So you have put in a subject-to offer on a house – excitement reigns but for many a prospective buyer the offer to purchase is subject to various suspensive conditions. You could be waiting for bond approval (these days around 80% for of the purchase price), have to first sell the home in which you are still living, or you may need to sell another property in order to pay the purchase price. Enter the 72-hour clause (also known as the acceleration clause), deemed necessary for sellers in residential transactions where the sale of another property (the buyers) must first take place.

Nicola Faurie, Relationship Manager at Bridge Flow, says that that the majority of people who put in subject-to offers do so because they do not have the funds available for a cash offer, which often means that they will almost certainly lose the property to a purchaser who is able to put in a cash offer.

Should the agreement contain the 72-hour clause, in a nutshell the clause comes into operation as follows –

1. The seller receives a new unconditional / cash offer;
2. The seller gives the initial buyer 72 hours to find an alternate source of funds to give effect to the purchase;
3. If the initial buyer is unable to do so, the contract lapses and the seller proceeds with the unconditional offer which they have subsequently received.

The 72-hour clause gives the buyer the opportunity to come up with the funds from another source. But for many people who don’t realise that the 72-hour clause is even in the contract, let alone understand its full implications, when faced with finding alternative source of funds in a limited period, begin to panic in their desperation to find a way of fulfilling the contract conditions, often with little success, only to see their dream home slipping through their fingers.

Short of borrowing money from a family or friend, which isn’t a good idea, a better solution available to buyers who find themselves in this predicament is to apply for bridging finance. Most people do qualify for this type of assistance as they usually have an un-bonded home which they intend to sell for more than the home they intend to acquire. The bridging company will be required to register a bond over the buyers property to secure the bridging loan, which will then have to be repaid when the property is sold. Once the buyers loan is approved, the bridging company can either make payment of the required amount or issue a guarantee on the buyers behalf – effectively turning their offer into a cash offer and in doing so assist them with the 72-hour suspensive condition and, voila, the purchase is saved!

Nicola adds, “The benefits of using a bridging finance company are two-fold. Not only are you able to secure the purchase of your dream home, but the estate agent who negotiated the initial agreement of sales’ commission is also covered.”

The post What the 72-hour clause means for buyers appeared first on Bridgeflow.

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
• Levies
• 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, i.e. 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.

About Bridge Flow

Bridge Flow is a Cape Town-based bridging finance company that specialises in financial add-on benefits to attorneys, estate agents and their clients by providing immediate, short-term finance at competitive rates.

They provide finance to estate agents in respect of commissions earned, sellers’ advances for net sale proceeds and property- backed customizable finance.

Contact : Nicola Faurie 082 417 9513
: Iza Albutt 076 043 0486

The post The nuts and bolts of Bridging Finance appeared first on Bridgeflow.