Buying a house can be a confusing and time consuming process. This is because many parties are involved (even in the case of a private sale) and much of the work occurs in the offices of attorneys, estate agents, banks and the government.
This step by step guide will attempt to shine some light on the process. Please remember that when you are buying and selling you have the right (and responsibility) to ask as many questions as you need to.
Editor’s Note: We’ve assumed that the seller has a loan over their property and the buyer will require one to make the purchase. Also, there will be cases where some steps will happen simultaneously, or in a slightly different order, but this gives you a general idea of what is involved and why this process is such a lengthy one.
1. The buyer makes an offer on the home s/he wants, by signing a legal agreement called the Offer to Purchase (sometimes also called a Deed of Sale). Read more about the Offer to Purchase here.
2. If s/he wants to accept, the agreement must then be signed by the seller. The buyer, as well as the seller, should keep a copy of the offer to purchase. The buyer pays any deposit to either the estate agent or the transferring attorneys, who must hold it in an interest bearing trust account until the property is registered in the buyer’s name. The buyer must make sure that s/he receives a receipt.
3. The buyer applies for a mortgage loan (bond/home loan) with a bank (hopefully through a mortgage originator!).
4. The buyer’s bond application goes through a process of approval by the bank’s credit division (more of that in our next post). 5.
5. The buyer’s bank sends out a valuator to assess the value of the property the buyer intends to mortgage.
6. The seller must obtain Certificates of Compliance for Electrical, Plumbing, Gas, Electrical Fence and Beetle, and give them to the transferring attorneys. Read more about certificates here.
7. The buyer’s home loan is granted, subject to the valuation and credit approval mentioned above, and the bank advises the registering attorneys to register a bond.
8. The transferring attorneys get a copy of the agreement and request the title deed and cancellation figures from the seller’s bank (which currently has a bond over the property).
9. The transferring attorneys call for FICA documentation for buyer and seller including ID, proof of residence and tax numbers. They also do a Deeds Office search on the property and the parties.
10. The transferring attorneys also request a clearance certificate for the rates and taxes from the local municipality.
11. The transfer documents are then drawn up by the transferring attorneys once all the information in the above steps is obtained. The transfer documents include:
- The transfer duty or VAT receipt (from the Receiver of Revenue).
- The rates & taxes clearance certificate (from the local municipality).
- The levy clearance certificate (from the body corporate).
- The consent of the bondholder (bank which holds the current bond) to cancel the current bond.
- Consents required in terms of conditions in the title deed (i.e. a right of first refusal waived by the interested party).
12. The registering (bond) attorneys advise the transferring attorneys of the amount available for guarantees (the amount of your new bond over the property)
13. The transferring attorneys then advise the cancellation attorneys to cancel the seller’s bond, which is done upon receipt of the guarantees.
14. Once the transferring attorneys receive the title deed and cancellation figures from the seller’s bank, they send a copy of the deed of transfer and guarantee requirements to the registering (bond) attorneys.
15. The transfer documents are signed by the buyer & the seller, with the transferring attorneys.
16. The buyer pays the transfer costs, with which the transferring attorneys pay the transfer duty to the Receiver of Revenue and a transfer duty receipt is issued.
17. The seller pays the rates, advance rates portion and levies.
18. The buyer’s bond account and supporting documentation are prepared by the registering (bond) attorneys.
19. The buyer signs the supporting documentation and pays the bond registration costs to the registering (bond) attorneys.
20. The necessary guarantees are prepared by the registering (bond) attorneys and forwarded to the transferring attorneys, who prepare the bond documents for lodgement with the Deeds Office.
21. The transferring attorneys then forward the guarantees to the cancellation attorneys, who get consent from the bank (which currently has a bond over the property), to cancel the seller’s bond.
22. Once all the documentation is signed and all the costs are paid, the buyer’s new bond documents, the transfer of the property (into the buyer’s name) documents and the cancellation of the seller’s bond documents are prepared by the respective attorneys and lodged in the Deeds Office – simultaneously.
23. The Deeds Office takes approximately 2 weeks (7 to 15 working days) to check all the documentation before they are ready for registration by all the attorneys on the same day.
24. On registration, the bank pays out the loan in accordance with the guarantees issued and the estate agent is paid the commission.