AA - 2021

Author:  Gerhard Kotzé – MD of the RealNet Estate Agency Group
Tony Clarke – MD of the Rawson Property Group
2 August 2021

‘Urgent sales spell opportunities, but beware false bargains’

Right now, there are a lot of homeowners looking to sell their homes as fast as possible – either to get out of a financial squeeze or because they urgently want to relocate to another town or city.

“And most of these sellers don’t want to spend the time or money it might take to get their homes into pristine condition, but are prepared to negotiate the sale price to get the deal done,” says Gerhard Kotzé, MD of the RealNet estate agency group.

According to the latest FNB Property Barometer, homeowners selling due to financial pressure accounted for 21% of home sales in the second quarter of this year, and those who were selling to emigrate, relocate or move closer to work accounted for another 22%.

‘8% drop between asking and selling price’

“The report also shows that the average differential between asking price and selling price is now around 8% – and in our experience that can be quite a lot bigger if the seller is in a hurry. This situation means there are some really excellent purchase opportunities now for buyers who are prepared to take on less-than-perfect properties and fix them up themselves.

“Looking out for these opportunities could also help you gain entry to a preferred location for a lot less than you thought. And as we always say, it is much better to purchase the worst home in a good neighbourhood than to buy the best home in a bad area.

“It’s not just low-interest rates making this a good time to buy, either,” says Tony Clarke MD of the Rawson Property Group. “There are some extraordinary bargains coming onto the market in the form of distressed properties as well. It’s a sad commentary on the financial pressures on consumers, but we know of at least one bank whose distressed portfolio has literally doubled in recent months.

They’re offering preferential interest rates to qualified buyers to help move these properties faster, making them extremely attractive investment opportunities for those in the know.”

As for sellers, Clarke says competition in sales are still happening – as long as properties are priced and marketed strategically.

‘Purchase the worst home in a good neighbourhood’

However, Kotzé notes, you do need to be especially careful when you consider buying a “fixer-upper” because you could easily end up having to deal with much more renovation and repair work than you thought.

“If the property is simply “tired”, it may take only superficial changes like a new coat of paint, some modern fixtures and fittings and some landscaping to bring it up to the standard of the surrounding homes and increase its value.

“But if it appears really run-down, the property may well have more wrong with it than immediately visible, and our advice to sellers in such instances is always to get a professional opinion from a home inspector or registered builder before they sign an offer to purchase.”

‘Get a professional opinion from a home inspector’

This does not necessarily mean that you should not buy the property, says Kotzé, “but once you have an inspector’s report, you will have a much better idea of what it would really cost to renovate the home properly, and be able to adjust your offer accordingly.

“For example, if the home needs any structural changes, you will need to include engineer’s and architect’s fees in your renovation budget, as well as those for the actual building, plumbing and electrical work that may be necessary.

“In addition, you may have to get plans for any alterations agreed to by the neighbours and then approved by the local authority, which is likely to take quite some time and could mean higher-than-usual holding costs before you could move in.”

‘Price and location are key factors’

The bottom line, he notes, is that it is usually not worth taking on a major renovation if your plan is just to complete it and resell the property within two or three years. “Generally, you need to live in a renovated home for an extended period before property values in the area will rise enough to enable you to recoup both your original purchase price and your renovation expenditure when you do decide to sell.

“So once again, price and location are key factors. If you are going to buy a home that needs a lot of work, it must come at the right price – and be somewhere you’ll be happy to live for many years.”

The original article can be viewed here: