Peter and Maggie bought their pretty three-bedroom house nine months ago. It is their first-ever house and they just love it. But things started changing 6 months ago...
Peter and Maggie were able to get a 100% home loan plus transfer costs, because Peter earned a very good salary working for a large local company, while Maggie worked a half-day receptionist job at the local high school. Their credit record is exemplary, and the couple intends to keep it that way.
The house was not the biggest in the neighbourhood, but it was in good condition and had plenty of potential. It was the best property Peter and Maggie could afford to buy. They still have plans to add a second bathroom, but added a beautiful lapa-braai first, which they funded with Maggie's bank overdraft and credit card.
They paid off the short-term loans as soon as possible, because they knew that the interest on the short-term loans were much higher than the interest they paid on the mortgage loan. So they only paid the minimum monthly repayments on the mortgage loan.
How suddenly things turned sour! Six months ago, Peter's company decided to downsize. Peter lost his job, and being a middle-aged white guy with very specialised experience and training, he has not been able to find alternative employment yet.
They were able to pay the mortgage two more months after Peter became unemployed, but they have fallen behind on the payments now. Interest rates have increased dramatically. The bank has charged late payment penalties and is threatening to repossess the house.
The municipal rates and taxes are also overdue, because they had to pay the water and electricity, or go without. The money that would have gone to the rates and taxes were paid into the mortgage account.
Peter is a proud man. He knew that things had to take a turn for the better soon, so he delayed his visit to the bank, to inform them of his retrenchment. And now it is too late. He is not going to beg.
The couple know that they are in financial trouble. Their good credit reputation is about to be seriously damaged. The only remedy they can see is to sell their beloved house. They just want the problems to go away! The proceeds of the sale will have to settle the arrear rates and taxes, pay the deposit on a rental place and finance the move. At least they will still have their good credit - and no one can go without that!
Maggie contacts the real estate agent that sold their house. She comes to see the couple immediately. She listens to Peter and Maggie's story with empathy, and promises to conduct a comparative market analysis immediately.
But the news is not good. Even when taking into account the high end of the comparable sales in the area, Peter and Maggie won't be able to ask what they need to cover their debts. The market has turned. The market favours buyers now, and Peter and Maggie bought their house at the peak of the sellers market.
The couple was devastated. How could their investment in their future, their proud and joy, not have increased in value?!
The agent explained that the house did increase in value - it just didn't increase with enough to cover all the debts. Buyers who can afford to buy at that price have become few and far between, and Maggie and Peter need to sell fast - yesterday, if possible.
The agent did offer to list the house at the price they need, to "see what happens". But Peter figured that the agent's commission was the problem. If they could save the commission and keep it themselves, the house would be able to repay their debts without a problem.
He is sitting at home anyway, doing nothing. So, why shouldn't he use his time to sell the property privately?
Peter placed a classified advert in the for-sale section of the local newspaper's classified section and tied a big hand written sign to the front gate. The sign simply read "For Sale", with Peter's cell phone number in neat digits below.
The response was overwhelming! Peter fielded almost 50 calls on the first day. Most of them were from real estate agents, but at least he knew that his marketing campaign was working.
Every caller wanted to know how much they were asking for the house, so Peter told them - even the real estate agents. But he refused to give any of the real estate agents a mandate on the house. If they asked if they could bring a potential buyer to see the house, Peter agreed, but made it clear that his price is his price. The agent would have to get the buyer to pay commission, because he sure wasn't going to!
He did say that to the agents, but he couldn't remember if he said it to all of them. There were so many agents calling...
"No problem", most of the real estate agents had said. It is the buyer who pays the commission anyway, so Peter didn't have to worry. And Peter didn't. He knew that he didn't sign anything, so there couldn't possibly be any problems with real estate agents later.
The agents started bringing buyers. And the buyers liked what they saw: A neat, practical home with lots of potential. But the offers those agents brought to the table were terrible. They looked good at first sight, offering more than asking price, but when the agent's commission was taken into account, the offer would mean thousands less in Peter and Maggie's pockets!
Peter came to the clear and honest opinion that real estate agents are the scum of the earth. They are bloodsuckers that will bleed an unsuspecting seller dry! So he refused to allow any more real estate agents onto his property. And the strategy paid off.
There was a week or so when no one came to view the house. The end of the month was drawing near, once again, and another mortgage payment would become due soon. And then HE knocked on the door. It was a pleasant looking young man, whose wife saw the house a few weeks ago. She liked what she saw, but he was only able to steal a moment today, to come and have a look.
James was also impressed with the house. And without the real estate agents loading the price with their commissions, he felt that the price was reasonable. He arranged to bring Sarah again that evening, to have another look at the property.
Peter could barely resist jumping with joy! He quickly phoned Maggie to share the news, but cautioned her not to count the chickens yet.
James and Sarah arrived on time. They carefully looked at every nook and cranny of the house, before asking Peter and Maggie if they cold discuss something around the dining room table. Peter knew what that "something" was, so he steeled himself and asked Maggie to pour some coffee.
James did most of the talking, after Peter once again stressed that his price is his price. James said that he respected that. But explained that they could only offer to buy the house at R10 000 less than asking price.
Peter did not want to lose his buyer - his ticket out of financial ruin - so he suggested they split the difference. James reluctantly agreed. But Peter and Maggie would have to move out of the house by the 15th of the next month, so that James and Sarah could take occupation. Peter reluctantly agreed, but insisted on a 10% deposit - to show the couple is serious about buying the house (and to fund Peter and Maggie's move).
Agreement at last. James and Sarah's attorneys would draw up the paper work. And everyone signed the contract of sale the next evening.
Peter and Maggie had solved their problems! Or they would have, if it weren't for that bloody real estate agent!
The transfer of ownership was about to be registered at the deeds office. Peter and Maggie were already settled in their new rental flat. Peter had found a job, albeit a low paying one. The bank was happy that they would get their money soon. James and Sarah were putting the finishing touches on the new bathroom they added to the house. And then the conveyancer's letter arrived...
They had received a commission claim form a real estate agent Peter had never even heard of. He claims to have been the cause of the sale. And the guy is asking for 8% of the purchase price!
Apparently James and Sarah approached him when they started looking for a house. The agent had arranged for mortgage pre-approval and also introduced Sarah to Peter and Maggie's house.
"Not my problem!" was Peter's response. "I never signed a mandate!"
James's attorney explained that Peter did, in fact, grant the agent an oral mandate to find a purchaser. The fact that the agreement of sale does not make mention of the agent's commission makes no difference. Peter and Maggie were liable to pay their agent. And no, James and Sarah were not responsible for paying the agent, because the agent had a mandate from the sellers - Peter and Maggie!
Peter and Maggie did not have the money to get into a legal battle with "their" agent. So they met with him and were able to negotiate a better commission. The agent was willing to accept 3%. But that still left the couple with a big shortfall for repaying the mortgage bond.
The transaction was about to fall through. Peter and Maggie would have to take possession of the house again, owing James and Sarah a stack of money for the home improvements they had made and the deposit they had already spent. And they would not be able to pay the monthly repayments on the house! Peter and Maggie would be back at square one!
The transferring attorney stepped in. She knew that she had to protect her client's interests. James and Sarah wanted to own the house. And Peter and Maggie had signed her power of attorney, which allowed her to act on their behalf, in any way required to transfer ownership of the property. So, she negotiated with Peter and Maggie's mortgage holder to give Peter and Maggie a personal loan for the balance of the mortgage.
Peter and Maggie were not thrilled. Peter had been so upset by the "bloody agent" that he would have been happy to let the sale fall through - as long as the agent didn't get paid a blue dime. But they accepted the personal loan - after the attorney pointed out that they would be in breach of contract if they didn't.
The house was transferred into James and Sarah's name. They are happy in their new home. And Sarah is expecting her first child in June.
Peter and Maggie are still making payments on their personal loan. If everything goes according to plan, they will have repaid everything by Christmas next year.
At least they still have a good credit record...
nafi
Real Estate Information