The mortgage origination value chain consists of the home buyer, estate agent, mortgage originator, attorney and the lender (bank).

1. Seller
The seller is the registered owner of the property to be sold. The seller could:
• Approach an estate agency to sell the property on his/her behalf
• List the property for sale through a direct selling mechanism on the Internet
• Sell the property directly to a prospective buyer.

2. The buyer
The buyer of a property enters into an Agreement of Sale with the seller of the property and could pay the purchase price to the seller in cash or by obtaining a home loan or mortgage through a bank. A buyer is also a person buying a stand and building a dwelling on the stand.

3. The estate agent
The estate agent is the starting point within the value proposition to the homebuyer. Although appointed by the seller, and primarily looking after the interests of the seller in terms of listing the property and finding a suitable buyer as close as possible to the seller’s asking price, the estate agent is compelled to operate and advise homebuyers within the guidelines and policies of the Estate Agency Board, the Regulatory Body for Estate Agents. The estate agent adds value to the homebuyer in finding a suitable property to satisfy the needs of the homebuyer.

4. Banks
The bank is also referred to as the lender. When the originator submits an application on behalf of the homebuyer to the bank, the bank will assess the application based on the creditworthiness of the applicant, the affordability of the loan for the applicant and the security that is offered for the loan in terms of the value of the property to be mortgaged. Based primarily on the risk the mortgage loan represents, the bank will offer the home buyer a suitable interest rate. The normal repayment period for a home loan is 20 years. After registration of the home loan, the applicant becomes the client of the bank.

5. The attorney
By law a conveyancing attorney is the only person who may register property transactions in the Deeds Office.
When there is a mortgage bond registered over a property, and the purchaser has procured a loan secured by a mortgage bond to pay the whole or part of  the purchase price, three basic types of transactions are applicable:

• The cancellation of the seller’s existing mortgage
• Simultaneously, the transfer of the property into the new owner’s name
• And also simultaneously, the registration of the purchaser’s bond

There is a fourth possibility – that the property transactions may be  in the sense that, for example, the purchaser has sold another property, and the proceeds of that sale, or part thereof, are used to pay the purchase price of the property he/she is now buying.

6. Mortgage originator
A mortgage loan originator or mortgage broker is a licensed professional who arranges mortgage financing for potential homebuyers. While a loan originator usually represents a particular mortgage company, the mortgage broker may possibly represent more than one lender. In either case, the job is to assist the borrower by beginning the borrowing process through the completion of a loan application, and gathering of the necessary documentation, such as income statements and credit reports.

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

Occupational rent – are you covered?

Reading the fine print and ensuring that every eventuality is covered in an agreement of sale is one of the most crucial aspects of buying or selling property.

This is the advice given by Adrian Goslett, the CEO of RE/MAX of Southern Africa who says that according to the laws governing property sales in South Africa, everything has to be reduced to writing and anyone who wants to conclude a sale without any complications should bear this in mind before signing any agreement.

“Although a sales contract normally has a section discussing occupational rent, many buyers and sellers do not realise its importance,” he says.

Goslett explains that essentially, this clause is intended to protect both parties as it covers the seller when the buyer moves into the premises before transfer has taken place, or the buyer should the seller stay in the property after it has been transferred into the buyer’s name. The clause should clearly state how much occupational rental must be paid each month.

While a buyer may have no intention of moving into a property before it is registered in his/her name, situations may arise where early occupation has to take place. Goslett says that delays at the Deeds Office and problems with obtaining rates clearance certificates are just two of the factors that may delay the transaction.

Likewise, a seller who initially didn’t plan to move out before the transaction has been completed may have to leave a property simply because they didn’t factor delays in transfer into the equation, or they might need to stay on for longer for a number of reasons.

Although frustrating, those who have foreseen such problems are in a far better position to deal with them than those who have simply chosen to ignore the occupational rent clause.

Both sellers and buyers, says Goslett, who do not ensure that the required occupational rent amount is stipulated in the agreement of sale leave themselves wide open. “Buyers do not call the shots in this area and the seller needs to ensure that the amount of occupational rental reflected in the sales contract covers the actual bond repayments that he has to continue making until the sale has gone through.”

On the other hand, the seller cannot be unreasonable in these cases by demanding a figure well in excess of the market-related value of the property and the bond amount owing.

“It is imperative for the buyer and seller to agree upon a figure that is fair to both parties. The main objective of any sales agreement is to clearly set out the intention of the parties so that there can no argument later on.”

Generally speaking it is normal practice for an agent to insert an amount that ensures that the bond amount that the seller is paying is fully covered. However, some agents put in an amount equal to 1% of the purchase price. This can result in seller losing money in the event that he is servicing a high bond.

Goslett warns that it is vital for both the buyer and seller to read the sales contract in its entirety, thereby ensuring that every eventuality is understood and taken care of adequately. “Buying and selling property is an emotional time for everyone and adopting a ‘things will work out for the best’ approach could end up in conflict, costing money and souring what should be one of the most exciting moments of your life.”

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za