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