How to sell a home: Why you need to think like a time-keeper
Selling your home is as exciting as it is stressful. Do you appoint an estate agent or try going solo? Whose offer do you accept if you get multiple offers to purchase? What regulations do you have to comply with before your home can be transferred?
Offers made to you will usually contain one or more suspensive conditions. Please note that the deed of sale will not be legal and binding if the suspensive conditions are not fulfilled timeously and to the letter. Any deviation from the terms of the suspensive condition has to be addressed in an addendum before the due date of such a condition.
We, together with your estate agent, monitor these dates and will contact you should we require an instruction to amend the due dates or alternatively to amend any conditions.
There are typically two kinds of suspensive conditions in a deed of sale, i.e. the bond grant and the ‘subject to’ clauses.
Suspensive condition: Bond grant
Purchasers rarely have the resources to purchase properties for cash. The offer to purchase will therefore in most instances be made subject to the approval of a bond.
Depending on the financial situation of the purchaser, the approval of the bond should not take longer than a month. There may be circumstances that require a longer period for bond approval and you must entertain each case on its merits.
As the seller you must therefore ensure that the period allowed for the approval of a bond is on the one hand sufficient to give the purchaser a fair opportunity to obtain the loan, and on the other hand not too long that it results in an unnecessary delay. You must take the additional automatic extension clause into consideration if it is provided for in your offer to purchase. Also apply your mind to the question of whether the days allowed for bond approval are working days or calendar days.
Pro forma offers to purchase may stipulate that the suspensive condition is deemed to be fulfilled once the bond is “approved in principle” by the bank or when the bank issues a “quotation” to the purchaser. It should be noted that this condition is not in line with the provisions of the National Credit Act. The act specifies that a loan is only formally granted on acceptance by the borrower of the quotation as far as it pertains to the bond amount, expenses, interest and repayment period. A final grant is therefore necessary before it can be said that the suspensive condition has indeed been fulfilled. This final grant must be obtained on or before the date set out in the deed of sale.
Suspensive condition: “Subject to” – sale
It is often a prerequisite of the purchaser, or the purchaser’s bank, that his present property must first be sold and registered before his new bond (which funds your transaction) can be registered.
If an offer to purchase is made to you, subject to the sale of the purchaser’s property, there are legal ways to protect yourself as the seller. It may be that you do not wish to decline the offer to purchase, but also do not want to withdraw your property from the market for too long while awaiting the sale and registration of the purchaser’s property.
This condition, due to its wording, can cause great discord between the seller and the purchaser. Sometimes, even with the best intentions, words used in good faith have ambiguous meanings which can have legal implications. Do not hesitate to contact us or your estate agent to assist you in wording such a clause.
If the offer that is made to you is subject to both the approval of a bond and the sale of the purchaser’s property, you must ensure that the bond approval date is calculated from date of acceptance of the offer and not from date of sale of the purchaser’s property, in other words you want to know as soon as possible if your purchaser qualifies for the loan. The purchaser will be protected as the bank will grant the loan subject to the sale of the property.
The delivery of guarantees is very important to you as seller, because this will be a clear indication that all the purchaser’s finances with regard to the purchase price are in order.
Guarantees are issued by either the bond attorney or by the purchaser’s bank once the purchaser has signed all the bond documentation and complied with all the requirements of the bank.
It usually takes between 10 to 14 calendar days after bond approval for the guarantees to be issued.
Buying your next property
You have to exercise caution in committing yourself contractually to the purchase of a new property before you have confirmed that the purchaser has indeed secured an approved loan. If you are going to purchase a new property it is advisable to make that offer to purchase subject to the successful sale and registration of your present property, regardless of whether the purchaser of your property has already successfully obtained a bond or not.
If you want to make an offer to purchase on a new property before the transfer of your property is finalised, it is very important that the conditions and timeframes in both transactions are aligned.
It is important to be able to distinguish between the terms fixtures and fittings. Fixtures form part of the property and may not be removed when you move. They are therefore sold with the property. Fittings are however regarded as items that do not form part of the property and that you can take with you when you move. It is not always clear in which category a certain item falls and purchasers and sellers often disagree on this issue.
There are a few broad legal principles for determining whether a particular item is a fixture or a fitting. These legal principles cannot cater for each and every unique situation and it is therefore advisable to distinguish between the two in the deed of sale.
We recommend that you insert an extensive list in the deed of sale (if provision is made for it) or add an addendum to the purchase agreement in which you specify the list of fittings that you want to remove and that are not part of the sale, as well as items that you regard as fixtures.
Some estate agents’ pro forma purchase agreements already contain a comprehensive list of both fixtures and fittings.
Make sure that you apply your mind to this list and delete items that are not applicable and add items that should be present.
This list is just a broad attempt to assist the parties and is therefore not a custom-made list for your particular transaction.
Next time: Who pays for what; how your existing bond is cancelled; and what tax regimes apply