Understanding the Transfer & Registration Process
While sales can be lined up during the lockdown period through virtual showings and online communications, no deals can be finalised until the Deeds Office reopens after the lockdown has been lifted.
To understand why this is, it could be helpful to know what happens during the transfer and registration process when buying or selling a home. Covering the basics, RE/MAX of Southern Africa provides the below outline of what happens during this process:
- OTP and home loan application
The first step in the process happens when the buyer signs an offer to purchase (OTP) and applies for a home loan. In South Africa, digital signatures are not yet accepted, and these documents will need to be signed in ink. Once the buyer has been approved for the home loan, the seller’s real estate agent sends the sale agreement to the transferring attorney. The seller usually appoints the transfer attorneys (who normally come recommended by the seller’s real estate professional).
- Bond registration process for the buyer
If the buyer is purchasing the property with aid of a bond, then a bond attorney will be appointed as well. The bond financer will appoint the buyers bond attorney, who will contact the buyer once they have received the instruction to attend to the registration of the bond. At this point in the process, the buyer will need to sign bond registration documents with the bond attorney. The bond attorneys will provide the buyer with a statement of accounts for the registration of the bond.
Note: The bond process and the transfer process run concurrently and independently. So, at the same time, the attorneys are doing their respective processes to help both the buyer and the seller complete their necessary steps.
- Transfer costs
The buyer will have to pay transfer costs, which includes transfer duty if it is payable. Transfer duty is tax buyers pay to SARS over and above the purchase price based on the value of the property (visit the SARS website to find a full breakdown of these costs). In the initial stages of the transfer process, you will receive a proforma account with the estimated costs until the actual costs are available. These costs may vary as a portion of the costs are determined by the registration date. Costs that will be on the pro forma account include property transfer costs, deeds office fees, post and petties, FICA, and other fees. You can get an online estimated calculation of these costs beforehand by visiting the BetterBond website. The proforma statement will be provided to the buyer when they meet with the transfer attorney to sign their transfer documents.
- Acquiring a Rates Clearance Certificate
The transferring attorney will also need to request a Rates Clearance Certificate, which is proof that all the outstanding debt on the property’s rates and taxes has been paid, from the local authority (most of whom are closed during the lockdown or are operating on essential services only). This is necessary because the transfer of a property can only take place once these costs have been settled and the certificate has been issued. The seller may need to pay a few months rates in advance to obtain the certificate. The Rates Clearance Certificate is valid for 60 days.
- Cancelling the seller’s existing home loan
If the seller has an existing bond, which is usually the case, the attorney will need to contact the seller’s bank and request the original title deed and cancellation figures. The cancellation figures consist of the outstanding home loan balance, one month’s instalment, monthly service fees, early termination charges, and other figures, which vary depending on personal circumstances. The cancellation attorney, who is appointed by the existing bondholder (i.e. the bank through which you took out your home loan), will then acquire the title deed so that the next step in the transfer process can take place.
- Signing the required documentation
The buyer and seller will both be required to meet the transfer attorney to sign their respective transfer documents, as explained above. If the buyer is taking out a bond, then he/she will be required to meet the bond attorney to sign the bond registration documents. When meeting either of these attorneys, it is imperative to bring the necessary FICA compliant documentation to the consultation. These documents include proof of address (not older than three months), your original identity document, income tax number and marriage certificate if applicable.
- Registration at the Deeds Office process
Once all the paperwork is signed and payments have been made, the cancellation, transfer and bond attorney work together to ensure that all the documents are lodged simultaneously at the Deeds Office. In the Deeds Office, there are three levels of examination that the documents must go through before transfer of the property, cancellation of the existing bond and registration of the new bond can be registered. This process usually takes 10 to 15 working days. Once the documents have gone through all three levels of examination successfully, the attorneys will receive notification that the process can continue to registration. Once registered, the buyer will finally be the owner of the home and the seller will be paid the net proceeds. The transferring attorney will send the original title deed to the buyer’s bank. If, however, the buyer doesn’t have a bond, the title deed will be sent directly to the buyer.
“Once everything is fully operational again after the lockdown has been lifted, a real estate professional will be able to guide you through this process. However, having a basic understanding will help you feel less stressed and more prepared as you work through the various steps involved,” concludes Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.