The process of buying a property is a well-trodden path, as property transactions occur daily in your suburb, town or city. It is most likely that you will find your ideal home via an estate agency. You should make the most of your estate agent by asking as many questions as possible about the steps involved in purchasing a home. They will be happy to tell you how it all works.
Although the process will probably seem complicated to you, especially when it comes to aspects of the deal which are unique to your own transaction, there are certain factors which are common to all purchases. We examine them here.
1. The Offer to Purchase
If you are buying a home through an estate agent, they will provide the necessary Offer to Purchase (OTP) contract. This can be extremely brief, in which case it will be replaced by a more detailed contract at a later stage if the seller accepts the initial offer.
The OTP includes purchase price, agent’s commission (usually in the region of 7% of the purchase price but you can negotiate that) and an indication of how you will pay for the purchase, i.e. cash, subject to obtaining a mortgage bond from a bank or subject to selling your home. It will indicate if the buyer intends paying a cash deposit with a mortgage bond for the balance of the amount.
If you are buying a home directly from a seller, an attorney will draft the OTP. Obviously there is no agent’s commission involved but you may have to pay a small fee for the draft.
The seller might want changes to the OTP before signing acceptance of the offer. The attorney or estate agent will make these changes and you will have to sign the contract.
2. The Bond Originator
In South Africa, as elsewhere, a bond attorney has become important in the process of buying a property where a mortgage bond is required.
Once the seller has accepted the offer, the agent or the purchaser gets hold of a bond originator who will collect all the necessary documentation from you and apply for bank finance on your behalf. Some agencies, especially the large chains, have deals with specific bond originators who will automatically handle your bond origination.
This service is free to the buyer. The bank that awards the mortgage finance pays the bond originator.
3. Approval for Finance
The estate agent or bond originator will notify you once the bank has approved the granting of a mortgage bond. The bank instructs the bond attorney to register a mortgage bond. This is in all likelihood a different attorney from the one handling the property transaction.
4. Transferring Attorney
Traditionally the seller nominates the transferring attorney to transfer the property into the buyer’s name. However, if you have a good reason for wanting a certain attorney to handle the transfer, the seller might be willing to accept the attorney you nominate.
The conveyancing attorney, as a transfer attorney is also known, gets to work, requesting the title deeds and cancellation figures from the current bond holding bank and a rates and taxes statement from the local municipality.
Once the attorney has these in hand, the buyer and seller will have to visit his or her office to sign the transfer documents. At this point the buyer will have to pay the transfer fees. If this is included in the mortgage bond amount, the bank will pay over the fee to the conveyancing attorney.
5. The Cancellation Attorney
There is yet another attorney function involved in the process of buying a property. The duty of this attorney is to cancel the seller’s bond after receiving a guarantee from the bank that will be mortgaging the property for the amount still outstanding.
You don’t have to worry about getting a cancellation attorney. It is usually is the same one as handles the transfer. If makes sense using a transfer attorney who is registered on the bank’s panel of attorney. This saves a lot of time, as documents do not have to be sent from one attorney to another.
6. The Bond Attorney
The bond attorney prepares the bond documents. The buyer signs these and the bong attorney prepares and issues the necessary guarantees, forwards them to the transferring attorney, and prepares the bond documents for lodging at the Deeds Office. Note that the buyer pays for this service.
When the bond attorney contacts the transferring attorney and states the amount available for the guarantees, it means that the transferring attorney is absolutely sure that the amount is available at the bank for the purchase of the property.
7. The Deeds Office
The bond attorney hands in all the documentation at the deeds office simultaneously by arrangement with all the relevant attorneys. The deeds office takes about two to three weeks to check the documents. If everything is correct they continue with registration of the property in your name.
8. The Bank
This is the final step in the process of buying a property. On the day of registration the bank pays out according to the guarantees issued. The estate agent receives commission and the transfer duty, which is a tax on property purchases, is paid to the state.
There are number of factors which can stall or slow down the process namely
- Failure by the buyer or seller to provide the necessary information
- Failure by the buyer to obtain proof of income statements and other papers
- Failure by the buyer to pay the stipulated cash deposit if required
- Failure by the bank holding the current bond failing to provide cancellation figures and title deeds to the transferring attorney
- Failure to obtain guarantees from the bank granting the new bond
- Failure by the buyer to pay the bond or transfer costs on time
- Failure by seller or buyer to sign the transfer documents
DISCLAIMER: The information contained in this article is the opinion of the Author
and should not be taken as advice.
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