Rands pur­chases pose risks for sell­ers, tie up cap­i­tal for buy­ers

Weekend Argus (Saturday Edition) - - PROPERTY -

AS WITH most things, there are pros and cons, and cash pur­chases are no ex­cep­tion.

“The pros are that there is no mort­gage debt to re­pay – only the rates, taxes and main­te­nance charges. Any in­come re­ceived from the prop­erty is free to be utilised,” says An­drew Heiberg, di­rec­tor at law firm Cliffe Dekker Hofmeyr Inc’s Real Es­tate prac­tice in Cape Town.

Fur­ther­more, in­vest­ment in bricks and mor­tar is more re­li­able than in­vest­ment in mar­kets.

The cons are that a pur­chaser’s cash is tied up in one as­set which is not flex­i­ble or im­me­di­ately avail­able to use and in­vest in other as­sets or op­por­tu­ni­ties.

“Cap­i­tal growth is (also) de­pen­dent on the prop­erty mar­ket – sup­ply and de­mand and the area.”

A risk for sell­ers is that cash pur­chasers some­times can­not come up with the money, even af­ter the agree­ment has been signed, warns Soukop CEO Dina Soukop.

“While it doesn’t make much dif­fer­ence to the seller whether it is a cash or bond sale, it is im­por­tant that it is a pro­tected cash sale.

“Ev­ery so of­ten there are cases where the cash pur­chaser doesn’t put down a de­posit, and then when the lawyer asks for the pay­ment, they can’t come up with the money,” she says.

“The sale then falls through, some­times weeks af­ter the agree­ment has been signed, and the seller has to put their prop­erty on the mar­ket all over again.”

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