Buying a House
Congratulations on your decision to buy a home. For most people, buying a house is probably the largest investment they will ever make. It requires careful consideration and planning to avoid many pitfalls. You may receive this information before you have taken any steps or you may have already progressed along the road to home ownership. Read through it anyway - it will hopefully clarify the process or you will be able to help someone else.
Firstly, we recommend that you consult a reputable Attorney before you start visiting show houses. He / she will be able to recommend a home loan consultant who will be able to prequalify you and ascertain how much you can afford to borrow. The Attorney will also be able to recommend one or more Estate Agents to show you houses which he / she has available for sale or introduce you to properties being marketed by other agents. It is essential that the agent knows and understands your requirements.
Involve Your Attorney
We recommend that you consult a reputable Attorney before you start visiting show houses. He / she will be able to recommend a home loan consultant who will be able to pre-qualify you and ascertain how much you can afford to borrow. The Attorney will also be able to recommend one or more Estate Agents to show you houses which he / she has available for sale or introduce you to properties being marketed by other Agents. It is essential that the Agent know and understands your requirements.
The Process - Submitting An Offer To Purchase
Once you have found the house you like and that you can comfortably afford, bear in mind that you may require at least a 10% deposit and funds for the transfer and registration costs. You will then be presented with an Offer to Purchase form to sign. This is usually completed by the Estate Agent. At this point, before signature, even though you may feel pressured to submit an offer without doing so, we strongly suggest that the Offer to Purchase be submitted to your Attorney for perusal. This will ensure that the agreement reflects your requirements. This might necessitate a consultation, telephonic or otherwise, which in the long run, may prove to be money well spent. You should in any event ensure that the meaning and import of each term of the Offer to Purchase is explained to you by the Agent.
Once the Offer has been perused by your Attorney, you can proceed to sign ensuring that there are no blanks unfilled and that all deletions / alterations have been initialed. The Estate Agent will submit the Offer to Purchase to the Seller who will accept it, reject it or make a counteroffer. The counteroffer will usually take the form of alterations to the Offer to Purchase which may be accepted / rejected by yourself by initialing the Seller's alterations. Remember that once you have signed, and the Seller accepts, a binding agreement comes into being. Any changes that you wish to make thereafter, will require the agreement of the Seller and will need to be in writing.
The Process - Applying For Finance
Once the offer has been accepted, you will require a copy thereof for submission to the Financial Institution in order that your loan application may be processed. This process should not take more than 10 (ten) days, especially if you have obtained a pre-approval certificate. If you do not have a pre-approval certificate, your Attorney or the Estate Agent will be able to assist you in submitting the required loan application.
The Process - Transfer & Bond Documentation
The Offer to Purchase (which now constitutes a Deed of Sale) will in the interim be submitted to the Seller's Conveyancer. It is usual for the Seller to nominate a Conveyancer, but you may be able to negotiate that your own Attorney or the Attorney attending to the registration of the mortgage bond, be appointed to attend to registration of transfer. Either way, the transfer fees will be paid by you unless the contrary has been negotiated.
The Conveyancer will request copies of your Identity Documents and Marriage Certificate and Antenuptial Contract (if applicable). Once any suspensive conditions have been fulfilled (for example approval of the loan application and the sale of your existing property), the Conveyancer will prepare the necessary documentation, request payment of the transfer costs and any outstanding balance of the purchase price, and arrange an appointment for signature of the transfer documentation.
The Financial Institution will by now have appointed a Conveyancer to attend to the registration of the mortgage bond over the property to secure the loan granted to you. This Conveyancer will request similar information from you in order to prepare the bond documentation and will also request payment of the bond registration costs and arrange an appointment for signature of the relevant documentation. Depending on the conditions of the Financial Institution, you may also be required to cede life insurance policies, sign debit / stop order forms and other persons may be required to sign as sureties. This will be attended to by either the Conveyancer or the Financial Institution. It is the Purchaser's obligation to ensure that all these requirements are met timeously.
The Process - Registration At The Deeds Office
Once the documentation has been signed and the necessary costs paid, the Conveyancers will liaise with each other to effect registration at the Deeds Office. After approximately 10 (ten) days, the Deeds, having been examined by the Deeds Office, will be available for registration. Assuming all outstanding requirements have been met, the transfer of ownership and mortgage bond will be registered simultaneously. You will thereupon become the registered owner of a property.
After approximately a month, a copy of the Title Deed reflecting you as owner, and a copy of the Mortgage Bond will be sent to you. The original will be retained by the Financial Institution. This will conclude the transaction. The copy of the Title Deed and Mortgage Bond should be kept in a safe place will all your other important documentation. In the event of you wanting to sell the property, the availability of the documentation will speed up the sale process.
The People You Will Deal With
The Estate Agent
Generally the Estate Agent is appointed by the Seller. You accordingly will not have a choice as to which Agent you will be dealing with. The Agent is however required to comply with a Code of Conduct and should the Agent act illegally or unethically towards you, you will be able to refer the matter to the Estate Agent's Board. Should you choose to approach an Estate Agent to find you a property, we recommend that you take advice, preferably that of your Attorney, as to a reputable Estate Agent.
The Conveyancer
The legal process whereby a person becomes the registered and lawful owner of a property is known as Conveyancing. Only a Conveyancer, (who is an Attorney who has acquired the additional qualification of Conveyancer) is entitled to register transfers of ownership of property and other transactions in the Deeds Office. As a great deal is at stake in the transfer of immovable property, the law seeks to ensure that the transaction is handled by a specialist and this is the Conveyancer's function. This protects the rights and interests of the public and also safeguards the integrity of the South African Land Registration system. As a general rule the Seller has the prerogative to nominate the Conveyancer to attend to the registration formalities on his behalf. However, since the Conveyancer's bill will be paid by yourself, you can negotiate the appointment of the Conveyancer with the Seller. Although the Conveyancer will always be acting on behalf of the Seller, the fact that you have been able to appoint the Conveyancer, may enable you to negotiate a discounted fee with the Conveyancer. When registering a mortgage bond, the Bank appoints a Conveyancer to attend to the registration of the mortgage bond. It will obviously be more cost effective and convenient if both transactions are attended to by the same Conveyancer. If you are successful in negotiating for a particular Conveyancer to attend to both transactions, the Conveyancer will be more willing to negotiate a discount in fees.
The Home Loan Consultant
The Home Loan Consultant is normally employed by the Bank and does not receive a financial reward for arranging your home loan finance. However, if the consultant arranging your home loan is not employed by the Bank, such person is likely receiving a commission based on the amount of the loan required for yourself. This figure should be disclosed to you and such a person should provide you with a number of loan options from various Financial Institutions. This should ensure that you are receiving the best possible rate. It may be possible for you to negotiate a better rate with your Bank if you have not utilised the services of a mortgage originator since the Bank does not have to factor in the cost of a commission. Speak to your Attorney in this regard.
Amounts To Be Paid
There are additional costs to be paid by yourself in addition to the purchase price. Some of these costs need to be paid prior to registration of transfer and accordingly, the necessary cash flow arrangements need to be made. The first payment you are likely to be called upon to make is the deposit. This amount should be paid over to either the Estate Agent or the Conveyancer, and should be invested in an interest bearing account with interest accruing to yourself. A deposit is invariably required as a sign of your good faith but may be forfeited in the event of a breach of the transaction by yourself. In addition to the deposit you will be required to pay a pro rata share of the annual rates on the property. The rates year is from 1 July to 30 June of the following year. All amounts due to the local authority must be paid in advance to the 30th June before a clearance certificate will be issued. Without a clearance certificate, registration of transfer cannot take place. You will be required to pay your share of the rates from date of possession or date of transfer, depending on the terms of the Deed of Sale. If you are purchasing a Sectional Title unit, you will have to pay a pro rata share of levies. Until the levies are paid up to date, transfer cannot proceed. You will further be required to pay the estimated transfer costs which will include both the Conveyancer's fees and disbursements as well as a tax levied by the Government called transfer duty, which constitutes the major portion of the transfer costs. An estimate of transfer costs is available upon request. In addition, you may be required to pay the mortgage bond registration costs in advance, although normally, these costs can be paid on registration. Please note that although Conveyancer's fees are payable in advance, they are not debited by the Conveyancer until registration of the transactions. The Conveyancer will only take his / her fee on registration of the transaction.
In the event of occupation taking place prior to registration, you will be required to pay occupational interest or rental, monthly in advance from date of occupation until date of registration. Provision must also be made therefore.
Some Important Clauses
- Beetle Certificate:
There are a number of woodborer beetles which damage the woodwork of the houses. The Deed of Sale will often contain a clause which requires the accessible portions of the house to be inspected for the existence of Oxypleurus nodieri and Hylotrupes bajulus beetle. In the event of such infestation being found, the Seller is normally required to replace or treat such infested timbers. In most Deeds of Sale, Anobium punctatum (furniture beetle) is not included but this beetle may also cause damage. Ensure that you are aware of the limitation of the Seller's liability as regards infestation by beetle as set out in the Deed of Sale. - Electrical Compliance Certificate:
Any homeowner or occupier is obliged to be in possession of a current Electrical Compliance Certificate. It is normally the Seller's responsibility to furnish this. The installation must be reasonably safe and free from defects. A certificate will be issued by a certified Electrical Contractor. - Voetstoots:
Please note that the property you are buying is normally sold voetstoots. This means that you should thoroughly examine the property. If there are hidden or latent defects the Seller will only be liable if they are deliberately concealed with the intent to defraud which is usually very difficult to prove. The Seller does not have an obligation to point out any defects in the property. If however he / she gives any verbal assurances, we urge you to reduce them to writing and incorporate them into the Deed of Sale to avoid costly litigation. - Risk and Insurance:
Please note that unless the agreement provides for a specific date (for example the date of possession) risk passes to the Purchaser on signature of the Deed of Sale. In the event of the Purchaser taking occupation before registration, you will need to ensure that the property is properly insured. Although the property may be insured upon registration of the bond by the Financial Institution which has granted you the mortgage loan, this insurance would not assist you in the event of physical damage taking place after date of possession but before registration. - Possession and Vacant Occupation:
Possession passes when the Seller gives the Purchaser access to keys. Ordinarily occupational interest would be payable from this date even though the Purchaser has not moved in. If the Deed of Sale does not provide for vacant occupation, there may be a tenant in the property and the passing of possession would entitle the Purchaser to the rental, but not to occupation. - Fixtures and Fittings:
Please note that the sale will include, unless specified, all objects which are actually attached to the structure such as light fittings, pool filters, fitted carpets, burglar bars etc. In order to ensure that no disputes arise, it is suggested that the Deed of Sale reflect all items which the Seller intends to remove. This is sometimes more prudent than trying to list every possible item which has been attached to the structure.
Please note that this information is not a substitution for proper legal advice and whilst every effort has been made to ensure the accuracy of the contents hereof, no liability shall follow from a reliance hereon.