Behind the scenes of a property transaction
Category Services
It's no secret that selling property is a lengthy and complex process and most first-time buyers (and those buying for the first time in many years) are aware that it will involve numerous professionals and institutions throughout - but few realise just how many it now takes to conclude the deal.
Jill Lloyd, veteran Agent and Area Specialist in Rondebosch and Claremont for Lew Geffen Sotheby's International Realty, says: "When I first started as an agent in the late 1970's, I concluded the same number of sales as I do now with just myself, my bleeper to notify me of messages and my tickler box with my data base.
"Agencies were often sub-offices in places like building societies which automatically brought feet into the office and the total staff complement was usually someone at the front desk who was also the receptionist and a conveyancing secretary - and that was it."
For many years, very little changed in the industry until the mid-90's when the advent of mainstream digital technology and the wonders of the internet triggered the dramatic and progressive transformation we have witnessed over the past two decades.
Lloyd says that although the advantages, solutions, conveniences and opportunities of the ongoing technological advances have been significant and undeniable, they have also added multiple layers, people and costs to the transaction process.
"And, as each and every single step of the transaction is vital, particularly as the transfer is normally at a set date and the timeline is very important, the number of potential pitfalls has also increased - in fact the absence of just one compliance certificate or a lost title deed can cause chaos."
Grace Uhde, senior Conveyancing Paralegal at STBB, says that in addition to the increased number of people and institutions involved, there are now also many more legal requirements, regulations and tax considerations.
"Since 1937, the process to transfer land has been subject to several legal and administrative changes. Over the years, these requirements increased, such as current requirements to comply with FICA which requires that the seller and purchaser prove their identity, residence and, recently, also their source of funds for the transaction.
"And the recently-signed Property Practitioners Act, which is set to replace the 43-year-old Estate Agency Affairs Act, introduces a new volley of changes to the industry which will impact buyers and sellers.
"We therefore always advise agents and clients to work from a checklist to ensure they don't miss any vital steps that could cause costly delays or even scupper the deal."
Lloyd adds that throughout the process there are also a number of steps that are easily overlooked and cautions buyers and sellers to be vigilant and ensure all I's are dotted and t's crossed.
"Sellers are often surprised to learn that the bondholder must be given at least 90 days' notice of their intention to sell the property and cancel the existing bond in order to avoid payment of an early cancellation penalty; and are often also unaware of the consequences of factors such as a change in their marital status (since the property was acquired).
"And buyers who plan to renovate or develop often forget to check the existing title deed to ascertain what, if any, restrictive title conditions apply.
"And considering that there are in excess of 40 steps from the initial agent contact to put a property on the market until the final transfer of the property, each with its own potential pitfalls, it's easy to see how errors and delays can occur."
There are also numerous costs to be borne throughout the process and these need to be budgeted for, says Lloyd.
"Some are upfront, out-of-pocket and non-refundable even if the deal does not go through, whilst other costs will only hit your pocket once the sale is concluded, and it is the latter that can be nasty surprises if not included in the budget.
"And it is not only professionals and institutions who have to be compensated, the government also gains a lot of money for each transfer, even from a moderately priced house."
She explains these costs for a R3 million sale:
Transfer duty R 163,000
VAT on conveyancing costs R 5,413
VAT on bond registration R 5,182
VAT on 4% commission R 18,000
SUB TOTAL R 175 395
"This increases exponentially the higher the sale price, for instance on a R5m house, transfer duty would be R383 000.
"In addition to this, there is the income tax payable by the agent, the photographers, the conveyancing secretaries and the attorneys. There is also VAT on the additional services that are necessary to obtain the compliance certificates.
"A depressed housing market therefore impacts SARS's income."
Lloyd concludes: "It's vitally important to ensure you appoint the best professionals who have not only the relevant qualifications but also experience.
"Everyone 'has' a hairdresser and a doctor, but few 'have' an estate agent or conveyancing attorney and, considering that property is the largest investment most of us will ever make, having the right people in your corner can make a world of difference.
"Reputable agencies and agents with strong brand identities and quantifiable performance record will have forged good working relationships with the relevant professionals over the years and will be able to recommend the best professionals for your needs."
Author: Private Property
