A surprising number of costs are involved in selling a property. The lengthy transfer process also means some of these costs are due before you get the proceeds from the sale.
This is when it might be necessary to get bridge finance on your property sale. This finance will cover your expenses until such time as the transfer is finalised and you receive the expected funds.
You may also use bridge finance on your property to cover other expenses.
The property transfer process
This is a basic overview of the process that takes place when a property is transferred to a new owner:
- The buyer submits a signed Offer to Purchase (OTP) and, if applicable, applies for finance from a bank.
- The sale agreement is sent to the transferring attorneys.
- If the buyer has a bond, it’s registered with the Deeds Office – and if the seller has a bond, it’s cancelled by the cancellation attorney. The cancellation attorney sends the title deed to the transferring attorney.
- The transfer attorney requests a rates clearance certificate from the local municipality
- The transfer documents are drafted and signed by the buyer, and transfer fees are then paid by the buyer.
- All the relevant documentation is lodged with the Deeds Office, which checks the documents before registering them.
- The buyer becomes the owner, proceeds are paid to the seller and the estate agent, if there is one, is paid commission.
- The title deed is sent to the buyer’s bank (if there is a bond) or, in the case of a cash sale, to the buyer.
Potential delays on transfer
The transfer process can take up to three months, even if everything goes according to plan. A number of issues may delay the process even further – so it’s worth taking car to avoid them.
Municipal rates being in arrears
You won’t be able to get a rates clearance certificate if your account is in arrears. The clearance certificate is vital to the transfer process, so make sure your rates are fully paid up.
Giving notice to the bank before cancelling your bond
It’s a good idea to let the bank know in advance that you’re going to be selling your house and will, therefore, be cancelling the bond. If the proceeds don’t cover the bond amount, you also need to make the conveyancer aware of this to avoid delays.
Not having the title deed
If you do not have a bond on your property, make sure that you have the original title deed in your possession. In the event that it’s been lost, the conveyancer can apply for a copy but this will take time and cost money.
Body corporate disputes
If your property is a sectional title unit, make sure there are no outstanding disputes with the body corporate. The body corporate can potentially delay transfer until any outstanding disputes are resolved.
Not honouring occupation dates
Trying to change the occupation date can cause delays, especially at the last minute. Make sure you are ready to move out on the agreed upon date.
Costs involved in buying and selling a property
Some costs are payable upfront while others are due on transfer or only at the end of the tax year.
Among the costs payable by the seller are:
- compliance certificate fees (water, electrical, gas and beetle)
- bond cancellation fees (and potentially late notice penalties)
- capital gains tax
- estate agent’s commission
- moving company costs
Costs payable by the buyer include:
- attorney/conveyancing fees
- transfer duties (exempt up to the value of R900 000)
- home loan initiation fee
- Deeds Office fees
- bond registration fees
- rates clearance.
Because some of the costs involved in selling or buying a property will be due before the transfer has taken place, bridging finance is often necessary in order to cover those costs. Delays in the transfer process can exacerbate this financial hardship.
Bridging finance can help cover these costs. It’s approved with the deed of sale on expectation of the funds from the sale. Once the transfer is complete, it is paid back in full.
Bridge finance on property sales with Lamna
At Lamna, we can provide up to 75% of the expected funds from the sale of a property as bridging finance.
To apply for bridge finance, you’ll need the following documentation:
- signed deed of sale
- signed transfer documents
- guarantees for purchase price.
Client borrows R10,000 for 90 days.
Total Cost of Loan
Fixed rates range from 36% to 60% APR and payment options range from minimum 3 to maximum 24 months. Apart from the initiation and monthly fees shown below, the only additional fee is credit life insurance if the borrower does not have this already.