So you’ve found the property of your dreams (either one you want to live in or an investment property).
Well done!
But what happens after you’ve found it until you’re able to move in and call it home? The process works something like this:
- Put it in writing that you want to make an offer. This is called an offer to purchase.
- Secure funding – If you’re a cash buyer, you need to pay an amount into the transfer attorney’s trust account. If you need a home loan, you need a final grant from the bank that your loan has been approved.
- Sign the paperwork at both the bond and transfer attorneys – and pay their respective fees
- When both the attorneys agree, the transfer attorney will submit the transfer documentation to the deeds office.
- The property registers, and you become the new owner.
Negotiations and the offer to purchase (OTP)
Once you’ve decided to buy the property, you need to negotiate the terms and conditions. In many cases, the agent will verbally negotiate with the seller and in other cases, they prefer having an official offer to purchase.
It is in this phase that you need to negotiate the terms and conditions of buying the property. In many cases, issues like these are not picked up until after moving into the property:
- The electrician issued an illegal COC – the geyser is leaking an ocean on the DB board
- Buildings on the property are not on the plans that the council has
- The roof trusses are rotten to the core and need replacement
- The levies that the agent declared are incorrect
Once the verbal negotiations have been completed, a legally binding document will be signed to make the offer official. This is called the offer to purchase. For more about the OTP, see the article here.
Paying for the property
The OTP will table the amount of time you have to deliver on the promise of paying for the property. You have a few choices here.
- Are you paying cash?
- Will someone else be supplying the money to buy the property?
- Do you have investments (or property) that need to be sold first before you will have the money?
- Will you need a bond?
If you need a bond, the OTP will specify a cut-off date by which you are required to have approved funding for the property. If you cannot secure funding or there are issues, the deal will fall through. Depending on the contract, you might be liable for damages – so don’t just wait the time out!
In case you’re a cash buyer, a date will be specified where the monies should be paid.
If you’re a cash buyer or will pay a deposit
In some cases, you might have the money in your back pocket (just next to the Kopi Lawak coffee beans). In this case, well done! Not many people have cash on hand for property! You might also have to pay a deposit and/or wait for an investment to clear before you’re able to pay for the property.
Never, ever ever ever transfer money to the estate agent. Did I mention never to do that – you should never ever give the estate agent the deposit?
Once all the paperwork has been sent to the attorneys, you will be contacted by the transfer attorney who will give you details of a trust account into which you can deposit the money.
If you need a bond
In most cases, people need a home loan. Most estate agents will add a clause in the OTP that they will assist you in getting an offer from the bank. The reason they do this is that they get a commission from the bank in the form of a kickback – at no cost to you.
Should I use a mortgage/bond originator?
A mortgage (or bond) originator is a company that submits your OTP and other legal documents to all the banks on your behalf. They know the system really well, and able to negotiate better rates with the bank.
Can you do it yourself? Yes!
Are you able to submit to the same banks as the mortgage originator? Yes! But they don’t like that, as they have competition then 😉
Stealthywealth has famously compared the two and got mixed results concerning where to get the best offer. I do think using them is a good idea – and if you want to submit to your own bank yourself, why not?
The attorneys
Once you have the money guarantees all sorted, you can now proceed to the paperwork and legal stage.
The attorneys have loads of documentation that they need to have you sign. So, start practising your signature!
The bond attorneys
If you’re a cash buyer, skip this part – you will not be having to deal with bond attorneys!
Once you’ve accepted the bond from a bank, they will appoint a bond attorney. Some banks allow you to choose from their list of pre-approved attorneys. The bond attorneys will handle the bond and have you sign a legal contract between you and the bank.
Once signed, they will let the transfer attorney know that the bank is happy and ready to submit the deal.
The transfer attorneys
The transfer (or transport) attorney handles the transfer on your behalf. You will also need to sign about 4 000 000 000 legal documents to prove that you drink filter coffee and not espresso.
The transferring attorney will also wait for other paperwork such as the certificate of compliance for electricity and gas (if relevant).
They also will need closing figures from the municipality and body corporate/housing association. Then proof needs to be submitted to the attorneys that the seller has paid all the bills. For example, if the rates and taxes are not up to date, then the deeds office will not allow transfer.
Submitting
Once everything is ready (including paperwork and bond attorneys), the attorneys will submit to the deeds office.
Depending on the deeds office, this could take anything from three days to the next coffee harvest.
Once it’s registered, you will get a call from the attorneys or an SMS from the bank to say the transaction has been completed.
And then the property is yours!
Why is the process taking so long?
Sadly, it’s never just ‘sign and submit’. This process can take anything from a week to years, depending on certain variables. For example:
- A property is part of an estate. The will and testament is disputed by the children. This can cause considerable delays in the process.
- If this is a repossessed property, the bank needs to pay for the closing figures and then again for settling the outstanding fees. The bank can easily take a month to pay out the monies. Once they’re ready to pay, the closing figures might have expired. New closing figures will need to be requested, starting the infinite cycle all over again
- The OTP has a conditional clause that another property need to be sold first. The deal will lay dormant until the property has been sold.
Conclusion
The OTP is the start of the legal process of buying a property.
You will need to jump through many hoops, sign billions of documents and pay some interesting fees to make the property yours.
Happy investing!