Mind the gap when selling and buying a home

Private Property South Africa

Since property purchases are among the single largest financial commitments private individuals will undertake, the need for meaningful protection against risks is essential.

The core of the issue lies in defects. Not only is there a debate about the difference between latent and patent defects, but the results of faulty or defective design, structure or workmanship sometimes only become evident over time.

The primary misconceptions about defects are:

  • “My bond insurance will cover everything.” – Wrong: Traditional homeowners insurance only covers damage caused by sudden and unforeseen events such as fire, lightning, storm, wind, water, impact and the like. For example, water damage to carpets resulting from a poorly designed roof would be covered, but not the cost of repairing the roof.

  • “The bank has inspected the property so it must be fine.” – Not true: The obligations of the bank valuators are limited to establishing if there is fair value in the home for their loan exposure.

  • “If the house has been sold voetstoots then there is no recourse to the seller.” – Wrong again: Voetstoots merely says, “These are the problems but I am not going to fix them – so take it as it is.” If you sell voetstoots, you are still required to disclose any defects you should have reasonably known about.

Many a seller has felt the pressure of the defects disclosure list and hoped that they have remembered everything. In some cases they know there is a problem but haven’t ever really investigated the extent of it. For buyers there is always the point where their house-hunting excitement is replaced by post-offer anxiety and the question becomes, “What if there is something wrong with the place and I can’t afford to fix it?”

Whilst sellers may take some comfort in the fact that accessing the legal route is expensive and time consuming, there are more and more successful cases going through the courts in favour of buyers where sellers have tried to hide behind “voetstoots”.

Let’s face it; most buyers are looking for a home to fall in love with. However, buying and selling a home is like any commercial transaction. Buyers are looking for a good deal that meets their needs. Sellers are trying to make their homes stand out in the market, and get the best price possible.

Selling and buying a home with a warranty makes sense for both parties. Sellers get to differentiate their home and pass their disclosure obligations on to the insurer. Buyers get the peace of mind that if something goes wrong they didn’t know about, they are covered.

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