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

TOP TEN TIPS FOR FIRST-TIME HOME BUYERS

ALWAYS CHECK THE FINE PRINT AND MAKE SURE YOU WORK WITH THE BEST PROFESSIONALS

The real estate profession is today attracting the very best professionals, joining the industry from all backgrounds. Legal people, entrepreneurs, doctors, university professors and others realise that property is very much part of most people’s lives.

With a recent slow-down in the property market due to tightened environment created by the National Credit Act, it has become vital to consult the best real estate professional and to know what to be expecting in terms of contractual issues if you are a first time buyer.

All humans have basic needs, as philosopher Abraham Maslow established in the 1950s in his well-known hierarchy of needs. And the need for good shelter is chief amongst these, Maslow found.

With this in mind, says Jeanne van Jaarsveldt, “it is always important to point out that there are certain important things that first-time home-buyers should be aware of and in our continued search to deliver the best service in the real estate industry in South Africa, we thought it well to formulate a standardised list of tips.”

Most of the tips revolve around legal issues and it is no surprise that a growing number of legal professionals are joining real estate.

TIP 1: CONTRACTS: First time home buyers are involved in entering into written contracts, firstly between the seller of the property and the home buyer and secondly between the home buyer and a financial institution who gives finance in respect to of the property.

TIP 2: SPOUSAL CONTRACTS: There are then certain contractual obligations which arise between the seller and the buyer of the property, and they include the status of the parties: If it is a married couple, married in community of property, both spouses must sign the contract or if one only signs it, then with the written consent of the other spouse. Where parties are married out of community of property, they are two separate persons with separate estates, meaning if only one of them buys a property, then only that spouse needs to sign any document, but if they both purchase a property, in equal shares, then both of them will be required to sign all documents.

TIP 3: BONDS AND CONTRACTS: If the home buyer has to obtain bond finance, the contract will normally stipulate a time period within which to apply to a financial institution and obtain the necessary bond finance in terms of the contract.  If the application for bond finance is unsuccessful, then there exists no contract between the buyer and the seller, but if bond finance is obtained within the stipulated time period, a valid and binding contract comes into existence between the buyer and the seller.  The buyer cannot after this date simply resile from or cancel the contract without any legal grounds.  If the buyer does, then the seller has a choice either to hold the buyer to the contract and enforce it in a court of law or cancel the contract and claim damages. Another implication might be that the buyer becomes personally liable for the payment of estate agent commission, which is generally the responsibility of the seller who gave the mandate to the estate agent.

TIP 4: OCCUPATION OF PROPERTY: If the buyer takes occupation of the property before registration, it is common for the parties to agree that occupational rental be paid until the date of registration.  Home buyers sometimes find defects in the property which they did not see when they inspected the property the first time and then withhold rental as a condition that the defects be rectified.  This is a breach of contract, which allows the seller to cancel the contract and evict the purchaser if he does not remedy his breach within a notice period specified in the contract.

TIP 5: LEGAL REPRESENTATIVES: Most first time buyers are confused when two attorney firms are involved in the transfer process, the transfer attorney as well as a bond attorney if a transfer attorney is not attending to both the transfer and bond registration.  This situation might give the impression that more costs are involved, which may be true to the extent that if one firm is attending to both the transfer and bond registration, then the costs may be negotiated with such firm to the advantage of the home buyer.  In any event, irrespective if one or two firms are involved, there is costs payable for both the transfer and bond registration.

TIP 6: TRANSFER DUTIES: No transfer duty is payable if the purchase price is less than R600 000.00.  First time buyers are sometimes under the impression that this also means that no costs are payable, which is not the case.  Transfer duty is a tax exemption, while transfer costs does not form part of it, and are costs incidental to the transfer process, for example attorney fees and deeds office fees.

TIP 7: BANK AND BANK OMBUDSMAN TIPS: Home buyers should be under no illusion about a bank’s valuation for bond purposes, which is not an indication of the real value of the property, but simply an administrative act to ensure that there is security in the property for the bank.

The ombudsman for Banking Services gives the following hints on their website, www.obssa.co.za in respect of a mortgage bond: 1.) When building a home, do not sign consent to progress payments before you are satisfied with the work done.  2.) Obtain expert advice necessary and do not rely on the bank’s assessor. 3.) If you are buying a renovated or older home, it is advisable to obtain the services of an expert to inspect the building.  You cannot rely on the bank assessor to do this for you. 4.) Check with your bank what insurance cover you have in place on your bond account. 5.) Verify that you know the difference between House Owners Cover – which is insurance against damage to the property and Home Owners Life Cover / Life Protection Insurance – which is insurance against death of disability. 6.) In the case of a married couple or where the bond is registered in to parties’ names, ensure that those are insured. 7.) The onus is on the home consumer to ensure that the payments are made every month to the insurance company.

TIP 8: ESTATE AGENT UNDERTAKINGS: First time home buyers should be really careful not to fall into the hands of agents who make promises they can’t fulfill. The important thing to remember is that the sales contract is there to safeguard against exploitation.

TIP 9: BOND CONMEN: There are some conmen out there who tell buyers that they can still obtain bonds even if the client is blacklisted. This is probably more the case in areas where there are many first time buyers. It is strongly suggested that first time buyers should go to a registered bond originator like Mortgage Plus for assistance.

TIP 10: AVOID VERBAL AGREEMENTS: If a buyer or seller wants to set certain specific conditions in the sales contract, don’t rely on a verbal agreement. And don’t rush into signing a sales contract. Ensure that you are happy with every word written in the contract.

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