Marketing solutions – How to selling a private property in South Africa
The immediate and obvious benefit of selling your own property is that you will save thousands of Rands on payment of Agent’s commission. If you have a property for sale and are planning on selling it on your own without the help of an Agent or Middle Man it is not as difficult as many believe it is. There are Sites that give you the option to photograph your own property and advertise it directly on the Internet, all at virtually no cost!
If you are planning to put up your property for sale you should bear in mind that it is not necessary to enlist the services of an Estate Agent to determine the value of your property. There are resources available that enable homeowners to do this for themselves.
The Deeds office captures property transfer history that will assist homeowners to evaluate their properties in line with market related averages. It should be noted, however, that the Deeds office does not record all features relating to a home such as the number of bedrooms or bathrooms, instead it is just about the erven (lot) which includes the stand size, portion, township, etc. From this info one will be able to compare prices by the size of the erven (lot) and proximity to other recently transferred properties.
Sold Price Index (SPI) reports that are based on Deeds office records provide information on properties that have already been sold. They also do not include a breakdown of a home’s features, but are useful in determining how much properties in a certain suburb, street or complex have recently been sold for. There are some companies that provide statistical reports, etc based on Deeds office information and other records for which they usually charge a nominal fee.
In South Africa home owners or sellers can also utilise the various online tools available. There are companies that provide Deeds office data and Sold Price Index (SPI) reports that allow homeowners to register and provided you supply your ID number you can draw a Home Valuation Estimate free of charge.
Homeowners would have to match this information with their own knowledge of the area and research done on similar properties that are currently on the market i.e. compare attributes that your property has to others on the market.
It should be noted that it is easier to determine the value of a sectional title home than it is to value a full title home. It is not too difficult to get hold of sectional title plans with the various unit sizes, etc and then comparing the units. Full title homes on the other hand are more complicated to value because the individual features they have may influence the selling price.
With changing market conditions homeowners should be aware that it is crucial to become more knowledgeable of the property market and trends in their local area. Look through the ‘houses for sale’ sections of newspapers and magazines and surf property related websites for more insight. You should also visit show houses in your area to gauge how your home compares. By using both deeds office information and by comparing characteristics you know of from homes in your area you should be able to fairly safely determine the price range that your property should sell for.
For a nominal fee homeowners or sellers can request online information on property transfers, Computer Assisted Valuations and Suburb trends. Valuation products are similar to what Estate Agents utilise, i.e. the CMA (Comparative Market Analysis) which includes the home’s physical attributes and sales history.
As a back-up to your own findings you could also try asking a reputable local Estate Agent to assist you with a valuation. You should be able to openly explain to a good Agent that you wish to try selling your own property but would like to have their opinion based on a Comparative Market Analysis for your area. They will usually be happy to assist you and show you records from which you can form a good opinion provided you bear them in mind if you are unable to sell your own property.
Property owners with houses for sale that have a tenant residing on the property must bare in mind the tenants’ rights. A written or verbal Lease Agreement comes first. They should also have the ‘right of first refusal’ whereby you should allow them first option to purchase the property by notifying them of your intentions in writing within seven (7) days after expiry of the lease and inviting them to make a written offer within ten (10) days after receiving such notice.
Okay now, let’s assume you have attracted a seemingly good Purchaser for your property who is either your tenant as above or by, for instance, advertising on a Website then after you have negotiated a price for the property, you will need to ask them how they intend to arrange financing?
Find out if the Purchaser has to sell off an asset (such as his own house) to obtain financing for the purchase of your home. If so, you could still have a sale but one that may take time or fall through due to the Purchaser not being able to sell his own home within a limited time period. A Standard contract document (Offer to Purchase) usually states that if you obtain a better Purchaser i.e. one who has available finances then the above Purchaser has the almost impossible task of finding alternate financing (such as a bank loan) or confirming the sale of their property within 3 days.
Also find out if the Purchaser has a deposit to pay and if they are paying cash for the final amount or if they require a Home Loan (Bond Grant) from a financial institution such as a bank. If they are paying a large deposit or if they are a cash buyer they may still require a limited time to release their funds into your nominated Attorney’s Trust Account. As the Seller you have the legal right to appoint an Attorney to tend to the sale (transfer) of your own property even though it is usually the Purchaser that pays the Attorney’s costs. Never handle any Purchaser’s funds, this should be left to your Transfer Attorney. Not all Attorneys will tend to a property transfer so you should enquire about this if you have an Attorney in mind.
Remind the Purchaser about their need to pay for Attorney’s transfer costs and perhaps bond registration costs as well (if they need to apply for a bond). For simplicity these costs can be obtained via the Attorneys. It may be necessary for the Purchaser to allow for these additional costs on the ‘Offer to Purchase’ document that goes to the Bond Originator or financial institution.
In the event that the Purchaser needs to apply for a Home Loan from a financial institution in order to purchase your property you can do a simple check by using an Affordability Calculator (available on most local property Sites) before contacting a Bond Originator. You can also refer to a Bond Calculator on these Sites to see what the monthly repayments will be but you will need to know the current interest rate to use this successfully. Note that the average repayment term that the banks allow for is usually 20 years (240 months) but this may vary according to the Purchaser’s affordability or requirements.
If the Purchaser seems to have the correct financing or very close to it then it will be worth proceeding with the paperwork. Bond Originators will pass the Purchaser’s loan application onto the major banks for appraisal. Not all banks work on the same appraisal method and so one bank may refuse a loan and another grant one for the same client. Banks may also grant certain ‘credit worthy’ Purchasers a reduced ‘interest rate’ whereby they may be offered a couple of percent or more below the current ‘prime lending rate’. This can greatly reduce the monthly bond repayment amount and secure a Bond Grant for certain Purchasers. There are links to Bond Originators on the right hand side of this Site, their services are free to you as their remuneration is received from the banks.
Okay now, after asking which payment method best suits the Purchaser, you may commence with the paperwork (Offer to Purchase document). You can download and copy one from some sites or even purchase one from some stationery shops. You may then pass this original document on to your nominated Attorney but keep a copy for yourself and pass others on to the Purchaser and Bond Originator on behalf of the Purchaser.
If you are nervous about doing the paperwork or do not fully understand it then we recommend that you simply take the Purchaser with you to the offices of your Attorney. Transfer Attorneys usually keep the required documentation. Any Agreement will be subject to conditions such as the Purchaser needing to apply for and obtain a Bond Grant within a limited period of time. By personally submitting a copy of the document to a Bond Originator you are able to ensure that their application gets underway and that you are also kept informed as to any progress.
Some Purchasers prefer to arrange their own financing by approaching their own bank directly for a Home Loan. If they would prefer this then make sure that they give you the contact details of their Home Loans Consultant so that you can also follow up if need be.
Once a Letter of Bond Grant has been issued to the Purchaser for a Home Loan and the Purchaser has indicated his acceptance of it then you should request that a copy gets sent to you as proof so that you can instruct your Attorney that they can proceed with the sale. Be certain that you are sure which financial institution your Purchaser is accepting for their Home Loan as sometimes a Purchaser may get approval from more than one bank.
With regards to South African property law there are three laws or acts that you should be familiar with, they are:
1) Capital Gains Tax (CGT) whereby one is liable to pay tax on profit above a certain bracket from the sale of a home, business or investment property. The Receiver of Revenue provides online information regarding this.
2) In South Africa two Acts have been passed to combat organised crime and money laundering in particular, namely the Prevention of Organised Crime Act 121 if 1998 and the (FICA) Financial Intelligence Centre Act 38 of 2001. FICA basically states that it is the duty of those working in the property industry such as Estate Agents (Realtors) to report suspicious activities. The purchase of property is a popular way for criminals to launder money. Private sellers should also be aware of any suspicious activities and learn more about the Act in relation to the sale of their property.
3) The National Credit Act (NCA) basically strives to improve access to credit for consumers at a reasonable rate from a reputable credit provider, to increase the availability of finance at a reasonable cost, to ensure that an increased access to credit does not lead to over indebtedness, to educate consumers about credit, to protect consumers and deal with unacceptable practices and to enforce the regulations set out there under.
The new act also places a greater responsibility on credit providers to refuse to give consumers credit if they cannot afford it. Credit providers must ensure that they do not enter into a credit agreement without first taking reasonable steps to assess the consumers general understanding and appreciation of the risks and costs of the proposed credit. They also need to assess the proposed consumers debt payment history and their existing financial means, prospects and obligations before going further.
The National Credit Act sets a framework for every type of credit transaction, from micro loans to home loans, from overdrafts to furniture finance. Consumers, credit bureaus and providers of credit, ranging from micro lenders to banks, all need to get to grips with the new Act. The new National Credit Act will undoubtedly facilitate the creation of a fair, balanced and transparent credit market. Besides protecting the consumer from unscrupulous moneylenders, it will help the consumer be more responsible about using credit.