Selling a property is a lengthy process and one thing is for sure, the money you are owed, once your house is sold is not in your account in a hurry. So why does it take so long for the money to be paid out when selling a property? We take an in-depth look and explain below as to why it can take so long.
The sale of a house is a complex process.
It involves banks, lawyers, other agents and a good deal of paperwork, meetings and administration. Understandably, as part of the sale, the transfer process can take up to three months if everything goes smoothly – and you will only receive any money due to you when the transfer actually takes place.
Before that can happen, however, there are a surprising number of legal and administrative costs that a seller can incur. The transfer process requires some of these costs to be paid in full in advance. Only then will you receive any proceeds from the sale.
If you have an existing bond registered over your property, the cancellation process will be conducted by a bond attorney and the cancellation costs are for your account as the seller. Some other costs that you could incur are rates, taxes and levies, compliance certificates and repairs and maintenance.
Should money not have been put aside for these costs, it can prolong the transfer process. Transfer costs must be paid by the buyer before the property is registered at the Deeds Office. Any issues that arise could delay the process even further.
Inevitably, all of the above can lead to a misalignment between when the expenses must be covered and when proceeds of the sale will be paid – which, in turn, depend on these costs being paid in advance. As you may have gathered, the time between the sale and transfer can be quite financially constraining.
Bridging finance can help tie you over. It can alleviate the uncertainty and stress while you wait out the usual 60-90 days for the property to be registered in the buyer’s name.
When your property is sold, bridging finance can advance you a certain percentage of the surplus (surplus includes the proceeds available after the settlement of all transfer liabilities). This can even be used for other needs too, such as deposits and moving costs or short-term rentals while your transfer is being finalised.
The all-important clearance certificate is vital to the transfer process. Before you can obtain one, there may be certain costs that you would need to cover – some of them in advance.
For example, property sellers have to pay rates and taxes, home owners levies and electricity charges to obtain a clearance certificates. Council requires payment to be made five months in advance before a clearance certificate can be issued. The seller would also have to pay for compliance certificates to ensure that the buildings are in good working order. These key pieces of paperwork must be produced before registration at the Deeds Office can occur.
If your municipal payments are behind, you will not be able to acquire a clearance certificate. However, many sellers have not budgeted for account arrears or for the required advance instalment to settle these.
This is where bridging finance can assist. It not only covers the account payments but, in so doing, ensures that the transfer process doesn’t take longer than necessary.
Second or Switch bonds:
The above does not only apply to new bonds. If you are already a property owner, you may be applying for an additional, further or switch bond. A switch bond is where you move your bond from one financial institution to another. A switch bond typically takes 12 weeks to be registered at the Deeds Office.
Commercial bonds and Property developers:
Delays in the transfer process can also affect working capital if you are buying or selling commercial property.
Property owners may require an advance on the equity in the sale. A prime case in point of where bridging finance can assist with meeting cash-flow needs is a Sale and Leaseback arrangement. As a commercial property owner, leveraging resources can pay good dividends and bridging finance can allow that to happen.
A property developer also typically finds their financial resources stretched at pivotal points during the development of a property. Commercial banks may have stricter lending requirements or there could be delays in the transfer of units, for instance.
Standard bridging finance (e.g. Phase 1 is complete and sold but the transfer is pending. Bridging finance can allow phase 2 to start) or Property-backed bridging finance, where units do not have to be completed, will allow the property developer to continue their work.
Again, the waiting period of transfer can be excruciating, especially if the property has integral bills that are required to be settled. Bridging finance can be used in much the same manner to assist with additional, further and switch bonds, as well as commercial bonds.
How Real Estate Bridging Finance works:
Bridging Finance bridges the gap between when expenses are meant to be paid for registration at the Deeds Office to occur, and the time that the transfer takes. You are selling future proceeds for a discounted value today.
If you would like to find out more about how we can help and end the frustration of waiting, email us on email@example.com or you can call, WhatsApp or SMS us on 064 515 2983.