When is my house actually sold?

A client walks into your home, falls in love with the property, and signs a sale agreement. You agree to the terms of the purchase, and you, the seller, sign alongside. Sold? Not necessarily. This is phase one. There are usually subjective clauses which, until met, means the agreement can lapse due to non fulfilment. Most usually, the sale is subject to the buyer being able to raise or secure a home loan. Most sale agreements provide from ten days onwards (depending on circumstances) for the prospective buyer to raise the funds from the bank...or source funds from elsewhere. If the buyer has asked for a 90 percent loan and receives it, he is legally bound by the agreement - the suspensive conditions have been fulfilled. But if the bank offers a 50 percent home loan – in other words, less than what the buyer requires - that agreement is no longer binding.

But, increasingly, there’s a lack of respect for - or perhaps, understanding of - the legal binding nature of a sale agreement. We may have moved a fair distance from the gentleman’s handshake, but we haven’t budged on the absolute commitment to which you’re bound when two parties sign a legal document. Yet, still, as Myles Wakefield, CEO of Wakefields Real Estate said, “Sales agreements are often treated more in the light of an ‘order form’; an option to purchase, rather than what it is – a legal and binding agreement.”

On the surface, it should be so clear cut: the price is X, the offer to purchase by the prospective buyer is X or Y, the seller is happy, and signs accepting the offer; or he’s unhappy, and countersigns it with a price or alternative conditions that he will accept. From there, once the various suspensive conditions are met, the transferring attorneys take over the paperwork, and the sale proceeds along the timeworn legal path to the deeds office. 

CASH IS KING...OR IS IT?

A cash offer for a property usually represented bargaining power. Not so much now, because a cash offer ‘within 30 days’ means the cash is not available now. It’s coming from elsewhere, and that ‘elsewhere’ could for some reason, be uncertain. Essentially that offer has almost less appeal than a bond which can be granted faster.  

WHAT CAN A SELLER DO?

A seller can insist that the conditions in the sale agreement are clear and concise; ensure that a cash or bond buyer has been prequalified – in other words, the bank has already agreed they are good for the required loan  amount  and that it will be paid (presuming the bank sees the value in the property) or that confirmation is given by the Purchaser’s bankers that he is able to meet his commitments where he is a cash buyer..

Bottom line, if the Purchaser can’t show the seller the money, the seller need not, and should not take their property off the market (in other words, reserve it for you) while the conditions are being met. The Seller could continue to accept other offers subject to the cancellation of the prior conditional offer. The Seller could also reserve the right to bring forward the date by which the Purchaser who made the first conditional offer has to comply with the conditions.

Once the purchase price has been secured by the payment of the purchase price and/or the delivery of bank guarantees payable on registration of transfer to the conveyancers, the final step of giving effect to the delivery of the property to the Purchaser by way of occupation; possession and registration commences.

In layman’s and practical terms (and not necessarily legal terms!)….the answer to a Seller’s question as to “when is my property sold?”…it’s sold on registration of transfer when both parties have complied with all their obligations, when the registration of transfer to the Purchaser has occurred, and the Seller has been paid. At that stage there’s certainty.

CAN ANYTHING GO WRONG ONCE THE CONDITIONS ARE FULFILLED? 

As with any process, there can be glitches en route. In the case of a property sale, here are a few examples of issues which could arise that would impact on the registration of transfer. 

• If the credit rating of the purchaser alters before registration of transfer, the bank could withdraw the bond. Likewise if something happens to the purchaser’s status, for example, retrenchment. 
• The seller’s financial status with the bank could be an issue – for example, the purchase price of the house might not be sufficient to cover the outstanding bond amount owed to the bank by the seller. 
• There could be surprises...such as issues with the rates, or – if the agreement requires them – the house plans.