The property profession in South Africa, needs to be reinvented.
It’s not going to happen with the new Bill, which is in my humble opinion ill-conceived, does not address the real problems, and appears to be the path to a massive crisis in the profession.
Let’s for a moment imagine that nothing exists and we can begin with a blank slate.
The first thing to understand is the property is the centre of it all, not the parties.
Control the pivot, which is the property, and you control the associated parties and the transaction itself.
Let’s consider a hypothetical example. A wants to sell A’s home. A approaches agent X, who is a registered estate agent. X sits with A and from X’s smartphone accesses the property hub and creates a unique transaction number, which is created by inputting the owner’s details and the property description. This hub would likely work on a blockchain type technology, for added security.
This creates a virtual file. In the file are the property details, owner details, ID number, SARS reference, and bond details. The system now automatically links to SARS, the financial institution holding the mortgage bond, FICA, the deeds office, and the central estate agent register.
The agent cannot open a file without being in good standing with the authority, nor could an intern, without the verification of a suitably qualified agent being present.
Once created, the mandate period, type of mandate, the commission agreed (with VAT if applicable), and all other details are captured. This is then sent to the seller’s phone or computer to be verified, along with owner’s login details to the file, granting the owner access to relevant information. The hub could also provide a message board for sending messages between the parties. If there are multiple agents this would help make sure they are all on the same page.
At this point, FICA information and KYC documents could be scanned an uploaded to the central hub. This would provide real-time verification and a more effective system for FICA. It would also make compliance easier for the majority of transactions, while more advanced KYC processes could be done at the office. Given cell phone cameras live photos of the parties could also be taken and uploaded.
At this stage, the agent and the buyer agree on whether or not the selling agent will ‘share’ on the transaction i.e. share commission if another agent brings a buyer. Once selected the selling agent is bound to their election and the terms of sharing i.e. 60:40 etc.
The seller is guided through disclosure of the defects on the property. This must take a similar form the way rental inspections are captures (room by room), the disclosure must also refer to elements like crime which has affected the home over the past 5 years, any developments in the area which may affect the property, any forms of nuisance (like loud neighbours etc). This disclosure form must be signed by the seller/s confirming the details. If any repairs have been undertaken the nature and extent of these must be captured along with copies of warranties etc being uploaded.
An agent would also have to capture their assessment of likely selling price.
Once the owner has authorised the transaction, either through electronic signature or through a written document (which would be uploaded), the agent may then begin marketing.
It could be required that no property portal may feature any listing which does not have a transaction key generated by the hub.
Now, along comes agent Y who has a buyer. She clicks on the advert and her buyer is preapproved and loves the property. Agent Y clicks on the hub link and sees the sharing arrangments on the property. If sharing is ticked and Agent Y is happy with the terms, Agent Y can click on the hub link and registers an interest in the property and a request to view, if not actioned by X the owner is advised that X is not sharing and will receive notification of the refusal. If sharing is ticked, but the selling agent refuses or neglects to assist they run the risk of cancellation of their mandate. This will prevent agents who tell their client that they share but in reality block buyers agents, even if it means losing the sale.
A buyer now appears who wants to put in an offer.
Firstly, they view the property and if they are qualified either through pre-approval, proof of funds, and/or a combination of these, they are forwarded a copy of the disclosure form, which they must sign, also confirming that they have viewed the property. At this stage, they will also need to view the title deed and request any clarifications from the transfer conveyancer.
If they elect to put in an offer, the offer is completed by the agent and if accepted by the seller, it is captured into the hub and the document uploaded.
At this point, a due diligence process needs to be initiated.
- The buyer needs to prove they are pre-approved and/or provide proof of funds;
- An expert needs to provide a declaration that they have obtained the approved plans (which are then uploaded into the hub), confirmed that the plans accord with what has been built and is in accordance with the approved usage, and finally that the erf’s extent is correct.
- A confirmation that the buyer has after being provided with the seller’s declaration viewed the property with the agent and found it to be in order;
- That the buyer has elected or elected not to use a property inspector;
- That plumbing and drainage certificate has been filed;
- That an electrical and borer beetle certificates have been or will be filed.
- A plant certificate has been filed.
At this point, after viewing and considering all the information, the buyer has 48 hours to confirm that they are proceeding with the transaction.
If the buyer agrees to proceed, the buyer can then through their transaction key, authorise a bond originator, financial institution or a combination of these to apply for their bond. The banks can use the hub to access information to which they are entitled.
As soon as a buyer accepts a quote, the other financial institutions access to the file is revoked.
If they elect to use a conveyancer other than the transferring conveyancer, they can add their conveyancer using their transaction key and they will also be granted relevant access.
The transfer conveyancer at this stage notifies the parties that the conveyancing process will now commence, pending the satisfaction of suspensive conditions.
At this point, the bank who holds the bond can instruct the cancellation attorneys and they will likewise get access through the on that bank’s transaction key.
The hub at this stage is populated with all the information needed by the various role players based on required access only basis. This means that information can be confirmed and its veracity triangulated with ease. This will also greatly assist when electronic registrations become a reality.
As the transaction progresses, the hub will also provide a log of events for information update purposes while providing a record of the transaction.
The hub will also capture financial aspects like for example say this is a shared deal the hub will know that the commission of R50,000 (plus VAT if applicable) is shared 60:40 so Super Real Estate (X’s agency which is VAT registered) will get R30,000 + R4,500 = R34,000, while Speedy Estates (who is not registered for VAT) gets R20,000.
The hub will not allow an estate agent who is not registered for VAT to receive VAT and will also ensure that the VAT number is the VAT number associated with that agency to eliminate VAT fraud.
Buyers and seller could also rate the service providers in a safe space.
Now comes an additional benefit of this system:
- All parties have access to updated verified information in real time;
- No rogue agent can practice because of the system tracking the funds;
- Fronting will be made incredibly difficult especially with phones now having biometric facilities;
- If the hub is correctly set up it will guide the parties through the process and ensure timeous compliance;
- Certain information once captured remains part of the property going forward. (Say a transaction collapses for whatever reason – the property inspectors report will be carried forward to the next transaction preventing a seller hiding defects.
- Compliance by agents will be made easier;
- SA could then produce brilliant stats on the profession, instead of what is occurring at present
- Agents can then draw stats such as valuation accuracy, actual time from the mandate to sale, client satisfaction, which could provide an objective record of an agent’s performance
A better system is possible but what we have and what the new Bill is proposing is not it.