1. The sale of property agreement
Once the seller and purchaser have agreed on a price, the terms of the agreement need to be placed in writing. Also known as the offer to purchase, the sale of property agreement is the primary document setting out the requirements of the process to be followed to effect the sale and the conditions thereof. If anything goes wrong, this is also the document to fall back on. Ask yourself, should this complex document be a standard document purchased at a book store, or a “fill in the gaps” document, completed by an estate agent so everyone can sign immediately?
The agreement should include, among other:
The purchase price.
How the purchase price will be paid.
Does the purchaser have to pay a deposit and when.
Whether the agreement is subject to the purchaser obtaining a loan.
Whether the agreement is subject to the purchaser selling its current property.
How long the purchaser has to obtain a loan or sell its current property.
When the purchaser will move into the property.
Does the purchaser need to pay rent if the property is not registered in its name.
What happens if the purchaser has moved in and thereafter finds out that it cannot obtain a loan.
Looking at what needs to be included in a sale of property agreement, it is clear that the sale agreement is anything but standard! This is why it is important to DBC Property that the sale agreement is not simply completed by hand by an estate agent similar to a crossword puzzle, but is carefully drafted by a specialist attorney.
Once the agreement has been signed, the next step can be taken.
2. Notice to the seller’s bank
If the seller currently has an outstanding home loan on the relevant property, the seller will have to notify its bank thereof. Some banks require 90 days written notice prior to transfer of the property that it intends to pay off its home loan. If the loan is paid off prior to the 90 days, a penalty could be payable, which could be a lot. Every bank’s internal rules differ and it is therefore important for the seller to find out as soon as possible when it needs to give notice to the bank and what the implications thereof are. You can also request your attorney to assist with the notice. On receipt of the notice from the seller, the bank will appoint a cancellation attorney and confirm what amount needs to be paid for the existing bond to be paid off. The cancellation attorneys will accordingly deal with the cancellation in accordance with the written agreement and the instructions from the bank.
3. Application for a home loan
Most sale of property agreements are subject thereto that the purchaser obtains a loan. The sale of property agreement should set out:
What amount loan is required? Is the purchaser going to pay a deposit, or does he need a loan for the full purchase price?
How long does the purchaser have to acquire the loan?
What interest rate is acceptable for the purchaser?
It is important to note that if these requirements are not met, the sale agreement will automatically be null and void. The home loan application therefore needs to be guided by the sale agreement.
If the loan is approved, the bank will appoint bond attorneys who will attend to the bond registration simultaneous with the registration of the property in the name of the purchaser.
What is a bond?
In simple terms, a bond is a loan for which the house you intend to purchase serves as security. The home buyer is required to pay back the home loan with interest over a period of time, usually 20 years. In security for the loan, the bank registers a mortgage bond over the property. The implication thereof is that the property may not be sold unless the bond is cancelled, and the bond will only be cancelled once the loan is paid off. While the bond is in place, the bank has certain rights with respect to the property.
How do I get a bond?
All major banks, or other institutions such as SA Home Loans, provide home loans to prospective buyers. A purchaser can either contact the banks directly or request a mortgage originator to assist with the application. Your attorney could also assist with this process.
The bond attorneys will provide a guarantee to the transferring attorneys that the loan amount will be paid out to them on registration of the transfer of the property into the name of the purchaser, together with a bond over the property in favour of the bank.
DBC Property entered into a partnership with First National Bank to assist with this process, which provides purchasers with direct access to specialist bankers.
The bank will provide the applicant with the necessary application forms and confirm which information they require to consider the loan. As the sale agreement sets out a time frame in which a loan must be approved, it is advisable that a purchaser has as much of the information prepared. This should include:
Proof of income
Colour copy of your South African ID.
Copy of the signed sale agreement.
Proof of current residential address, not older than 3 months.
Latest official salary slip or bank statement.
Summary of income and expenditure.
Once the bank confirms that the purchaser qualifies for a loan, the application is approved subject thereto that the bank does a valuation of the property. If the bank is comfortable that the value of the property serves as sufficient security compared to the loan amount, the bond should be approved.
4. Registering the property in your name
Once the loan is approved, unless other requirements are set out in the sale agreement, the sale of property has become unconditional and the process of the transfer of the property can be commenced.
Usually there are 3 different attorneys involved in the transfer of the property:
The transferring attorneys attend to the transfer of the property from the seller to the purchaser at the deeds office, and is appointed by the seller or in terms of the sale agreement.
The bond attorneys attend to the bond registration in favour of the bank and is also appointed by the bank. The bond attorneys will provide a guarantee to the transferring attorneys confirming that they will pay the purchase price to them on date of transfer.
The cancellation attorneys attend to the cancellation of the bond currently registered over the property in favour of the seller’s bank. The cancellation attorneys will only cancel the current bond and agree to the transfer of the property after it received guarantees from the transferring attorneys through the bond attorneys that the outstanding debt owed to the bank will be paid on registration of the property in the name of the purchaser.
All attorneys will collect the documentation required for transfer and then lodge the transfer with the deeds office. If the deeds office is happy with the documentation provided, the transfer will be placed on preparation in the deeds office. Once the transfer is on preparation all attorneys need to lodge for registration, where after the transfer will be registered and the purchaser will officially be owner of the property.
In order to transfer the property into the name of the purchaser, the transferring attorneys require the following information:
Title deed of the property.
To be obtained from the seller or the cancellation attorneys.
To be drafted by the transferring attorneys and signed by parties to the sale agreement.
Clearance certificate from the municipality.
The municipality needs to confirm that all amounts due to them has been paid.
Transfer duty clearance from SARS.
Transfer duty is payable on any transfer of property above R900 000. SARS needs to confirm that the transfer duty has been paid to them by the purchaser or if the purchase price is below R900 000, that transfer duty is not payable.
The seller needs to provide the transferring attorney with an electricity certificate issued in terms of the Electrical Installation Regulations. Other certificates could be applicable depending on the area of the property, such as an electric fence certificate, a gas certificate, a plumbing certificate and a beetle certificate.
Payment of purchase price or receipt of guarantee
The transferring attorneys will only transfer the property after the purchase price has been sufficiently secured by means of payment into its trust account or bank guarantee provided by the bond attorneys.
Cancellation of bond
The cancellation attorneys need to lodge its cancellation of the current bond simultaneously with or prior to the transfer of the property. Without the cancellation the property will not be transferred. If there isn’t a bond registered over the property, cancellation attorneys will not be appointed.
Registration of bond
The bond attorneys need to lodge its bond simultaneous with the transfer of the property. The transferring attorneys will not register the transfer without the bond registration, as the bank will only pay out the guarantee on confirmation from the bond attorneys of registration of the bond.
5. After transfer
After registration of the property into the name of the purchaser, the transferring attorneys will ensure that all parties get paid the amounts due to them. The attorneys will also confirm to the municipality that the transfer has been done. Both the seller and the purchaser will need to pay a visit the municipality, to place the municipal account on the purchaser’s name. It might be that the municipal account has been paid up front and the parties would have to agree on what amount the purchaser need to repay to the seller (or vice versa).
What can the parties do to speed up the process?
The seller needs to ensure that its municipal account is up to date and that there are no disputes on the account. The sooner the seller can visit the municipality to let them know they intend to sell the property and request clearance figures in order to transfer the property, the better.
Secondly the seller can start to arrange all necessary certificates required to transfer the property. This information can be obtained from the seller’s attorneys.
Lastly the seller can ensure that its existing bank is aware that its loan will get paid off. It would also help if the seller could arrange a copy of its title deed with the bank.
The purchaser’s job is to get its loan sorted out. This process could be major and should be started as soon as possible. If this takes too long, the transfer might not be able to continue.
Lastly and most important all parties should at all times communicate with the various attorneys. The better the communication, the better the process.