Why is the transfer of my property taking so long and what can I do to speed up the process?
13 Jan 2021
You have found your dream home, submitted your offer to purchase and have been advised what the additional costs involved in the transfer of your new dream home are. And now you wait. And wait and wait.
With increasing frustration (I mean you want to remodel that kitchen and bathroom already), your mind begins to wonder – why is this process taking so long?!
Don’t worry, you are not alone. It is one of questions most people ask during the property buying process. But it is important to remember that every property transfer is unique. Therefore to understand why a transfer is taking “so long”, one needs to understand the facts of each transfer in order to give a broad estimate on the date for registration. And this can rely on a number of factors.
An average transfer can take up to 3 months. But there are also instances where the property can be registered in 6 weeks and still others where there are unforeseen problems (such as the rates clearance certificate is delayed due to infrastructure problems) resulting in the property transfer taking up to 6 months to register. Not all transfers are equal and are hardly ever “average”. Now this may not offer any comfort to the person going through the process. But it may help to know that you are not alone in your frustration.
But what is actual the process?
Very briefly and (very) simply – once a seller has accepted an offer to purchase (meaning the transfer process has officially begun), the buyer must produce proof that that their bond application has been successful. The seller must then appoint a transfer attorney, (who is a conveyancing attorney) to handle the process.
Transferring attorneys are one of three attorneys who will play an important role in the home buying process. This team of attorneys includes (a) the transfer attorney (usually appointed by the seller), who is responsible for registering the property in the name of the new buyer. They will obtain FICA documents (ID and proof of residence) from the purchaser and seller and thereafter apply for the transfer duty receipts and rates clearance certificate from the municipality in order to register the property in the buyers name, (b) the bond attorney (appointed by the bank), who is responsible for registering the bond in the home buyer’s name. This part of the process can only occur once a home loan has been granted by the bank and the buyer has accepted the quote. The bond registration process takes about three months and requires the home buyer to pay the bond attorney a fee that varies according to the size of the home loan. The bond attorney advises the bank once registration has happened, and the guarantees are paid over to the transfer attorney, and (c) the cancellation attorney (appointed by the bank) – who is responsible for attending to the existing bond cancellation. The cancellation attorney will require a written request to cancel the existing bond, accompanied by a 90 Day (3 month) early Settlement Notice. If the seller does not comply with the notice period, they may be required to pay a finance charge (penalty interest).
Once the transfer duty has been paid, all documents have been lodged at the Deeds Office and the transfer attorney has finalised their accounts and paid over all proceeds to the seller, commission to the agent and refunded any credit that is due to the seller (within 12 months), registration of the property (meaning the purchaser is now the new rightful owner of the home) should then occur. This can take anything from 8 to 10 working days. The transfer, new bond and cancellation of the existing bond are all registered simultaneously.
Now that sounds pretty straight forward. Seamless and simple. But it very rarely is. Why? Because there are a number of factors which can influence the timing of any of these cogs in the property buying wheel, resulting in an increase in the time it takes for any one of the above steps to be completed.
Let’s break this down a little….
What are real the hold-ups here?
Delays due to the purchaser requiring a bond to secure the purchase price
Applying for a bond, whether you are a first time buyer, or have done this before can be a stressful process. With different banks offering competitive rates, it can be overwhelming. And in some instances, can take time. Ideally, it should take a minimum of one week to get complete approval of your bond. However, due to application backlogs, delays or purchasers not meeting certain requirements, the process can be delayed for at least two to four weeks (at most).
Ooba sets out some tips on how you may be able to speed up the bond application process –
- Check your affordability – before you even apply for a loan, check whether the property is affordable. Ensure you have ascertained the price range that is right for you. By targeting the correct price range you can avoid time wasted in applying for finance for unsuitable properties. Take into account what you can really afford (remembering the interest rate charged that may affect the size of the loan that the bank will grant), your unique financial requirements and monthly repayment affordability (calculated on joint net surplus income after existing debt commitments and monthly living expenses have been taken into account). Don’t forget the ‘hidden costs’ (transfer and bond registration costs and fees) have to be paid upfront, and add a sizeable amount to the cost if the bank is not willing to finance these cost.
- Get prequalified – apply for prequalification. This takes some of the stress out of applying for a bond once you have decided on buying a property. An additional positive factor is that buyers who are prequalified are in a much stronger position to negotiate with sellers.
- Check your credit record – bond applications may be declined for several reasons. For example, you may not be able to afford the monthly loan repayments. Another critical consideration is your credit profile (including your credit bureau results, which provide a picture of your debt and payment history). If the bank considers you a good credit risk, it will assess the value of the property to be purchased. If this too meets all the relevant criteria, the loan is usually granted. Improving your credit score includes ensuring you make all debt repayments on time. Every month.
- Submit the correct information – to assist the bank in determining its risk, you will be required to provide personal information such as bank statements, salary slips, a statement of assets and liabilities, a statement of your monthly expenses and information on your employment and credit history, including whether you have ever been insolvent. Ensure you submit all the correct information first time. If you are unsure, ask for assistance from the bank you are applying at or the bond originator that you use.
- Get the best interest rate – the lower the banks risk in lending funds to a particular borrower, the better the rate it will offer that individual. In calculating its risk, it will consider factors such as the amount of equity you are willing to invest in the property, i.e. your deposit; the size of the loan; and the repayment-to-income ratio (the ratio between the bond repayment and your income). The size of bond you apply for, your credit history and the investment value of the property you intend buying also affect the rate you will be offered. Shop around and negotiate with various banks to ensure you get the best package.
Delays due to the municipalities in obtaining rates clearance certificates
The transferring attorneys need to apply to the municipality in whose jurisdiction the property falls for “rates clearance figures”. Legally speaking, no property can be transferred without the written permission of the municipality – the certificate is required to show that any amounts due to the municipality (in respect of the property being transferred) were paid, before the Deeds Office will allow such transfer to be registered. The seller is required to make payment of the rates for a period of 3 months in advance. Usually (and under normal circumstances) it takes no longer than 10 – 14 days from the date of application for the transferring attorneys to receive the requested rates clearance figures and thereafter, once the payment of the figures has been made, approximately 2 to 3 days to obtain the clearance certificate. This means that this part of the process should not delay the transfer of the property from happening by much, and the property will generally register before the amounts to be paid per the clearance figures “expire” (The Municipal Systems Act provides that a rates clearance certificate is only valid for a period of 60 days from the date of issue).
It must be borne in mind however that if any taxes are owed, the seller is not exonerated and the taxes will still have to be paid by either the seller or the new owner as per their contract of sale. This can sometimes be quite a lengthy process to be finalised, depending on efficiency of the relevant local authority. Unfortunately there is no clear indication of how long the process will take. And no real tips on how to speed this part of the process up. Finalising the rates clearance certificate really comes down to the municipality to whom you apply.
Delays encountered with SARS in obtaining transfer duty receipts
Transfer duty is calculated on a sliding scale according to the purchase price of the property and the SARS e-filing system or through a third party conveyance systems which integrates with eFiling and ensures that all parties (including the relevant estate agent/agency) are registered and that their taxes are up to date (property transfers are used in an attempt to ensure tax compliance across all taxes).
As a result this process can take some time to be completed. It is therefore essential that all parties provide the correct tax details to the transferring attorney and resolve any tax issues prior to submitting the e-filing applications. Any disparity between the information provided and what is known by SARS could cause delays. Once satisfied, the application will be approved. If no payment is required, the system will automatically release the receipt after approval.
Should a payment be required, the transferring attorney will make such payment electronically after which the receipt will be issued. Remember Transfer Duty is payable within six (6) months from the date of acquisition. If the Transfer Duty is not paid within this period, interest will be calculated at 10% per annum for each completed month. A completed month is calculated as the first day from the expiry of the interest free 6 month period to the date of payment.
The crucial point here – ensure all correct information is supplied to SARS first time. Any disparity in information will result in a delay. So be cautious and vigilant. This delay can be easily prevented.
Co-operation between purchaser and seller
During the transfer process, it is no surprise that the purchaser has to provide their continuous cooperation where submitting documentation is concerned. The purchaser is required to –
- furnish the attorney with the required FICA documentation;
- pay the deposit, if any, into the trust account of the transferring attorney;
- ensure that the application for a mortgage bond, if any, is submitted and approved in time;
- sign (and return) the transfer documents to the transferring attorney;
- pay the transfer costs into the trust account of the transfer attorney;
- sign the mortgage bond registration documents;
- comply with additional documentary requirements of the bank that has approved the mortgage bond;
- pay the mortgage bond registration costs to the bond attorney attending to such registration, and
- guarantee payment of the balance of the purchase price to the bond attorney.
But, the purchaser is not the only party required to provide and submit documentation. The seller also has their fair share of documents to submit and preparation to complete. Even before the property is sold. Here are some time-saving tips a seller can undertake to speed things up-
- give the 90 days’ Notice to the existing bondholder for cancellation of the bond;
- have an access bond frozen, before cash can be withdrawn;
- obtain the building plans for the house;
- ensure that rates and taxes are correct, especially where a previous subdivision took place;
- have the original title deed in your possession, alternatively request the conveyancer to apply for a duplicate original as soon as possible as this process can take 1 to 2 months;
- if you are travelling overseas ensure that you have signed a Power of Attorney beforehand;
- repair all known defects in the property before show day;
- arrange electrical compliance certificates, gas and fence certificates, which are valid and beyond reproach;
- update any trustees in a family trust (if applicable), and
- make sure that the property, if built within the last 5 years, has the obligatory NHBRC (National Home Builders Registration Council) certificate.
Whilst the above is not an exhaustive list, it is imperative that there is a mutual respect and understanding between purchaser and seller in getting the property transfer done, in a reasonable amount of time. And where at all possible have both parties ensure that there is not any undue delay caused by incorrect information and shoddy paperwork.
It is extremely difficult to estimate precisely how long a transfer takes from the time that the conveyancing attorneys receive the instructions to the time the purchaser has the keys of the property in their hands. As you can see from the above, there are many moving parts. If all documents are submitted correctly, bond approval granted without delay, all rates certificates and transfer duty paid and obtained timeously, the entire process from start to finish, can take a couple of months. But this depends entirely on all parties working together to get the deal over the line. Remember in a moving wheel, one cog coming loose can slow down the whole cart.
Whilst the above highlights, at a high level, some of the complexities involved in the transfer process, it is not all encompassing and should therefore be considered as for information purposes only and should not be considered legal advice. It is crucial to seek appropriate professional guidance to ensure that your property buying process is as seamless, hassle and stress free as absolutely (and reasonably) possible.
Get in touch with Benaters today to see how they can best assist you during your property buying process.
Article sourced from Benaters.
- Transfer duty and transfer costs
- Deeds Registries; Sectional Titles Act & Regulations 12e (2020)
- Drafting Sale of Immovable Property Agreements – Part 1
- Lean on thy neighbour? – The duty of lateral support
- Property rates and prescription in a nutshell