Exploring property transactions
When buying, renting, or selling, clients are often met with various new phrases related to the property industry. It is essential for clients to familiarise themselves with these terms to avoid running into trouble later.
To help demystify these terms, RE/MAX of Southern Africa runs us through the A-Z of property transactions:
Asking Price:
The price set for the home is usually suggested by a real estate professional based on a competitive market analysis and agreed to by the seller. Depending on demand, buyers can choose to make offers above or below the asking price.
Bond Originator:
A free service that can help buyers find the best deal on their home loan. Bond originators have several services that will help buyers navigate the bond application process more efficiently.
Conveyancer (also known as a transferring attorney):
A legal professional will attend to all the paperwork and other legalities that are required for a property transfer to take place.
Deposit:
An amount of upfront cash is provided to the buyer upon acceptance of an offer to purchase. The rule of thumb here is roughly 10% of the asking price. A deposit is not a legal requirement but can make a buyer’s offer more appealing and could help the buyer acquire the remaining home finance.
General Valuation Roll:
An amount of upfront cash is provided to the buyer upon acceptance of an offer to purchase. The rule of thumb here is roughly 10% of the asking price. A deposit is not a legal requirement but can make a buyer’s offer more appealing and could help the buyer acquire the remaining home finance.
House Price Appreciation:
A percentage of growth calculated based on average house prices in an area (usually calculated at a national level). These averages can provide an indication of how much more property will cost in a year’s time. For landlords and tenants, these averages can provide an indication of what a fair annual rental escalation could be.
Interest Rates:
There are various rates at which interest is calculated on debts, including home loans. Consumers should focus on the Prime lending rate, as this is the base rate that banks use when offering loans to consumers. This will either be above or below Prime depending on how good your credit score is.
Off-market sale:
When a property is for sale, but it has not yet been publicly advertised or listed on any property portals.
Pre-approval:
A certificate issued by a bank that provides a buyer pre-approval of a certain loan amount, calculated based on what a buyer can afford. These amounts are only 100% finalised after the bank has completed a property valuation and has received a signed Offer to Purchase a property.
Reserve Price:
The minimum price is set for a home when it is sold via auction.
Sole Mandate:
A written agreement that places the responsibility on a single agent for a period of time. It is often far more effective to sign a sole mandate and allow one agent the space to secure the best sale. A sole mandate is also a more convenient option because sellers will only have to liaise and deal with one agent rather than several.
Turn-key property:
A property that is move-in-ready, with no need to do any further renovations or updates.
Unconditional offer:
An offer to purchase that is not subject to any other conditions, such as a home loan or private home inspection, etc.
Zoning:
The type of property that can be built on a plot of land. Local planning authorities control zoning permissions.
“There are a lot of moving parts to any property transaction. That is why the real estate profession exists. Property professionals are there to help guide clients through these transactions. Never feel afraid to ask questions if you are ever unsure of anything during the process,” says Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett.
FICA
FICA has become an important aspect of our daily lives and also affects the selling and letting of property, and there are onerous requirements pertaining to FICA when it comes to property transactions.
Tiaan Pretorius, manager of Seeff Centurion, says “FICA” is the abbreviation that is used to refer to the Financial Intelligence Centre Act of 38 of 2001 which was amended in 2017. It is part of a host of legislation aimed at assisting in the prevention of money laundering, fraud, tax evasion and identity theft.
Under the FIC Act property practitioners (estate agents) are specifically mentioned by name as being “reportable institutions” with various obligations with regard to FICA with responsibility around identification of their clients as well as having their own risk management and compliance programmes.
Pretorius says estate agents must be able to verify and identify their clients. They also need to keep records of their clients while still being POPIA (Protection of Personal Information Act) compliant.
The estate agency business for example must appoint a compliance officer, and register themselves with the FIC (Financial Intelligence Centre). It must also create its own risk and compliance programme and train its employees and agents on it. Estate agents are also obliged to report all transactions which meet the reporting threshold and those which appear to be suspect in nature.
The FICA requirements pertaining to verifying clients apply across the board, from sellers and buyers to landlords and tenants, he says further. The property practitioner will request clients to provide them with proof of their identity as well as proof of residence. Other documents that they can provide to assist in making sure their transactions proceed timeously are documents from SARS confirming their tax number and documents confirming their marriage status such as a marriage certificate if applicable.
Other than it being a legal requirement that forms part of a property practitioner’s duty, Pretorius says compliance with FICA also protects the agent and business. The wider impact is that it ensures protection for the local economy not being blacklisted from using international financial systems, and reduces the capabilities of criminals and terrorists to use the formal economy and financial systems to continue to pose a danger to others.
Article courtesy of property24