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Nov 11, 2015 10:36:39 PM

Should you buy your childhood home?

Topics: Buying, South Africa, Richard Gray, Harcourts 0

There are all sorts of reasons why you might want to buy the property you grew up in, but you shouldn’t let your head rule your heart.


That’s the advice of Richard Gray, CEO of Harcourts Real Estate, who says that as the trend towards multigenerational living gains ground, young adults are now not only moving back in with their parents but increasingly, buying their parents’ homes with the intention of also raising their own families there.


“According to Professor John Graham, a co-author of ‘All in the Family: A Practical Guide to Successful Multigenerational Living’, this is consistent with the steady return to the interdependence of the extended family and the move away from the nuclear family model.


“And in our experience it is also consistent with the rising age of first-time buyers, who are now often in their mid-30s and watching their parents get close to retirement.”  However, he says, you should not buy your parents’ home for any sentimental reason. You need to think about it very carefully, decide if it is really the home you want, and seek professional advice from an experienced estate agent, a reputable mortgage originator and your accountant or tax attorney before you sign an offer to purchase.


“For example, you need to consider the location, just as you would when looking at any other property. Is it close enough to work and does it offer reliable public transport? Does it have all the shops, schools and other amenities that you need? Is it safe, or would it perhaps be better if you all moved to another home in a more secure area or development?”


In addition, Gray says, you need to evaluate the condition of the property itself. “If your parents are getting on, there may well be some deferred maintenance issues and to avoid the possibility of family disputes later, you will need to identify these and reach agreement about who will do the work and who will pay for any repairs that may be needed - before you buy. “And just as with any other property, you will need to keep the potential resale value in mind. Updates or alterations may be needed now to make the house work for your extended family but you will need to be careful not to overcapitalise and not to limit the appeal of the property for future buyers.


“What is more, you will need to comply with local building by-laws and, if the house is in a security estate, you may also need to get the approval of the Home Owners’ Association before you can make any changes.”


At the same time, he says, you will have to establish whether you can afford the property and how you will finance the purchase. “The biggest obstacle for most first-time buyers is the deposit, and your parents may be willing to help you with that, but then you must agree on how you are going to pay it back – especially if the loan came out of their retirement funds.


“Similarly, you will need to agree on a fair purchase price, bearing in mind that if your parents set price that is too far below market value in an attempt to help you qualify for a loan, the SA Revenue Service could view the transaction as an attempt to avoid paying transfer duty.


“You will also need to qualify for a home loan in the usual way, as the banks can’t make any allowances for the fact that it’s your parents’ home you are buying. In other words, you will need a good credit record, steady employment and enough discretionary income to afford the monthly bond repayments.”


Then finally – and perhaps most importantly – you should think carefully about whether everyone in the extended family you are creating will get along, find out how other members of your family who live elsewhere feel about the arrangement and try to plan ahead for any change in your circumstances, Gray says.


“An ageing parent may reach a stage where they need more intensive healthcare than you can provide at home, for example, or someone who is contributing to the bond instalment may lose a job, and it would certainly be helpful at that stage to have a written agreement in place that spells out what will happen in such cases.”