It can be quite daunting that the sale of a property does not require any scrutiny or “due diligence” into the purchaser, seller or conveyancer.
Carefully drafting a Private Sale Agreement can really go a long way to creating a quick and trouble-free property transfer, especially if you're a private seller.
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The worst thing you can do, is to just sign and hope for the best. You should first analyse the purchaser and then the offer. The less you know about your purchaser, the greater the chances of being saddled with a “problem deal.”
The typical scenario is a perfect stranger suddenly appears on your doorstep and you are expected to sign away your house, without batting an eyelid!
And then you start wondering if “what’s written on the piece of paper, is worth anything?”. On the contrary, if you have researched the purchaser before signing, you are more likely to choose a reliable buyer.
Virtually every other significant transaction, such as buying a motor vehicle or applying for banking facilities, will want to first qualify the applicant.
Previously I explained how attending to all the paperwork before a sale, can save the seller such a lot of time. So if you, as the owner have spent a lot of time preparing for a quick sale, you will want to make sure that you will find a quality purchaser that will deliver the goods.
SEE: Speed up your property transfer in a 'third of the time' with this checklist
From the seller’s point of view, whilst you may have a list of all your own selling requirements, you should realise that the purchaser is also likely to have his own preferences.
Although we will set out the perfect seller’s checklist, it is something to rather aim at; as it is unlikely that every purchaser can fit in with all the seller’s requirements.
Generally, a successful negotiation will always be the result of “give and take from both sides.”
Most property transfers stall because of defects, compliance certificates and delayed payments.
Here is a checklist of options that will help a seller focus on key points for a quick and trouble-free transfer.
Research your purchaser
Do an internet search on your purchaser. If there is anything unusual or noteworthy about your purchaser, you will find it on Google and LinkedIn and other websites.
If the purchaser consents you can also arrange for a credit bureau check.
How will the purchase price be funded? Cash, a bond or the sale of the purchasers property
Receiving a cash offer to purchase is nothing to celebrate; unless and until the cash actually is paid over and received. An undertaking to pay cash is merely a promise that is unsecured. There have been many instances where a promise to pay the whole purchase price in cash, never materialises.
Most sale agreements stipulate that the cash will be paid over in 3 or 7 days; and of course, you do not have anything to lose, by waiting just a week to see if the cash is actually received.
A mortgage bond provides certainty and commits the bank to paying the selling price on registration of transfer. This is the most certain option, because once a mortgage loan is granted, the money is “put on the table” and allocated to the purchaser and to your sale.
Agreeing to wait for your purchaser to sell his own property, so that he can raise sufficient funds to pay you, is always the most uncertain and the least desirable option.
The most certain option is to agree to wait until the mortgage loan is actually granted.
Try and ascertain if the purchaser is “good for the money.”
Making an enquiry into your purchaser’s financial affairs can be very tricky and a sensitive matter because most purchasers might feel offended, if you are trying to delve into their private financial affairs.
However accountable institutions are compelled by law to request the purchaser to state the source of their money.
But most serious purchasers are only too willing to demonstrate upfront that they do have the necessary cash and costs available to complete the transaction.
READ | How to apply for a home loan on a single salary?
In other countries, there is a much more rigorous scrutiny of the purchaser; for instance calling for 6 months of bank statements and written references from the purchaser’s banker, accountant and attorney.
In the early days, it was common for savings and investments to be held in a 32 Day Notice Account and when the seller requested proof that the purchaser had sufficient cash, the purchaser willingly handed over his original S A Permanent Building Society Savings Book and also signed over the proceeds, which would become payable after 32 days.
Call for a deposit
It is really common (and highly recommended), that a deposit be paid on, or within 3 days of the seller accepting the offer to purchase. Calling for a deposit is the simplest way to test whether not the purchaser is serious and whether he is prepared to commit himself to the transaction.
However, not everybody has a large amount of money immediately available in their bank account to pay, without making prior arrangements. But nonetheless, generally speaking, deposits are always paid as was agreed in the offer to purchase contract.
If the purchaser delays payment?
If payment is delayed and the property market is depressed it is probably worthwhile granting an extension, because it is unlikely that there would be any other competing purchasers. However in a booming market, sellers were quick to immediately cancel the sale in order to seek out a new purchaser, who would be prepared to increase their offer.
READ | 4 steps to 'urgently address' deeds office backlogs
“Sudden Death” time limit - for payment.
It is legally possible to have a sale agreement that simply says if the deposit or purchase price is not paid by a certain date; then the entire sale will automatically cancel; without the need to send out a letter of demand.
There are unusual cases, where after repeated promises of payment fail, that the seller gives the purchaser a final ultimatum. This is where the purchaser makes a final promise that he will definitely pay by a certain date. So we have drafted what we call a “Sudden Death” Addendum, which provides that if payment is not received by midnight on a particular date; the entire transaction will automatically cancel – just by the mere passing of time. This obviates the need for issuing any Letter of Demand and is founded on the legal principle – “time is of the essence”.
What will the property be used for?
We have experienced at least 3 instances of purchasers, using the property as a Brothel before they have even paid the purchase price. All three proposed transfers collapsed due to complaints from the neighbours. Typically the seller was told that that the property would be used as a Sports Massage Parlour and then there was the delay and the problem of evicting the purchasers.
WRITING UP THE OFFER TO PURCHASE – WITH TERMS AND CONDITIONS
The way in which you write up the offer to purchase is highly significant because your choices will become terms and conditions in the contract and will commit and become binding on the purchaser.
Short guarantee time limits/ short bond grant time limits
Depending on how busy the property market is, you should provide that the bond be granted within 21 days of the date of sale with 15 days for the issue of bank guarantees. If the banks become busier, then it would be appropriate to assert that the bond should be granted within 30 days.
If the purchaser is self employed then a much longer time period should be granted to give him a chance to produced audited financial statements for the lender.
If a purchaser wants 45 days or 90 days to provide bank guarantees, then he has a reason why he wants to stall the payment. It is fairly common that the purchaser will not disclose that he must first sell and transfer his own property, in order to raise the money.
READ: Mortgage Bond vs Home Loan | Two parts of your land asset whole
Subject to the sale of the purchaser’s property
It is now becoming quite common for offers to purchase, being conditional on the purchaser having to sell his own property in order to raise the finance. Whilst most of these transactions do complete, most sellers shy away from a simultaneous transfer that is linked to the purchaser’s sale, because one does not know if the purchaser’s purchaser will qualify for a mortgage bond or not.
In essence, whilst the seller is not legally tied to his purchaser’s purchaser; practically and logistically the sellers transaction is tied to someone that he has no legal bond with and over whom he has no control. So these types of transactions are very uncertain.
In the past chains of interlinked transactions numbering up to 5 or 6 properties relying on the finances of the originating deal will really delay everything. One should know that each time there is an extra property in the chain, one should add another month to the normal timing for a transfer.
However in a depressed property market where there is less cash, “linked deals” become more common and one should insert a clause that your purchasers purchaser is not allowed to extend the chain beyond two transactions being tied to each other.
“72 Hours Clause/Continued Marketing Clause“ or Gazump Clause
This is a very neat option which is becoming more and more popular. It offsets the uncertainty of having to wait to see if your purchaser will sell his own property or even if he will finally be granted a mortgage loan.
Essentially it gives the seller two strings to his bow, because despite the fact that he has already sold to the first purchaser and is now waiting for the purchaser to sell his own property or obtain a mortgage loan; he is legally allowed to continue seeking out a competing second purchaser.
Should a second purchaser come along with a more desirable offer to purchase, the seller must give the first purchaser the opportunity to match or better the competing offer. So if a second purchaser offers cash and the seller is certain that the cash will finally be paid, he can give notice to the first purchaser to match it; and if the first purchaser does not match it, then the first purchaser’s offer automatically falls away.
READ: Under offer | The 72-hour clause explained
Pinpoint and agree a specific date of occupation
By far the most common occupation date is “on registration of transfer”.
On the other hand, others will stipulate a particular occupation date, mostly before registration of transfer.
Whether one pinpoints a specific occupation date or simply agrees to occupation coinciding with the date on transfer, is much debated.
The most common drawback is that if you give occupation to the purchaser before transfer, the purchaser will have an opportunity to discover various defects in the property.
The other side of the debate is that, in this time of the rise of consumerism, the seller should make an all-out effort to have any defects in the property repaired before occupation; so that if the purchaser occupies before transfer, he will not discover any problems and unforeseen defects. Numerous leading estate agents prefer this option.
One of the main drawbacks with “occupation on transfer”, is that one can never be absolutely certain as to on what particular date the transfer will be registered; so there is always uncertainty about when the purchaser can occupy. The purchaser needs certainty, so that they can give notice to vacate their current residence.
Because the date of transfer is never fixed and cast in stone, it poses an opportunity for the parties to try and manipulate the date of registration of transfer and simultaneous occupation.
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For instance, a seller wishing to accelerate the transfer; whilst the purchaser wishes to delay transfer. The reason is that they try and adjust the date when they will occupy.
Once we had the seller who wished to delay the transfer by two months to coincide with his departure to Natal; on the other hand, the purchaser who had purchased the property, wanted to move in as soon as possible to set up her law practice in the building she had just purchased. So there was a dispute as to when should the transfer be registered, because the date of occupation could be manipulated and was actually never stipulated.
Do not give occupation unless the purchase price and costs are fully secured
It has been very common that some purchasers will try to occupy when they do not have the purchase price – let alone the rent. So to avoid a costly and lengthy eviction process most people absolutely will not allow occupation, unless the transfer costs have first been paid and the full purchase price has been guaranteed or secured by a mortgage bond.
The offer to purchase sale agreement must contain complete and accurate details
If an offer to purchase does not contain the precise and exact property description; the entire sale could be invalid, because there has to be absolute consensus as to precisely which property is being sold and where it is located.
Also for the purposes of granting a mortgage loan, the bank will refer to the property description as it is reflected in the sale agreement, not knowing that the property description might be incorrect. If the bond is granted over the wrong property; the entire sale will be invalid. A two-week delay can take place just for the bank to amend the property description in its bond.
Contact details of both buyer and seller must be clearly written up. Bad handwriting causes an incorrect email address and sometimes there are no telephone numbers. These errors cause delays in contacting the parties.
Tenants can be obstructive to the sale of the property that they are renting.
It is usually very unsettling when a tenant learns that the property he is renting, has been sold. The tenants
co-operation is required for access to workmen for Electrical Certificates and the handover to the new owner.
If the tenant is not treated with kid gloves by the owner at this time; they have been known to become obstructive and will delay progress.
READ| What are a tenant's rights when a landlord decides to sell?
The Property Condition Report/Property Disclosure must be completed accurately and comprehensively.
The seller is protected if this document is completely and accurately filled in. It becomes a record as to whether not the seller was aware of certain defects or not aware of the defects.
This becomes crucial if a hidden defect is discovered and the seller has previously recorded that they were not aware of the defect.
By virtue of the Voetstoots principle, if the purchaser can prove that the seller was aware of a defect and intended the buyer to be deceived and prejudiced by the defect, the seller will be held liable to pay for and repair the defect.
However, if it has been recorded that the seller was not aware of any defects; the seller will not be liable.
Many serious delays are caused by sellers travelling before they have signed the required conveyancing documents.
Besides the offer to purchase contract there are other documents which have to be signed for submission into the Deeds Office. These documents cannot be faxes, photocopies and scanned. They have to be original. The Deeds Office will only accept original documents and therefore before departure, the seller must ensure that they sign all original documents with the conveyancer before they travel.
The other option is, before travelling, to request a conveyancer to draft a Power of Attorney that will allow a friend or relative to sign the conveyancing documents after the seller has departed. This is very common and is a real time saver.
Serious delays and costs will be incurred if conveyancing documents still have to be signed overseas. The reason is that the signature of original documents has to be authenticated in the presence of a South African Consular Official or a Notary Public.
READ | I've lost my title deed. What do I do now?
The same law firm should attend to both the bond and transfer.
It is without doubt faster and more convenient if the same law firm is instructed to attend to both the transfer and the mortgage bond. Most banks will allow a single conveyancer to attend to both transactions.
If one law firm is instructed to do the bond, and a different law firm is attending to the transfer, it is fairly common that the two offices do not co-operate as timeously as one would wish.
So always try to ensure that one law firm attends to all of the related transactions in one office.
Choose a conveyancer with a great reputation
It is absolutely imperative to choose a well-established and reputable conveyancer. Some attorneys are not qualified as conveyancers and they are general practitioners, which could mean that they spend most of their time in Court and not attending to the conveyancing, as a specialist conveyancer would.
There have been many horror stories of neighbours or relatives who are chosen to attend to the conveyancing, when they are not specialised to do so, resulting in many botched transactions.
Most estate agents will know who are the best conveyancers and one can check on the conveyancer’s website to read customer reviews on “Google Review”; just as you can read a review on Trip Advisor about a restaurant.
READ | Should the purchaser choose the transferring attorney?
The seller has the prerogative and the right to choose the conveya cer
All of our High Court Judgements (bar one) confirm that, it is the seller’s right to appoint the conveyancer.
Section 20 of The Deeds Registries Act and age-old custom, stipulates that only the owner or his representative, can give transfer. It is legally and logistically impossible for the purchaser to take ownership.
If the purchaser chooses the conveyancer there can be a conflict of interest which can result in a messy dispute.
For example, if the purchaser delays payment, the purchaser’s attorney will be conflicted, because he will have to sue his own client. The Seller will expect “not his own conveyancer” to sue the purchaser, who is the one who chose the conveyancer.
Also, If a seller agrees to the purchaser choosing the conveyancer, he and the conveyancer could be perfect strangers who are suddenly given legal control of the seller’s most valuable asset, without even paying for it.
Conclusion
This article has set out all the possible delay issues to avoid. Whilst it might not be possible to have the purchaser agree to everything that the seller requires, this checklist together with this previous advise provided on how to speed up your property transfer, will completely empower the seller to negotiate the quickest and most trouble-free transfer possible.
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