The answer to all bond declines

The answer to all bond declines.

This can almost be seen as the modern-day concept of a peer-to-peer transaction in which the finances of a bank are eliminated and the seller and buyer enter their own financing agreement to pay off the purchase price.

The question thus arises: Why is this not becoming a Plan B for all property transactions where a purchaser struggles to secure a home loan?

The answer most likely lies in the reality that most property sellers are just focused on Plan A – that is to secure a cash- or a bond-approved buyer.

Few sellers are also prepared to wait for an extended time to receive the full purchase price, says Meyer de Waal, Cape Town-based conveyancing attorney who has made an in-depth study of instalment sales and rent-to-own property transactions over the past decade.

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However, we are finding that more and more sellers, particularly those who own vacant plots, investment properties or holiday homes, are prepared to wait for their money – provided the repayment of the purchase price is well structured and secured.

Buyers who struggle to raise a home loan, such as those with poor credit scores, who demonstrate a lack of affordability and those who have a shortage of consistent revenue streams – like self-employed buyers, entrepreneurs and foreign buyers – are all exploring innovative methods to secure a home loan.

And it works in practice, demonstrated by de Waal’s team helping to structure an instalment sale agreement for a R1,7mn property.

The seller struggled to sell the property,” says de Waal, noting that the seller eventually found a foreign buyer.

The buyer came up with a 30% cash deposit and we prepared an instalment agreement to conclude the deal.

Author: Meyer De Waal

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