 Good evening and welcome to episode 313 of the Private Property Podcast. I'm your host, José Manto Moaco Marlo. It's a pre-recorded interview this evening, so if you're joining us live, do you keep the conversation going down here below? And I'll let you know more about that in a bit. Welcome of course to all our new viewers who are joining us for the first time this evening. You're tuned into the early daily property podcast in South Africa. Do you make sure that you also go to our Facebook and our YouTube page to catch up on all the great content that we've already brought to your screens? And all our regular viewers from the Top Fan gang members are on Facebook and of course those of you who watch us on YouTube and Instagram, welcome to it. You know how we do every single weekday. You and I have an appointment at 7 p.m. where we tackle a hot property topic and I'm always in conversation with an expert guest who helps us better navigate our property decisions. And of course talking about helping us manage our property decisions, you can of course catch other great shows that we have across private property's social media pages every single weekday at 8 p.m. As it is a Thursday, you can catch a warning in Pharma and Balino Aguilera on this evening at 8 p.m., taking you through the farming podcast. And of course in Bali is always in conversation with great professionals within the farming and agricultural space and really do help in getting a better understanding on agricultural matters. So it doesn't matter whether you're looking at sort of large-scale commercial farming or starting a smaller operation, perhaps as a cooperative farm in a smaller operation that will service your community. That show is certainly one that you do not want to miss out on. And every Mondays and Fridays Chad takes us through the home shopper show. They're always profiles incredible properties that you can find on www.privateproperty.co.za. So if you're in the market for a property and want to just see really great properties and what they have on offer, that is a show that you do not want to miss out on. And on Wednesdays, we don't leave you alone. Estie Carson brings the first time home buyer's show, which is always in conversation with people who have not only walked that first time home buying journey, but have gone on to grow their property followers from strength to strength. Those are great shows that you can look forward to every single weekday at 8 p.m. So do make sure that you set your alarms and of course tune in and engage with the team members. And you'll see that where a lot of the women presenters are also being profiled on our social media pages. So you'll get to know a little bit more about us. You get to see us on your screen so regularly, but there's still a few things that you don't quite know about as a Sombali mogul's profile coming up yesterday. Surprise some of the things that I also got to learn about her. Do you make sure that you go to the Facebook and Twitter pages to find out all about the different women that you can see on your screens? Well, this evening we're talking about something that I, you know, not a number of people are currently facing right now and probably don't quite understand the responsibility that lies ahead for them if they're going to walk down this path. We know that many people have been affected by the economic effects of COVID-19 and that is also meant that we're seeing home owners who are selling their properties, whether because they are looking to downscale the way that they're living or are looking to upgrade and take advantage of the historically low interest rates. But either way, these home owners are first-time sellers and so their owner really experienced the buying side and I fairly conclude up about what happens on the buying side, what they need to budget for as prospective home buyers. And yet when it comes to the sell side, unfortunately, not many of us are very aware of not only the process but what we need to be prepared to pay when it comes to the selling side. So this evening, Ezra Mareh, who's a partner at Mareh Casita Attorneys, was going to help us better get a better understanding of the financial misconceptions of the first-time seller. Ezra, good evening and thank you so much for joining us. Good evening, Zama, it's nice to be here. It's always such a pleasure to have you on the show, Ezra. Ezra, this topic when I think about it, I know of a number of first-time sellers and so many of them did not understand or even have an idea that there are certain things that they're going to financially have to budget for. Some of them thought, look, I already know I'm going to sell my property. Let's say even if it's just 2,000 rands more than what I paid for it. So I know I won't even owe the bank any amount of money. And they thought I'm going to walk away from this transaction without spending anything when it comes to disposing of my property. But you and I know it doesn't quite work like that. Let's just look at how should a prospective seller best financially prepare themselves when it comes to the financial burden, so to speak, the financial responsibility that they're going to have to deal with when they sell their property. Yes, Zama, thank you for this opportunity because it's something that I've been struggling with for quite some time with numerous sellers that I'm dealing with. And it seems like when a seller wants to sell their property they seem to think that everything that they are going to make out of the proceeds of their sale, they can utilise to buy their new property, which is in some instances correct because your proceeds can be allocated to wherever you're buying. However, there are certain payments that need to take place in the interim before transfer takes place. And I think that's where the misconception or the financial misconception comes into play. So payments like paying for a state agent commission, that can take place at the end of the transfer. Paying for transfer fees of the attorneys, that can take place at the end of the transfer. Some attorneys choose not to do that at that time, but you are able to do that, it's not something that's supposed to hold up the transfer. But then there are things like compliance certificates that you pay for now already. However, you can make an arrangement that the conveyancer may deduct at the end of the transfer registration point. You can deduct those amounts that's necessary for compliance certificates to be paid. So if there were repairs, gas repairs, water repairs, electricity repairs, those kind of things you can make an arrangement with the companies attending to these compliance certificates and you can arrange with the conveyancer to pay on transfer. But payments that need to be made before transfer that may hold up your transfer if you do not have those funds is specifically source, your transfer duty, but that's not for the seller to pay, that's for the purchaser to pay, and for the seller is the rates payment. So generally the payment will be much lower than anticipated. However, the municipalities charge you an amount of 60 to 90 days in advance. So whenever we get those rates figures and we present them to the sellers, we say to them, you're your rates figures for payment. Ultimately what they think in their minds is that I'm not in arrears with my municipality payment, why is this amount so high? And then what we need to explain to them is that you have to pay for 90, 60 to 90 days in advance because what the municipality does is they effectively want to make sure that they receive payment for the municipal rates up until transfer. So they're not out of pocket. What you could do and what they do and they're generally quite good with that is that if you pay 90 days in advance and your registration takes place within say 60 days of your advance payment, the municipality will pro-rota refund the seller into their bank account that we provided them with with the amount that they've overpaid for that amount of municipality and rates. So generally that amount is the amount that they need to understand is payable in advance. But I earlier said that transfer duty is also a payment that may hold up your transfer if you don't have the funds to pay. So generally what happens is that a seller is going to buy at another place and that's why they're selling. So they also purchase on the other side. And that's where I also see that they don't understand that they think the proceeds of the sale can be utilized to pay for their transfer duty where they're purchasing. And the problem is that if these two transfers are taking place simultaneously, you do not have the funds now to pay for the transfer duty and receive the receipt from source until registration. So even though it's not a seller payment to make, you might be a purchaser on the other transfer where you have to pay transfer duty and you think that you can utilize your proceeds but you can't because your proceeds are still locked in. Because we have to remember we can go back to your purchaser where you are selling and ask them if we can use some of the deposit that they've paid to pay for our transfer duty where we're buying. But if we want to do that, your purchaser is losing interest on the funds that they would have received for the money lying in my trust account. So it's all very difficult to explain to clients that we can make these things happen but somewhere someone is going to lose money or interest if we're going to take from Peter to pay to Paul in order to make the second transfer work. Yeah. As you've actually highlighted a few key things that I want us to chew on a bit because as you've pointed out there's so many different kinds of scenarios and in all of them it's the seller not being aware of the financial obligation that they're going to have when they need to or rather when they sell their property. I want to find out from the viewers at home if you've encountered this especially of course as a first time seller. We talk a lot about first time buying some of the surprise costs that many of us unfortunately didn't know about. I mean if you at home know about my faux pas when it came to not knowing that I had to pay two attorneys per finance property when I was buying my first properties and because I was buying two simultaneously had to pay four attorneys and knowing behold that only by just for two and by the time the third and the fourth invoice came about I obviously got the shock of my life. So I'm very aware of not having a clear picture in as far as finances that you need to get in order as a buyer but as you know Israel has also pointed out as sellers and first time sellers tend to also not have a good understanding of some of their obligations when they sell and it could easily hold up the process. I mean we already know that right now you know properties are taking quite a long time to lodge and eventually transfer at the deed's office because of COVID and you wouldn't want your property transferred to be delayed by something that you have control over. I think there's already so many other factors that as a seller you don't have control over by virtue of putting your property on the market you obviously wanted to sell so you don't want to be the reason why there is a delay in your property being sold especially at that stage where you found the right buyer they qualified you've put down a deposit that stage already is you know takes so much time that by the time you're in that sort of stage in the transaction you do not want to be the reason why that offer sort of falls through or it doesn't get registered. Now Israel I want us to talk a bit more about the rates and not even the levies right because you're talking about how the oftentimes you know municipalities will give you either 60 or 90 days that you must pay them funds we're seeing the same thing obviously with levies for people who live in sectional housing communities and some also have the same you know sentiment of well I keep paying my levies every month and when there has to be a levary clearance then there's you know there's an issue and the reality unfortunately is there are people who live in complexes or estates where both the rates and the levies are relatively high so higher than sort of the average and so the upfront costs can be can be quite substantial especially if you haven't budgeted for it can you just take this through the the levy component of it because I know this is another one that a lot of sellers tend to not be aware they need to adequately budget for. Yes so with regards to the levies it's quite interesting most of the times our fund in the past we now deal with levies and homeowners associations so you've got body corporates and homeowners associations so they are actually in fact two payments to be made the the the payment that's allocated to the purchaser in that regard with regards to a transfer is payment for the consent so we have to in terms of your title deed you have to apply to the homeowners association to to provide consent from their side that they're happy for the transfer to take place this consent is usually payable by the by the purchaser and it's usually an amount of about 500 rand or 650 rand the higher amount payable is for the seller's account and that is your your your levies up to date and in some instances your homeowners association levies also up to dates you make two payments and some homeowners insist that you make the payment for annual fee so I've had a in in the recent past I've had a seller had to pay 28 000 rand in order to get a homeowners association clearance up to the end of November but the transfer will take place way sooner so you have to pay that but then you have to arrange for a refund to be paid to them on transfer I understand that they they might become anxious because in order to get that refund allocated to you within the next month or so just off the transfer is also another problem because they might be out of pocket for two to three months where they could have utilized that to pay for their next levy on the next property that they're purchasing but yes so with regards to homeowners associations and body corporates those are the two amounts that they're looking to have to pay and sometimes it's only two months in advance or or three months in advance but in most instances the homeowners association will be an annual fee in advance so it's quite a large amount but then otherwise it might be a levy just up to date up to transfer date if you can calculate the transfer date and you then only pay up to that date but then you also have to remember the other problem is that we request these uh consents from the homeowners and from the body corporates but that they're only valid most of the time for 30 days so the way that we've been operating in the deeds office and with the municipality being late etc it's been a very difficult task to know how far in advance I need to prepare to pay for this consent because they expire in months after months after months because we're not able to lodge in the deeds office or to have the matter registered timeously and you know I actually recently in contact just that to where uh where you know um clearance figures had expired so payment was made they'd expired we had to get new dates in uh and sort of new time frames and make another payment and luckily when everything got got resolved payments were made um by the time the matter came up for appropriate deeds office it so happened that on the day of registration the deeds office was was closed because of you know there was a COVID case so they had to decontaminate and it ended up only registering the following day and and I think I was quite fortunate in that the there weren't as many delays by the time the matter was ready to actually be lodged so a lot of the the you know pressure points were actually prior to that stage and by the time the matter was ready to lodge everything pretty much went smoothly you know except of course that one day when the deeds office was closed but of course all those delays could you know very easily sometimes even um lead to a person who had fond guarantees and maybe potentially um the bank no longer being able to extend the guarantees for you know a longer period because we also know that those also have their own time frame have you found any instances especially now during COVID because one of the things that I saw is we were outside of the sort of normal time frame and as far as some of the guarantees were concerned and but luckily really I want to say that the bank was understanding in terms of you know we're in COVID there have been certain delays when it comes to certain things and so there wasn't really pressure on the other side that um the you know the party's going to lose their bond but is that possibility because I think sometimes sellers don't quite get the magnitude of the delays I mean buyers note because they have an estate agent sitting on them in an attorney sitting on them and explaining all these different time frames and so they are very aware that if I don't pay this you know on time I might lose out and if you lose out too late in the game then you're also liable for all kinds of payments but the sellers don't don't get that kind of pressure right we don't pressure sellers in terms of these payments need to be made uh you know quickly because these are the potential repercussions do you get instances where uh there's a there's a delay from the seller side and and that delay really is due to finances that has even led to a deal ultimately falling through yes um I think in most cases that would be in developments so I've I've got a few developments where we are sitting with some uh some purchases that have to apply for bonds and due to the fact that the seller or the developers um documents aren't in order or they haven't received the required certificates that they need or you know for whatever reason the bank then comes back and says but we can't we can't provide your purchaser with with bond approval anymore you know the problem we start with in covid specifically um also is that we are um extending these applications to the bank that the purchasers applied for and they might have had their job up to august but then they lost their job or they're working for themselves and they don't earn a better income or they don't earn any income anymore and then you sit with the situation where the bank turns around and says well you know sorry but time has lapsed and we have to revisit your bond approval and see whether you now actually do it could be considered or can't so um we've had instances like that where the purchaser had to go back to the bank and say please I need pre-approval again and they've refused and that's a very sad situation but unfortunately it's also part of the bigger picture which is not just um you know the seller that didn't pay on time it's unfortunately all just one big bag of problems at this point of time in time in regards to the issues we're having with covid too. And you know Ezra I think wouldn't you even highlight that that never mind a deal potentially falling through because of covid and banks even being extra cautious when it comes to you know granting home loans and in the event where there are delays as you're highlighting they go and have the matter revisited to see if the person still qualifies and one of the things I've found is unfortunately and we've seen this pre-covid I think it's it's more pronounced right now where from the buy side you know people sometimes when particularly aware of some of the costs and when they you know sort of get through approved and as they find out what they need to be paying for it so if you're like me and you end up finding oh actually it's not just the transferring like ten years you must pay there's also a bond registration attorney that you need to pay and you need to make that payment in the event where you find you know out something like that as a buyer you tend to find that because they feel there are so many steps in to the transaction they didn't go and take out you know a personal loan or extend another credit facility that of course impacts their affordability and their home loan and we often say to buyers do not do that don't try don't take a new line of credit when you're getting ready to buy a home you don't want to you know jeopardize your chances of either getting the home loan getting it at the you know loan to value that you want and also getting it at the interest rate that you want so the repercussions are quite a lot and I'm sure then they've certainly been this is where because of the delays we're also then finding that some of the buyers had gone on and taken other lines of credit because it's just been so long right and that in the interim even though their job is still the same their income is still the same because the nature of their you know credit obligations have changed the amount that their bank is also comfortable sort of lending you know can change so previously the bank was very happy to grant you that 600k you know home loan they're going to pay for everything but you went and took oh you know took a personal loan or extended a credit card and now they're thinking actually maybe we can only you know do a 550 and of course 50 000 rand isn't just going to you know appear out of out of nowhere nobody a majority of us don't have that kind of money just lying around you know have you seen those instances because I think we're not realizing the effects of delays on on the transaction in its entirety right on the one hand we can see the buyers get affected in this way on the other hand sellers can be the reason or they can get affected in this way but from a holistic perspective there's so many things that can happen and due to the delays yes I think you know the one other aspect that the sellers don't take into account is they usually have a bond to be cancelled and if you cancel your bond in advance before the time that you actually supposed to pay it off then you pay a penalty fee and in most instances I think that sellers aren't aware of this and the moment that they try to cancel the bond that's when the bank comes back to them and says well pay for penalty fee and it's usually quite a bigger amount and that they they haven't prepared for that either so they think I'm selling my house for 100 000 rand my bond is 80 000 rand so I'll have enough left at the end of the day I've got 20 left but no in fact you have to deduct those amounts you have to deduct all the other like the conveyancing fees all the other fees you need to pay for and that I find that they are usually not aware of but also if you're going to if if your purchaser pays cash they can obviously either pay cash or they can pay with a bond so when they also apply for a bond we need to issue guarantees from their bond attorneys that are giving us the funds to settle that bond cancellation of the seller and when we do that generally your seller is also purchasing and also with a bond and we need to also pay off the second transfer bond so all these things happen simultaneously and I think what both sellers and purchasers don't understand is if these matters are financially linked you actually can't do much but wait and you'll have to have a lot of funds or cash available for these extra amounts that you have to pay in order for transfer to take place so this morning a good example I've got three transfers running together and the first one in the in that the first ITP that was signed they're almost done everything is finished in that matter I'm ready to lodge but it's reliant on the second transfer and the second transfer is reliant on the third one and the first one's rights clearance certificate is going to expire soon but we don't have rights clearance certificates issued for the second and the third one yet so now we're sitting in a situation where the poor first seller is waiting for his money everything is there everything's in place but it's reliant on the second and third transfers to go through before we get to a point where we can actually pay out and I think what these first time sellers don't understand is they think I've signed my OTP my house is on the market for 5.2 million I'm going to get my 5.2 million the moment that I sign my offer to purchase and that's unfortunately not how it works and in fact you're only going to get it on registration you're also not going to get it when the funds are paid into the trust account or when they've got bond approval so it's quite a long wait for sellers and I think that's also something that I need to take into account so I think the truth of it is also as a seller you need to not budget on the proceeds of you know the sale of your property coming in within a week or within a month because it's a fairly long process so if there's another financial obligation that you have and it could be something else you know it doesn't even have to be property you want to not rely on these funds as much as possible because as you say they don't get released immediately at all you know they after even after the registration you know transferring attorneys will reconcile the statement if all these different payments had been made and then you will get a okay this is now what you know is supposed to come to you or actually given all the other payments that had to be made as a seller you actually don't have any proceeds you know that come to you it pretty much just gets to zero so being aware of we'll call it the balance sheet the balancing act the financial balancing act that has to take place when you're selling your property is such an important thing as a seller especially if you're selling because you're in a financially difficult situation I think the big one is you know people who are looking to sell for downscaling purposes and aren't aware and I'm so glad that you actually brought up the you know the bond cancellation and how you can get you know penalized by your bank I know there's certain banks that have waived that amount I mean the penalty during this period others are still going to penalize if you don't give them sufficient notice and and it's such an important thing to bear in mind because if you're downgrading because you're in a financially difficult situation or perhaps you're looking at I'm going to sell so I can rent for a little bit and suppose for example you had taken the payment holidays that the banks offered last year and so your interest essentially kept piling on so you had the payment holiday for you could have taken it for three months or extended period of six months but because the interest kept you know sort of piling on you don't realize by the time that you now want to sell how much that effectively cost you so it really is important that you get a really good grasp of your finances as a seller especially if you are relying on getting money from you know your bond facility when you or rather when you sell that particular property because you may just find that it's less than what you anticipated if at all or you may find that you have to make additional payments because you went and took you know payment holidays it was still the relatively early stages of your home loan so you hadn't chipped away in terms of the payment maybe you also hadn't put down a deposit so all these different factors and certainly do come to play the one cost is really that I know sometimes and you mentioned it earlier on is of course the bond cancellation of trainees as well I mean you had mentioned how sellers can sometimes sort of work around it with some bond registration bond cancellation attorneys rather you know taking their money from the proceeds later on but you will also find in that way they can see that this isn't one of those instances where there'll be a lot of funds sort of live behind they may just say that actually what their payment upfront and so you need to pay in into the trust account and and that's a cost that I know so many people especially at first time seller you just wouldn't know I mean the matter fact that we learn when we're buying a property that there's a bond registration attorney you probably will forget about it and don't think there's also going to be a bond cancellation attorney yes I think you know the biggest surprise to me is sometimes people will stay less specifically think that if their bond is paid up and it's zero then the bond is done and it's cancelled and they've got nothing to do with it anymore but it's not physically cancelled in the deeds office and so any exactly in this matter that I'm busy with at the moment it's the same thing this woman thought that her bond was cancelled everything was done she's not paying an off anymore there's nothing to be done but there's a cancellation fee to the attorney's payable which I can completely understand comes out of the blue and you do not accept it and you don't like it but it is what it is so that's that's the one the other thing the other expense but that's for the purchaser but also you know it also it might fall before a seller that's purchasing another property if you pay your bond your bond attorneys those fees are much higher than the bond cancellation fees and in fact that it's on a scale and the scale is almost exactly the same amount that you pay for the transfer fees so you in for basically double transfer fees if you pay for your bond attorneys and you pay for the transfer attorneys and you pay for a bond cancellation for where you're selling so there are a lot of costs and I must say from my side what I'd like to get across to the to the listeners is just to say that perhaps it's a good idea that when you sign your OTP that either your agent or the attorney that you're appointing they can work out I mean it's not it's not exact signs at that point in time but we can basically provide you with a with a reconciliation account of what you might be in for because you know bother fact that there might be problems with your plumbing at home and you have a lot of repairs to be done or electricity issues etc we know your bond cancellation will basically be in the region of 4500 round we know that your compliance certificates if there's nothing wrong is 750 round each so those kind of expenses we can give you upfront so that you know what you might be in for your bond cancellation figure takes a bit of time to get from the bank and to get from those attorneys but at least we know what you're in for with regards to the cost of the bond cancellation fees and then you know we so that would be my suggestion to your sellers is to say to them we can provide you with some sort of a reconciliation upfront that you that you it's better and well equipped in order to to navigate this process going forward and I think that's a great place to leave it at is really that really you want to have a good sense as a seller of what you're up for at the beginning and you're able to ask your your transferring attorney for a a good roadmap and a financial roadmap of what lies ahead so you can best prepare and and I think if anything if you're going to be looking at selling right now just based on this episode alone you already have a sense that there are things that you need to be budgeting for and especially if for example you might be in a race with the rates or your levies it's not going to sell without those being paid off and this of course you're going to want your property to go in auction which is a completely different bull game altogether but if you're sort of doing the conventional sale those are figures that you're going to have to make sure uh you know adequately paid for and cleared and so that by the time you get a buyer the process is as smooth as possible so make sure you plan we talk about you know buyers being able to budget and adequately plan for the buying process as the seller get your ducks in a row you know from your financial ducks in a row and so all the paperwork that you're going to need selling also has its own set of paperwork and that you need to you know to get ready contact your bank and just give notice so even if you end up you know not selling just give notice I think one of the nice things it's it's logged in the system doesn't negatively affect you in any way and they'll send you an email saying that you know this notice was put into this bond facility and it expires after 90 days um or it's valid for you know that period and in the event where you end up not selling it's fine but rather do that the moment you think of of selling before the ad even goes up just do that already preemptively I think that would be my big tip from you know from an admin perspective uh in addition to what Izri has shared with us this evening well Izri it's been such a pleasure to have you on the show thank you so much for joining us it's always great uh to speak to you thank you very much it was a wonderful experience and good luck to all that still is out there absolutely and that is Izri Mareh who's a partner at Mareh Pustiti at Attorney's Wrapping up the Thursday edition of the Private Property Particles with my son Osama and don't walk with Malo I know we're pre-recorded but we're going to keep the conversation going on our social media pages so do comment down here below for the sellers you know did you have any financial surprises when you were selling your property that you were not aware of prior to walking down that selling journey do share with us down here below well that's a wrap from me I'll be back on your screens tomorrow evening I'll be live tomorrow at 7 p.m. until then hoping you're staying home and staying safe