IT is excellent news that homebuyers are once again able to obtain home loan pre-approvals, but sellers need to be sure that they also have the cash necessary to cover any deposit required as well as the closing costs.
So says Berry Everitt, MD of the Chas Everitt International property group, who notes that more than 60% of buyers are only able to secure a home loan if they put down a deposit of 10% or more of the purchase price, and that this can amount to a significant sum of cash.
“Then there are the additional costs of a home purchase, including home valuation and bond registration fees, legal fees, deeds office charges and, on any home costing more than R600 000, transfer duty.
“On a home costing R1 million, these costs would total almost R50 000.
“What is more, most of these fees are applied on a sliding scale, so the more expensive the property, the greater the closing costs, which means that even buyers who did anticipate them may have underestimated the actual amount required.”
If buyers are not able to pay the deposit or costs when required, the transaction can become very protracted or even collapse, with potentially serious financial consequences for the sellers.
Writing in the Property Signposts newsletter, he notes that, if sellers have already bought and moved to their new home, they could find themselves having to make two bond repayments for much longer than expected while they try to re-market the property.
“At the very least, even if they have not moved yet, they will have to pay holding costs such as municipal rates on the property for longer than they anticipated.
Even worse, they may find that because the property has been on the market before, it has lost its ‘novelty value’ for prospective buyers and that they are not able to get the same price for it as they did the first time around.”
However, Everitt says, it is obviously difficult for sellers to enquire into the financial affairs and capabilities of prospective buyers, which is why they should make it a condition of their mandate that their estate agent do so.
“When a trained, experienced agent informs prospective buyers how much cash will be required to complete a transaction and enquires whether they have the necessary resources, he or she will usually not be perceived as nosy but as helpful.
“Such an action can certainly save everyone time, money and possibly even embarrassment if the buyer does not have enough cash to hand,” he says.
