2014 May 24 - Avoiding Bond Cancellation Penalties
of the most common financial surprises sellers encounter is the concept
of bond cancellation fees'" says Colin Fibiger, CEO of Property
Network, "but these can largely be avoided."
When one sells a home and has
an existing bond, this bond has to be cancelled and there are fees
connected with this. Firstly the bank will charge a cancellation fee
and secondly a penalty for early cancellation.
the reason that homeowners are shocked by this surprise fee on their
account is that in the normal course of business, clients are
accustomed to receiving a discount for early settlement and being
penalised is the last thing they expected," says Fibiger.
The standard cancellation fee is normally just under R1000 and varies
from bank to bank. This is to all intents and purposes an
administrative fee which covers the costs of cancelling the bond at the
deeds office and is unavoidable.
"Clients can however avoid early cancellation penalties by giving
sufficient notice to the bank," says Fibiger, "and most banks presently
will waive penalties if 90 days notice is given."
"A problem arises when a sale is taking place and the conveyancing
attorneys only advice the bank of the intent to settle and cancel once
the purchasers bond is approved," he says. "At this point in the
transaction, registration is probably going to take a maximum of
another 60 days leaving the seller 30 days short of the bank notice
requirement and therefore due for penalties."
Property Network advises all clients to give notice to their bank at
the time of signing the mandate and has a standard form which is uses
for this to assist their clients.
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