Is the Rent-To-Own Option For You?

The information in this article is courtesy of iAfrica (Pitfalls of Rent-to-Own – 28 April 2009).

Since banks are insisting on exceedingly large deposit before granting home loans, the rent-to-own option has become a popular choice among home buyers.

In a nutshell, rent-to-own or lease-to-own is a term relating to a real estate agreement, which is composed of a rental lease, and a purchase agreement where the tenant has the option to purchase the property at a fixed price at a specified point of time in the future. The main idea of a rent-to-own agreement is for the buyer/tenant to rent and maintain the property for a set period of time before she or he must obtain a home loan and exercise an option to purchase — or decide to walk away from the deal.

Dr Willie Marais, national president of the Institute of Estate Agency (IEASA), believe that both the tenant/buyer and the landlord/seller win in such an agreement.

For sellers, the agreement means that they have the opportunity to tap into a broader market of potential buyers, not just those with good credit and cash for a deposit. Also, the rental income will cover existing mortgage and an opportunity to lock in the property price that might fall in a down market.

One of the main advantages for the seller is probably the fact that tenants will have an interest in maintaining the property, as it will soon be theirs.

Potential buyers will have the advantage of moving into a home that they want without handing in a large amount of cash.

A rent-to-own transaction has 3 agreements: an Option to Purchase, a Lease Agreement and a Sales Agreement. The landlord/seller will usually charge an option fee equal to 1% to 3% of the purchase price, which can then be paid off by the tenant/buyer as part of the rent. This will then act as most of the deposit on the property at the end of the rental period.

Marais warned potential rent-to-own buyers that they should consult an experienced estate agent, a reputable mortgage originator and the advice of an attorney should they decide to enter such an agreement. The following questions should be answered before signing the agreement:

Is the price fair given future price expectations?
What portion of the rent will be credited towards the purchase price?
Who will be responsible for rates/taxes during lease period?
Under what conditions could the rent-to-own contract be voided?
Under what conditions will the buyer be refunded any part of the option fee?

Marais also proposed that all buyers that are considering renting-to-own should first consider renting cheaply while saving for a deposit, as this might be a better option in some cases.

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Legal Duties of Estate Agents

The information in this article is courtesy of iAfrica (An Estate Agents Legal Duties – 24 April 2009).

When selling your residential property, it is essential that you are aware of the duties of the estate agent. The agent has a responsibility towards the seller but must always be fair to the buyer. These are some other duties of an estate agent:

1. An agent must strive to achieve the highest possible price excepted by the buyer.

2. Agents must ensure that there is no conflict of interest such as selling to themselves or to friends. If so, agents must disclose this information.

3. Agents are not allowed to take any payments from the buyer to achieve a quick sale.

4. Agents are not allowed to disclose any private details about the seller especially not to help the bargaining process – unless this has been discussed.

5. An agent must submit to the clients all offers on a property including those that may have come through another agency on a shared commission basis.

6. Agents must advertise property in an honest way according to the promises made when the mandate was received.

7. Payment of rental properties must be kept up-to-date by agents and monthly statements must be send to clients if money is kept in the agent’s trust.

Southern Suburbs Struggling

The information in this article is courtesy of Property24 (Southern Suburbs taking a baeating - 15 April 2009).

The Southern Suburbs of Cape Town has certainly shown just how tough conditions are.

Figures show that there has been 49 sales between January and March 2008 at an average price of R6,4m against the 12 sales at an average of R3,1m for the same period this year. It also shows a 14% difference between sale price and list price.

Seeff's Upper Constantia team of Sari Raz and Christiaan Steytler explains that these figures don’t necessarily mean that price have decline but rather illustrates that less expensive properties are being sold.

Raz added that March did see 3 good sales between R4m and R7m by overseas buyers.

Germans Still Investing In South Africa

The information in this article is courtesy of iAfrica (Germany Loves South Africa – April 1 2009).

A popular German publication, The Süd-Afrika Magazine, which focuses on Southern Africa as a destination, recently held their annual expo.

This year’s show featured food, music and general information on Southern Africa and exhibitors ranged from tour operators to immigration specialists.

Dina Porteous, area principal in the Margate area for Pam Golding Properties, Yvonne Booysen, manager of Pam Golding Properties in Margate’s rental division and Gaby Moessner, manager of the Pam Golding Property group’s German office, attended the Süd-Afrika Tage 2009 show in Germany. This event attracts high profile investors and incorporated travel, trade and business meetings – including a business conference highlighting investment opportunities in Southern Africa.

According Porteous their exhibit stall attracted a lot of attention at the expo. She believes that German investors choose South Africa because of the excellent climate, friendly people and beautiful homes.

Moessner said that the attendees of the expo are extremely well informed about the South African property market. They generally prefer standalone homes rather than golf-estates of town houses and some have rental income in mind. The Western Cape including the Overberg region remains the most popular location.

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