Minimise Your Risk as a Buyer

buyerinspection

Over the years I have heard many ideas about how a buyer could protect his interests when purchasing a property.  These ideas vary considerably in their practicality.  

Of course prevention is better than cure, so a thorough inspection of the property is the first and somewhat obvious recommendation. More often than not however due to the emotion of the purchase process, and the fear of loss by the buyer who wants a quick decision to his offer being accepted, a thorough inspection is NOT actually done.  This is the case more often than one may rationally assume.  

If it was not totally impractical the ideal would be to 'try before you buy' but sellers are seldom looking for tenants so this is not going to be an acceptable proposal in 99% of cases, if not more.  I certainly would not even think of recommending such a request to a seller, but there are a number of other more practical solutions that can be considered and that a professional agent could facilitate.

The recommended course of action would depend on the particular property and the circumstances, so I have four scenarios to which I propose four different solutions;

(1) Where a buyer has concerns he can ask the seller through the agent, to give him a written report to the effect that there is nothing known to the seller that is wrong.  A seller's declaration.  While misrepresentation does protect the buyer it can be very difficult to prove and the voetstoets clause has a far greater effect in protecting the seller.  Asking for a specific written disclosure with the intention that it form an annexure to the sale agreement on the condition of various aspects of the property from will usually result in fair and full disclosure.  For the seller not to do so would make any claim against the seller easier to remedy and thus it is reasonable to expect the disclosure to be honest.  I have such a disclosure document should you wish to email me for a copy. 

(2)  The Buyer could make the purchase subject to a home inspection service.  In South Africa this is not yet common practice as it is in parts of Europe and the US but where you seriously suspect a less that 'open' seller or you are concerned that it is a problem property, it could be an excellent idea.  I have however heard a number of instances where the home inspection service, to justify their fee, lists a number of problems that are really not very important or serious and buyers have used the service to try renegotiate the price. Such a deliberate strategy has even been touted as an advantage by some home inspectors.  This is unethical and so the uptake on these services has been limited and understandably not very popular with agents. The cost of the fee is also quite high, but so is the purchase of a property so all said and done it could be an excellent route to follow if the circumstances warranted it. Just remember that if the purchase is conditional due to this inspection it could (depending on the wording of the sales agreement) allow the seller to look at other offers from other buyers during this suspensive period.  As a buyer you may not want that risk.

(3) Where you suspect that the seller may be really keen to get a deal closed, it would be easiest to factor in a reasonable 'worst case' scenario and deduct a 'budget' for repairs from the offer price if you feel the asking price does not adequately reflect such eventualities. This is the cleanest and neatest way to protect your interests and then be happy that if there are repairs that surprise you, take it on the chin as you have factored them into the equation.  If they are not required, then you have scored a little extra towards your revamp!

(4) Where you feel that the price you are paying would be too high if there were some unforeseen expenses and there was a specific concern, for example a recent major repair that had been done to the pool or the roof,  you could consider putting into the purchase agreement a clause that would require the transferring attorney to hold a portion of the purchase price in his trust account for a limited period after transfer.  Say for a period of three to six months months so that if a specific problem occurred then funds could be used from this withheld amount to address the repairs to that value.  A reasonable seller should be confident if he is representing a repair to a property as sound, that such a suggestion is reasonable.  This also binds the seller to the repair as he is the party that contracted with the repair company. I do know of instances where the repair company or contractor has been less than co-operative with the new owner.  Of course the key to this is that the withheld amount and period is reasonable and there needs to be great clarity in the agreement as to the circumstances under which those funds can be accessed.  Again I have such wording for an agreement if you wish to email me.

There will always be an element of risk that has to be accepted when you are buying a second hand property.  The seller also has a right to get on with his life and the property he has subsequently purchased without being held unreasonably liable for problems and faults in the property he has sold.  At the heart of the voetstoets clause is the common sense need for finality to liability.  Non disclosure often ruins an otherwise happy occasion, and usually the poor agent gets blamed for everything, so let the buyer beware and be warned!

andre@everitt.co.za

Andre de Villiers – All rights reserved (c)  15 September 2013
Permission granted to News24 for publication

 

 

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