Anyone who has ever been in the unfortunate position of suddenly having to come up with the cash to pay a transfer attorney or the city council in order to buy or sell a property will be well aware of the option of bridging finance, but often property buyers and sellers are unsuspecting of additional costs that will be incurred when buying and selling a property. Bridging finance has been around for a while to assist property sellers to overcome these shortfalls, but many are unaware of this as a solution.
Nicola Faurie, relationship manager at Bridge Flow, a Cape Town-based bridging finance company, says that most property sellers are not aware of the additional costs involved. “Sometimes it’s a case of buyers being ill-informed and not realising the full meaning and extent of certain clauses in an offer to purchase. Sellers, too, on the other hand, are also often unaware that things such as rates and taxes must be settled before transfer can take place and are often caught unawares.”
Faurie explains that the bridging finance facility on a property transaction can be used to cover:
- Deposit on the purchase price of a new property
- Transfer duties
- Outstanding rates and taxes
- Moving costs
It is however not limited to the above and can utilised by the property seller for any purpose, for example to buy a car that is on special for a limited period of time.
Bridging finance is available only once the sale is secure, ie when the deposit has been paid, the bond approved and the balance of the purchase price has been secured via a bank guarantee. Buyers are able to apply for bridging finance once all of the above is in place and as long as they are selling an existing property. Once all the paperwork has been received and no problem issues are flagged, bridging finance companies are usually able to process and approve a loan within a few hours. In the case of Bridge Flow’s process, Iza Albutt says that if the credit committee has received the required paperwork before 2pm, they are able to do a real-time transfer of the funds on the same day.
What happens next?
Both buyer and seller are now in the hands of the deeds office as they await transfer of the property, which can take anything from two to eight weeks and sometimes longer if there are any complications. Once the property is transferred and registered, the bank releases the funds for the mortgage loan and the bridging finance debt is settled. This means that any bridging finance is short-term and settled in a lump sum.
Bridging finance has been very successful in the property market as a solution while funds are locked in a property deal. One wonders, then, why banks don’t offer similar solutions on property transactions.