Bridge over trou­bled wa­ter be­tween sale and trans­fer

Weekend Argus (Saturday Edition) - - PROPERTY -

THE PE­RIOD be­tween the sale and trans­fer of a home can be fi­nan­cially con­strict­ing, of­ten leav­ing sell­ers with no ac­ces­si­ble cap­i­tal for ex­penses such as a de­posit on a new home, set­tling mu­nic­i­pal ar­rears or even liv­ing ex­penses.

“This can be fur­ther ex­ac­er­bated by de­lays at the deeds of­fice, es­pe­cially when sell­ers have over-ex­tended them­selves on their new homes and don’t have cash for the de­posit and the trans­fer fees,” says Lew Gef­fen, chair­man of Lew Gef­fen Sotheby’s In­ter­na­tional Re­alty.

“Bridg­ing fi­nance can be the ideal so­lu­tion as it is a short-term loan cre­ated specif­i­cally for real es­tate as the cur­rent home serves as collateral to se­cure the loan amount.”

An­drew Church, CEO of Rodel Fi­nan­cial Ser­vices, a bridg­ing fi­nance com­pany, and chair­man of the Bridg­ing Fi­nance As­so­ci­a­tion of South Africa, says bridg­ing fi­nance is only ad­vanced to sell­ers once they have sold their prop­er­ties and the con­di­tions of the sale have been met, with the loan pe­riod av­er­ag­ing 45 days.

“It is a com­pletely sep­a­rate trans­ac­tion to the bond ap­pli­ca­tion and sub­ject to dif­fer­ent cri­te­ria, the most im­por­tant be­ing that the seller’s credit rat­ing is less im­por­tant than the fact that the seller has eq­uity in their prop­erty, with the sale price less trans­ac­tion costs be­ing greater than the mort­gage bond.

“We ad­vance up to 85% of the eq­uity in the prop­erty with the in­dus­try in­ter­est rates cal­cu­lated at around 4% per month, which trans­lates to R4 000 per R100 000,” says Church.

The loan is then re­paid by the con­veyanc­ing at­tor­ney upon reg­is­tra­tion and trans­fer of the net pro­ceeds due from the sale price, leav­ing the seller free to get on with mov­ing.

Although bridg­ing fi­nance is a fi­nan­cial loan, it is tai­lored to a spe­cific mar­ket and in­dus­try only and is there­fore not pro­cessed by banks or bond orig­i­na­tors.

The bridg­ing fi­nance prod­uct is very dif­fer­ent from mi­cro lend­ing and also less reg­u­lated by law. Church says it is there­fore es­sen­tial to only use com­pa­nies reg­is­tered with the Bridg­ing Fi­nance As­so­ci­a­tion of South Africa.

“To en­sure and pro­tect the in­tegrity of the in­dus­try, the main play­ers for­mu­lated a self-reg­u­la­tory body which will stand un­til the pro­mul­ga­tion of the new Prop­erty Prac­ti­tion­ers Bill which seeks to en­com­pass the many dif­fer­ent par­tic­i­pants in the prop­erty in­dus­try.”

He cau­tions cash-strapped sell­ers against bor­row­ing from at­tor­neys who lend money to their clients.

“At­tor­neys can­not be money len­ders in a trans­ac­tion and also pur­port to act in the best in­ter­ests of the buyer and seller. There is al­ways a con­flict of in­ter­est in this sit­u­a­tion and un­for­tu­nately we have nu­mer­ous ex­am­ples to prove it,” he says.

Gef­fen con­cludes: “Bridg­ing fi­nance can be costly so don’t ap­ply for more money than you need and take the loan for the short­est pe­riod pos­si­ble while cap­i­tal is be­ing freed up.”

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.