Find out where the buyer’s cash is stashed

Tough times and credit restrictions have made “cash” buyers the flavour of the year in the residential property market, but before they sign offers made by such buyers, home sellers and their agents need to find out where the “cash” will actually be coming from.
“There are obviously very few people going around with briefcases full of banknotes,” says Aida National Franchises CEO Young Carr, “and sale agreements need to be drawn up to take account of the time it will take for buyers to access their money in order to pay for the property and any additional costs such as transfer duty and legal fees.        
One possibility, he says, is that the buyer has the full amount of cash required in a bank account and would be able to furnish bankers' guarantees or pay it into a trust account immediately. If this is the case, and the home seller has no mortgage bond to be cancelled, the sale agreement can provide that guarantees will be furnished within, say, 72 hours.
“If the seller does have a bond, however, time will have to be allowed for the transfer attorney to obtain cancellation figures from the bondholder – and the sale agreement can then provide for guarantees to be furnished within three days of the buyer being asked to do so by the conveyancer.”
Another possible scenario, says Carr, is that the buyer's cash is tied up in a notice or fixed deposit account and cannot be withdrawn immediately without incurring a penalty. The sale agreement should then provide for guarantees to be furnished when the funds become available – assuming that the notice period is acceptable to the seller.
“And finally, it may be that the buyer only has an expectation of cash because he has sold his own property and is in the process of transferring it to a new owner. In this case, the agent needs to point out the possibility that something could go wrong with this transaction and allow the buyer to decide whether he wants to make his offer to purchase conditional on the transfer actually being registered, or set a definite ‘guarantee date’ after the date on which he anticipates that the transfer will take place.”
It is also very important, he says, for sellers and agents to ensure that buyers have sufficient cash resources to cover the additional costs - such as transfer duty, bond registration and legal fees - that they will be required to pay in order for the transaction to succeed. “If a buyer does not make adequate provision for these costs, a ‘cash’ deal could in fact end up taking just as long or longer to conclude than one in which the buyer has to obtain a home loan.”
Issued by Aida National Franchises

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