There’s nothing to pour cold water on the excitement of a successful house sale quite like the realization that the buyer isn’t going to get a bond from the bank.
Is the sale stone dead? Is it back to square one for both seller and buyer? Or is there perhaps some way of saving the sale?
We discuss the option of a “kustingsbrief” or “seller’s bond”. What is it? Could it help you? What are its advantages and disadvantages?
Read on for some insights…
“A kustingbrief … has long been recognised as a superior front-ranking form of security.” (Extract from judgment referred to in the article)
You accept a great offer on your property, the sale agreement is signed and the buyer pays the deposit. You put the champagne on ice. But before you can pop it open, the buyer’s bond applications are rejected by every bank. Your sale is about to die. Is there anything you can do to rescue it?
The “kissing letter” option
A kustingsbrief (literally “kissing letter”) has its origins in old Dutch law and refers to a type of mortgage bond – a “purchase money mortgage bond” – registered in favour of a person or institution to secure the balance of the purchase price (or the full purchase price if no deposit is paid).
Many “bank bonds” and other third-party loans will fall into that definition, but in this article we’ll use the term only to refer to a bond in favour of the seller. For example, a buyer pays a R400,000 deposit on a R4m sale. The buyer can’t get a bank loan so the seller agrees to let the buyer take transfer in return for a bond in favour of the seller for the R3.6m purchase price balance. The buyer then takes transfer and pays off the bond in the same way that a bank bond would work, except of course that all payments go to the seller.
Have a look at the advantages and disadvantages of the concept below before considering this option.
All that said, in the right circumstances this option could be the saving of a great sale. It goes without saying that full advice specific to the circumstances is absolutely essential here.
For any assistance or guidance please contact our Conveyancing department.
This article is for general information purposes and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us At DKVG Attorneys for specific and detailed advice.