Real Estate Investor Magazine South Africa March 2014 | Page 19

UPFRONT kind of credit, to rent a property and even to get a job. An installment sale agreement – even if it only entails taking over the seller’s bond repayments – is infinitely better than a property repossession for any distressed seller. There are also other motivated sellers, such as those who need to relocate for work purposes or those who are selling due to death of a spouse or a divorce. These sellers will also find an installment sale attractive, because their main priority is to conclude the deal swiftly and with certainty, so they can move on with their plans and new lives. If there is no bond on a proper t y, for example, an elderly couple who a re downscaling to free themselves from the cost and hassle involved in owning a property, an installment sale is also an attractive solution. They will receive a g uaranteed monthly income, including healthy interest if this is negotiated, for five years to supplement their pension. It is certainly a better option than selling the property for cash and investing the cash in traditional investment vehicles where it will be decimated by investment fees and dismal returns, and at significant risk in a volatile market. Remember, if there is a bond to be settled, the seller will not see the money that will go towards settling the bond anyway, as it is paid directly to the bank by the conveyancers. So, whether the buyer is settling the outstanding bond amount via a lump sum borrowed at an exorbitant interest rate from a bank, or via monthly installments through an ALA agreement, it does not affect the seller’s cash flow position. Remember that in all these examples, the seller is also well protected by the ALA contract and has solid security. If the buyer does not make the required payments, the buyer forfeits all payments made and the seller still owns the property, along with any capital growth on the property and benefiting from the reduced bond on the property. The property can then be occupi