.

 

The risk of submitting an offer which is below the asking price, is that the buyer may lose out to another buyer willing to pay more. Conversely, sellers rejecting reasonable offers also risk missing out on potential buyers who will move on to other properties.

 

When could you chance an offer of up to 5% to 10% below the asking price? Sellers may be more amenable to a discount if it is a cash offer, or there are no conditions, and they are in a hurry to sell. It is best to chat to the agent. If there are other interested buyers, it usually means that the price appears to be reasonable and offering a discounted price might result in losing the opportunity.

 

Chancing bigger discounts of up to 20% is rare and likely only for high end properties priced upwards to R10 million to R20 million, depending on seller motivation. Sellers may accept lower offers due to the need to sell quickly, or if the price significantly exceeds market value. Properties lingering on the market with no interest may also prompt sellers to consider substantial discounts.

 

Should you offer more than the asking price? That would depend on whether you consider the property as offering good value, or if there are other buyers and you do not want to lose out on the property.

 

Multiple offers on a property can result in driving the price up. Properties in prime locations and accurately priced properties are examples of those which may require an offer above the asking price to secure a purchase.

 

Take care though not to overpay, even if you fell in love with the property, you should not risk paying more than fair market value.

 

Writer: Gina Meintjes

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