Amidst the current economic climate of reduced access to financing, many would-be home owners are finding themselves in the frustrating position of not being able to get a bond. Many buyers have tried to purchase multiple times without luck and have now resigned themselves to being long term tenants.
If only they knew that all was not lost and that they could indeed still acquire a property through an instalment sale. Instalment sales offer property buyers seven unbeatable benefits.
Benefit #1 - No bond required - The word 'bond application' is a swear word to many home buyers. It conjures up thoughts of begging, pleading and then being rejected. Happily with an instalment sale, no bond is required from any bank to purchase a property so buyers who are currently unable to get bonds can still buy property! They would obviously have to be able to afford the monthly repayments and even a small deposit but the rigorous lending criteria applied by banks are no longer an obstacle and headache. This now means that self-employed people or business owners can finally buy their own property.
Even foreigners can get access to 75% credit through an instalment sale. Currently banks will only lend at most 50% of the value of a property to a foreigner irrespective of their ability to service the payments. Through an instalment sale a foreigner (who is not a permanent resident) can purchase a property with a deposit of only 25%. This also means they do not have to bring their hard currency into South Africa and run the risk of a weakening rand.
Furthermore foreigners who are permanent residents can get access to 100% credit and need not put down any deposit for an instalment sale.
Benefit #2 - Lower deposits - Deposits required for instalment sales are typically about 5% of the purchase price but can even be zero in certain circumstances. That is far more affordable when compared to the common deposits of 10% to 20% associated with conventional purchases.
Benefit #3 - Flexible terms - Ever tried negotiating interest rates and loan periods with banks? Probably not, but if you have tried you were undoubtedly not very successful. By contrast, the terms of an instalment sale agreement are totally flexible and almost anything can be agreed and implemented between a buyer and seller. This means that all parties can normally achieve a win-win situation with a tailor-made solution specific to their needs.
Benefit #4 - Quick 'ownership' - Most instalment sale agreements take only a few weeks to complete and the buyer can usually move into the home within a very short period of time after signing the agreement.
Benefit #5 - Develop a good credit profile - As an instalment sale agreement is a credit agreement, you have a unique opportunity to prove to a bank your ability to responsibly service monthly payments. You may ask why this would be necessary. Well if you needed or wanted to later take out a bond on the property or buy another property, you could use your successful payment history to better substantiate your ability to be a responsible debtor to the bank.
Benefit #6 - Delayed transfer duty - With a conventional sale the buyer has to pay transfer duty to the Receiver of Revenue at the time of the purchase. This is generally a significant amount of money for the buyer and frequently prevents buyers from being able to purchase at all. In the case of an instalment sale, transfer duty is only payable six months after the date of the sale agreement, giving the buyer time to save and prepare for this payment. In addition, if the buyer cannot pay the transfer duty after six months all is not lost. The buyer will be charged an interest penalty of 10% per annum on the outstanding amount until such time as the duty is actually paid. This penalty is a relatively small amount to pay in such circumstances.
Benefit #7 - 'Low' Risk - A purchase of residential property on an instalment sale basis is well controlled under the Alienation of Land Act 68 of 1981, with the instalment sale being recorded against the title deed in the deeds office by attorneys. This provides both parties to the deal full legal protection.
So with all these great benefits it's no surprise that there are long queues of buyers lining up to take advantage of instalment opportunities.
Propsolve has developed a safe and seamless end-to-end process to assist these buyers. We have helped many a 'renter' become a proud property owner using this proven method. We work closely with our attorneys, who are arguably the most experienced instalment sales attorneys in the country to provide our clients with a one-stop shop solution. Visit Propsolve's website at www.propsolve.co.za to find out how we can help you get your foot onto the property ladder now!