Many South African first-time homebuyers and sellers remain surprisingly ignorant of the basic legalities surrounding any property transaction.

So says Lanice Steward, MD of Anne Porter Knight Frank (APKF), who adds that in our training sessions with agents, it has become necessary to insist that they give clients a short educational rundown.

She says first-time homebuyers, in particular, tend to have absolutely no idea how property is bought and sold and how to go about getting a bond.

When the deal looks as if it will go through, one of the most common mistakes is to fail to appreciate that a signed contract is legally binding: If a better offer or prospect comes up the buyer cannot simply change his mind. Some young buyers have heard about the cooling off clause and think it applies across the board. In fact, it applies only to properties valued at under R250k.

Another common first-time buyer mistake is to underestimate the extra? costs of a transaction: transfer duty, attorneys fees and Deeds Office costs. Good agents, said Steward, will draw a buyers attention to these early on.

Some clients, said Steward, are scared of any documentation and try to avoid putting matters in writing until the eleventh hour.

This can be disastrous when it comes to submitting an offer because, quite apart from the fact that a written offer will put the agent in a far stronger position to negotiate, it is in fact illegal to make such an offer verbally.

Inexperienced buyers, added Steward, often show a marked reluctance to invade a home owners privacy?. As a result they fail to inspect homes carefully and never fully appreciate the partially latent defects and flaws.

A good agent will, of course, insist on faults being listed in written form but there is nothing which can replace a hands-on inspection.?

When buying a property always ask for the home plans. It is essential to see these.?

Once you have them, said Steward, hold onto them. Some years ago a fire at the Deeds Office destroyed several hundred plot plans, leaving owners, who did not have copies, with no option but to bring in a draughtsman and have them redrawn.

Then, too, many of those planning to buy a property using a trust, a close corporation (CC) or a company as the holding vehicle, should take note not only that this vehicle must have a tax number, but that the taxes must be fully paid up.

As soon as money is paid to achieve a transfer, there will automatically be an investigation into the holding vehicles tax status. If any money owed is still outstanding, the sale will be blocked.

If the tax defaulter is the seller, SARS may be prepared to take the outstanding sum from the money paid. If, on the other hand, it is the buyer, SARS will insist on the money being paid up before any further transactions take place.

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It’s not much discussed, but mortgage fraud is becoming more extensive and could well be adding to the banks’ current extremely cautious approach to lending.

There are 101 varieties of mortgage fraud and the real scale of the problem is only just becoming to emerge, but in most cases the lender is definitely at risk in these schemes. If you add this worry to the restrictions of the National Credit Act, it’s really no wonder that the banks are much more wary about lending than they were previously.

At a national mortgage fraud seminar held late last year, Absa Home Loans Operations GM Pieter Vorster told delegates that an estimated R300m worth of fraudulent home loan applications had been blocked by the banks. And Greg Salter, the Nedbank Home Loans GM for Special Projects, Risk and Compliance, noted that mortgage fraud was increasingly being perpetrated by international crime syndicates using advanced technology.

Indeed the FBI recently noted that mortgage fraud is increasingly being favoured by criminals who see it as a low-risk activity generating relatively high returns.

However, the most common form of mortgage fraud is still income inflation by individuals, that is, the falsification of income and debt information and documentation to help applicants obtain home loans, or perhaps bigger loans than they would otherwise have been granted. This immediately exposes the lender to the risk of non-payment, since the borrower may not really be able to afford the monthly instalments, especially if interest rates rise.

And it is of course absolutely illegal so anyone who advises the would-be borrower to provide any false information in loan documentation is also putting that borrower at risk.

Potential buyers should never to be cajoled into making false statements on loan applications, including overstating your income, understating your debt, or lying about the source of your deposit or the nature and length of time of your employment. And if the person helping you make an application insists that ‘everyone else does this’ or that it is ‘quite legal’, ask them to put that in writing. You can be sure it won’t happen!

CONTACT US

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

Complete this short form online
Call us on 011.327.4489
Email: morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za