 Perhaps it's been upgrading. Now, to better help us understand some of the questions that we should be asking, some of the things really that we should be looking out for before we sign that offer to purchase some joint buy grants here, who is the Director of Epic South Africa grant. Thank you so much for joining us again this evening. Thanks for having me, Zuma. So I think grant, I mean, let's probably just go right into it, right? And so many people are very likely looking into buying, you know, into a new development. That whole, I think, to many probably one of the things that appeals to them is moving into a brand new place. I know some of the developments even offer, you know, some of the kitchen accessories. So you really want to move into a place that nobody else has, you know, lived in. And there's just something about that, right? But what are some of the things that we should be looking out for? Some of the questions we should be asking, whether it's the sales rep or the developer who's selling us that property before we sign that offer to purchase. Yeah, so obviously, new developments are marketed very well, they're packaged beautifully, and you sort of go along to these places that are landscape and look amazing, and it really feels like home. And first and foremost, you should be looking at the developer's reputation and their history. How much have they developed? What have they developed in the past? Have there been any issues with the developments, you know? So I think first and foremost, we need to consider the developer and their experience, whether it's the developer themselves or the bigger development team, what their experiences and what they've actually produced. And I think, Grant, you know, where are some of the, how would we actually find out some of those, some of that information? Because I think if you look at certain markets, certainly, for example, in the Hauden region, you'd find that there's so many developments that are popping up, so many different names that you can see on the various boards that some people might not know some of the more household names in terms of their developers. Perhaps some are more familiar than others, but certainly not every developer is a household name. So how do we then kind of fact check whether this would be somebody's, you know, first development, or they've kind of been in the game for a number of years, or perhaps even have multiple projects running in different parts of the country? So first of all, you've got a sales agent on the ground that should know the ins and outs of the development itself as well as the developer and the development teams, the professional team that's involved. So asking the questions there, which developments, how many units we have developed in the past, and then making use of our friend Google to just get online and jump and check out the development, see if there's any feedback or reviews or comments or anything that's popped up online about the development that they've had. An example is, I don't know, again, in Hauden, there have been several developers where developments have popped up, like you say, and there's actually been a massive issue with DEMP and a lot of the developments haven't had their DEMP proof coursing put in place properly. That issue has then followed a couple of developers around because it's something that they do as a matter of course, is they don't invest in the properties, make sure that, for example, the DEMP doesn't cause an issue later on. So you can sort of check with the sales agent first and foremost, and then just jump on Google and check them out. And I think, you know, we'll get to some of the questions that you should probably ask when it's now at the post-sale aspect, because I think there are so many issues that could come up post-sale, and you've already highlighted one. DEMP does become such a huge issue, and I've heard horror stories of people who've bought into new developments, and then it starts raining because perhaps they probably bought in the winter, then comes spring and summer, it starts raining, and they have a massive DEMP issue. And when they follow up with the developer, the developers know where to be found. They said, you know, they've had it over the unit and there's nothing that they can really do. And when you kind of search around, you ask around, you get a sense that that developer tends to have that more often than not. And typically, you know, some of the consumers probably didn't know about it. So we'll look a little bit about some of the processes that perhaps you could ask about when it's now post-sale and you find certain snags in the particular property. And then what are some of the issues that you should be looking out for when you're buying a new development? Because I think oftentimes developers sell at different stages. Sometimes it's a brand new development. They haven't even broken ground. How would you then know that this is the type of property I should even be going for? They don't even have a unit that's ready to display it because they haven't built it. And perhaps in the next few months, then they'll have that unit up and ready so you can get a physical sense of how it's going to look like. But before that, you're literally just looking at a drawing. You're looking at, you know, they are mock-ups and you're already signing that this is something that you want to buy. And I think that even you put in like a 20,000 or 30,000-rand deposit once you've signed. What should we looking out for at that stage? When it's just buying off plan, there isn't even, they haven't even broken ground at that stage. Yeah. So I mean, if you're buying off plan, firstly, the risk that you're taking is nature of that transaction. So you are taking quite a substantial risk and therefore are giving property at a discounted rate compared to, for example, a property that's been built and the developer shown proof of concept has sold some units. And that's why phase one is usually cheaper than phase two and phase three. I mean, that's just the nature of the game. So go back to my point. Reputation of the developer is vitally important. So looking into the developer first and foremost. Secondly, when you are going to sit down and sign that OTP, don't allow a motion to take control. So those sales agents that developments are trained to make sure that you get there, you get all the sites about the property that show you 3D rendering, 3D models, show you the small little architectural model, and you get so excited about being able to visualize and see the units you're living that you immediately sign that OTP. I would suggest that you go down to the site, take a look around the site, make sure that it's viable firstly from your perspective in terms of location, where it is the services, and then take the offer to purchase and go to your convening attorney and I'll seem to go through it. There are a lot of issues in development offer to purchases that tie you into that regardless of how things progress down the line. And one of the examples is many issues that you have is the development starts, but then they miss their deadlines. So let's say, well, you're going to have occupation the 1st of March, 2021. And 1st of March, 2021 comes and half of the first block is bought to maybe the gatehouse. So you need to be able to get out of that contract if they have any of those timelines and often that clause is missing. And I think that was actually one of the questions I wanted to ask was around timelines. So in the event where perhaps you're talking to the developer and you're asking them even about some of their past developments, perhaps one of the questions that you should be asking is, do they need some of the various deadlines of the different phases as they are building? Because that would also essentially indicate to you with this particular development that, look, we've done this before firstly and secondly, we're able to meet our deadlines. So you don't find yourself in a situation where you anticipated occupation at a particular date and then the unit isn't ready and you have all these different sort of excuses from the particular development. Now, Grant, is the issue of finances something that you should be asking the developer? Should we be asking them for their financials? Just to make sure that they've got the money should we be asking whether they are bankrupt or haven't bankrupted before? Because there's so many horror stories that we tend to hear about halfway through a developer runs out of money, they can't finish it and you've now bought into it or perhaps you moved in at phase one and this is meant to be like five different phases and they're only halfway through phase three and they run out of money. And no matter how much they try to kind of sell they're still not selling. So should we be asking about them should we be asking them rather about the nature of their finances? Yeah, I mean, you know, you should and I doubt you're going to see the financials of a developer. I don't think they'll provide that to you but it's certainly something that you know people need to understand that going into development developers particularly in sectional type of schemes one of the biggest issues is the finance of that project. It's very difficult, they have to do 70% pre-sells to be able to activate any finance usually and want to activate that finance and then start building. So I would say if you're going to go into this once again it's nature of the game is that if you're going to buy into a or buy off plan or buy into new development you are putting that 10 or 20,000 at risk for the potential upside benefit of buying early into the development. So discuss the finances with the developer as much as possible try and get an indication if you feel anything's off make sure that you maybe take a step back and wait a little bit. Part two is don't commit too much money. So if they need a 10,000 and a deposit don't commit a 100,000 and a deposit to try and secure the best unit still commit the 10,000 and unit because you know then you only stand to lose 10,000 and and then make sure the agreement is in place to again we talk about timelines. Once the developer starts missing time as you which you would understand is that the carrying costs of an empty development delay but the site itself the finance costs are huge so the more the developments delayed the more at risk the developers from financial perspective and therefore at risk your money is. So we were saying earlier you need keep an eye on them hitting their timelines go down and visit the site make sure that you very clear that block number one was meant to be built by the 1st of April block number two by the 1st of May make sure that's actually happening the more they miss his timelines the longer they carry and they're building and the costs for the more the expenses are going up and therefore the more at risk they are financially so you've got to be on top of as much possible particularly with newer developers that you maybe don't know or don't have a history guys like for example Baldwin we speak about Baldwin because they're the biggest in the country you know you know those guys are firstly good for the money they they build very quickly they're very good on their timelines so you can actually literally almost probably peg it to within a week and that they actually develop things part two is is there are situations that happen that develop a control lockdown as an example so do be aware that you might have a clause in your agreement that allows a renegotiation of those time frames but make sure you've got something in that in the agreement that allows you to exit if they don't meet those those projected timelines if you're joining us at home I'm speaking to Grant Smear who's the director of Epic South Africa and we're talking about some of the questions you should be asking before buying into a new development if you have any questions about buying into a new development perhaps you are looking on private property.co.zn and you still undecided whether you should go for a new development or perhaps just buy into a complex that's already been running for a couple of years do send through those questions we're going to go for a quick break and after this we'll be taking some of your questions and really looking at some of the other issues that we should be mindful of before we buy into a new development we'll be back to our stuff to this Episode 26 of the private property podcast I'm your host Zaman Donga Kumal it's an item joined by Grant Smear who's the director of Epic South Africa we're talking about some of the questions you should be asking before buying into a new development and of course if you've got any questions on buying into a new development perhaps you're a bit you know uncertain about whether to buy into a new development or maybe just go for a complex or an estate that's already established do you send in those questions Grant have already got a question coming in from Nantlan Dabeni who asks why are the last phases so expensive So I mean like I said earlier buying into a development off plan in particular and their first phase is usually the most risky also the developer tries to incentivize those first buyers to really get to that 70% pre-sale so what they'll do they'll divide the section the sections or the phases and phase one they'll need to develop and get the finance on so they'll try and get 70% pre-sales use some of the profits and then finance phase two and carry on so really it's about two things it's proof of concept buy confidence so buy confidence getting people in and once that phase one is bought they can show firstly they're established they're developed and therefore people pay phase two phase three more because there's less risk to the buyer or to the buyer sorry And you know so Grant I mean I've seen a lot of different developments especially here in Haudenay if anything I mean we've got quite a lot of excess stock where some of the developers for example like even offering free levies for a year and I suppose it's a way to entice buyers to buy in but I think for many of us who are able to see the other side it's also developers who are struggling to sell some of that stock should people kind of trade carefully with some of those developments where they are struggling to sell you know some of their units or should we just take it as we're in a market where there is quite a lot of excess stock and it isn't necessarily a sign of a bad development but perhaps just the market that we find ourselves in particularly in the Haudenay region Yeah you know I think it's interesting because any property so we can take new developments existing stock anything there's always a price point for it so a property will always sell at a price so if it's being sold at the right price there's always a market for it so if a developer is struggling to sell my first question is is it poorly developed or is it poorly developed or is the price too high so yeah I mean if you are comfortable getting in at a certain level so should a lot of other people in the market if there's a hundred new developments and they're struggling to sell 30 of their units I would potentially question why those units are sitting available if we're in a difficult market right now even if they drop that price 100, 200,000 and they'll go up to sell all 30 so there's always a price point that a property will sell regardless of the nature of the market so I don't think that's an issue something so yeah you're exactly right I think somebody is struggling to sell the stock I'll be quite cautious of getting into that space and I think it's something that's probably a lot of people in Hauden I'm not so familiar with other parts I certainly see it here in Hauden you're driving around and you see big boards with you know get first 12 months off of levies what does the boy seem enticing when you consider how sometimes levies can go up to 2000, 3000 sometimes even more but the upside could as you're saying that there could actually be something that might be suspect beyond it being just excess stock for the sake of excess stock and I think perhaps and that brings us to the issue of negotiating prices I mean oftentimes we a lot of people who have to buy into new developments have an issue with the price right because oftentimes in property we know that the price that's advertised isn't necessarily the price that you're going to pay you're able to negotiate sometimes get 5, 10 even more percent less than the purchase price that was advertised and yet we tend to not see that being the case with developments how do we go about negotiating a lower price in these new developments particularly because a lot of times the developer has already sort of priced in their price point as they're doing their own financials and building essentially so how do we go about negotiating and trying to get a lower price than what they've advertised to us So I mean the first thing is to just understand what the reason why you're buying into a complex or why you're buying into a development you know if you feel that there's a good developer and he's creating good stock he's come with a great product and a great area you could potentially see upside benefits by buying in early and then seeing some capital growth there and benefiting out of that so you might not want to negotiate a discount but just get in as early as possible and also buy the best possible units from a location point of view within the complex part two is if you really look into then a negotiated discount I'll take a look at a few things is how many developments are going over the North as an example and towards the land's area that entire space along Vidcorp and Northumberland has got three or four big developers throwing lots and lots of units up so they're literally competing there's hundreds of units all at the same time they're competing for the same market so you've got definite potential there to negotiate prices on the complex that you choose because there's so much stock on the market and that's the case where the developers are going to be struggling to sell everything because there's so much out there so much supply at the moment so first thing is supply and demand in an area how much stocks in the market part two is how many units are you buying and I mentioned this earlier to you is are you buying a bulk so if you've got if you buy from an investment perspective you've got a whole lot of people that are in the same space as you're looking to invest you identify a good complex maybe you're going to approach and develop and buy five, 10, 15, 20 units in a complex you'll most certainly get a discount the other side of it is developers will use two things that'll that'll say well I don't need to give you a discount because we're paying your transfer fees for you that's normally negotiated with the development attorney and that that's given at an absolute steal for them because the development attorney is getting a bulk supply and then part two is that you're not paying transfer duty but remember if you are generally buying too complex in this talkhouse again you're generally buying below the millionaire and mark which means there's no transfer duty applicable anyway but you are paying that within their purchase price which is then financed so there's something just to keep in mind that that you know the specializes in particular again are trained to try and drive value towards you in terms of you you need to pay a million renters this unit whereas if you buy your time and you and you play the game right you do your research correctly your potential negotiator is slightly better deals particularly now we spoke about earlier in this market you know lockdown and post lockdown market is going to be an absolute biased market and that's so correct you know granted a number of different guests that we've had right now on the private property part cost have actually said that even pre-covid we already saw that it's a biased market but now more than ever we've seen interest rate cuts we've seen the effects that COVID has had you know not just in the property market but the economy and not only in South Africa but really at a global scale so the next few years probably the next three to five years with obviously the first kind of 24 months being a really big biased market so if people do have the opportunity to take advantage of approaching the developer that they want to buy from this is probably the opportunity for them to to negotiate that lower price we are of course taking more of your questions at home around buying into a new development another question coming in Grant this one from Stephanie Whitboy who asks I've gone to I've gone to a few developments and notice the unit prices differ from agent to agent how does one find the best price so the first thing is to be careful once you engage one agent that agent is essentially linked to you in terms of the purchase process so you know again I would if I found a cheaper price through another agent I'd literally approach the agent that I've been dealing with and said and while it's on the market at 100,000, 50,000 in cheaper through this agent I needed that price so you can a lot of developments have their own sales teams they don't have agents on it but their own sales team so again there's about a negotiation there so again I think the point and you've done this correctly is research you know don't just blindly arrive at a complex or walk around and accept what what it's given to you is do your research and jump online there's plenty of information private property marketing I mean you can go and search areas and find comparables and prices and quite easily I'm using the platform so I mean just do your research is is that important and we've got a comment here from one of our regulars Bruno Santos who says I've noticed properties are built too quickly and poorly developed compared to the older ones from about 15 years ago so I think that's one of the reasons why they give you free levies for a year yeah yeah so I mean there's two things here I mean the free levies for a year I think yeah very very cautious on that developers are offering it but in fact it's not their right to offer because you've got your section title scheme registered which needs to be registered post the development once the occupation certificates are given out and then your your body corporates is then convened and then they make a decision on your levy so the developers are offering something that to be fair as in my perspective I understand to be corrected is not their right to be giving anyway you know because what you're doing is once they convene that body corporates or that section of type of body you're going to tell them oh by the way I bought with no levies so who in that complex going to pay levy and who's going to be fair pay for your your your PQ your participation quotient of your fees so somebody needs to pay that at the end of the day so it's going to come some way and if they've given the entire complex free levies you know where normal don't you'll have to raise especially so I do have an issue a little bit of that I do agree with certain developers that they are putting up stuff very very quickly that are cutting coins and cutting costs and I think it's because people going to develop without fully understanding the space and then they make assumptions and they think it's a hugely profitable area and they don't really do the research in terms of pricing labor costs building costs holding costs and then they start cutting corners so they've got to get stuff up quicker and then they've got to cut corners in terms of quality so I do agree that there is some stuff going on very very quickly but you know we use ball and isn't wrong for ball and have had some issues in the past but they build far faster than anybody else I know but they've got a template model where they they can literally or sort of like they pay a leg on a big scale to be fair so they can build very quickly with the right quality so again I think it's about researching the developer making sure that of what they've built in the past hasn't caused issues and then going into development maybe getting a property inspector in and we asked about property inspector before but you know getting a property inspector in who know the little science look for them for proof coursing as an example needs to protrude from the wall they'll look for that make sure it's there and I think another question coming in here this time from Kalanikiam who asks what information do I need to get if I'm a first-time investor in a new development is there some sort of a document that someone needs to get and read before buying into a new development so the so the problem I said like I said is the the the section type of scheme or the section type of register is only registered after the fact and then or is registered and then and then the units are sold and then all the the body corp is convened so the decision on the levies is then made so a few things like they and what the developers do they normally do an estimate on levies now to their benefits to minimize that estimate as much possible so it doesn't seem like it's that as expensive to to live in because levies is is the biggest expense that's overlooked when people buy in section type of so firstly I'll look at not only what they they budgeted levies what are the elements that make up their budgets and I'll do a comparison to maybe a next door next door complex going to find out from the next door complex person what are your levies compared to this what are the amenities you offer compared to the complex I'm looking at to try and understand that if that budget is realistic you'll often find that that number is very very low so levies is the very first thing that I would question in terms of documentation from from the the sales agency you're really going to get the the plans and what is planned and what's going to proceed the agreements and then the financial or the project of financials so there's not a lot you can get from them particularly when it's off game from it from it from that point of view and I think you know one of the things that we do under estimators we're saying is the cost of levies oftentimes people don't realize just how high that particular cost can be in some instances you know especially levy can be raised fairly early on once you know you've taken occupation so perhaps another way to go about it is in the event where that same developer has built a similar you know complex or a state to find out of those you know particular state or complex what are the levies looking like because you tend to find that in some of them the levy structure is relatively similar because what they're offering in those particular you know complexes or estates is relatively the same so it also does give you you know a good estimate of how much it might potentially be grant before I let you go any other tips for our viewers at home who are looking into buying into a new development yeah so I mean again the reason you're buying in if you're buying in for investments I'd be very very cautious unless you're getting a substantial deal I'd potentially look at secondhand stock or at the stock it's on the market already built if you're looking to buy a home you know again the reason you're buying you know take a look at that the big thing that I think again is overlooked like I said is a levy cost and people buy into complexes because these all these amenities gyms are offered swimming pools tennis courts um clubhouse everything else all of that those costs need to be carried by somebody so if you're going to a medium-sized complex that can be very very expensive and you can sit with a levy that's two and a half three and a half thousand a random month which actually is is a large chunk of what your mortgage would be so you might want to start looking for first time home by looking at a complex with fewer amenities lower levy costs so you can actually afford a bigger property and pay less towards your your common area usage so I think that's biggest thing for me particularly new developments thank you so much Gran so I think to our viewers at home if you are looking into buying into a new property there's quite a bit of research that you must do from understanding you know whether or not the developer who's building has done this before uh you know researching about their trek record researching whether they have processes in dealing with the post-sale snags that might come up into that particular development and really being sure that you trust that particular developer but also understanding what happens after that so you know what are your levies going to be looking like are you sure about the estimate of those particular levies are you sure that you'll still be able to afford that place post you know having bought that particular establishment and really the big thing that Gran has emphasized is the importance of making sure that you double check and research and you can of course do that right here on private property.co.zd where we give you various tips on how to go about navigating dealing with developers on your home ownership journey Grant thank you so much for joining us this evening um I've been speaking to Grant Smith who's a director at Epic South Africa and we've been looking at some of the things or questions that you should be looking out for and asking when buying into a new development we'll course back again tomorrow evening looking at another issue that is affecting a lot of us and of course if you're on your property journey you don't want to miss that one until tomorrow we'll be back good evening I hope you're staying home and staying safe and we'll be back again tomorrow.