One of the lessons that Rawson Developers’ eight person sales team has learned since setting up their own offices at 205 Main Road, Rondebosch is that a high percentage of potential property investors need counselling about the way in which banks operate and the procedures necessary to qualify for a loan.
“In broad terms,” says Trevor Weston-Green, Rawson Developers’ Property Development Analyst, “buyers are either too optimistic or too pessimistic about their chances of obtaining finance. However, the good news is that trained sales consultants and bond originators of the type a reputable developer will usually employ, can in a great many cases sort out those problems and show the buyer how to qualify for a loan. The message that we and other developers have, therefore, to get across to the public is ‘do not despair: come and talk to us. You may be surprised to find that the banks are far more willing to lend mortgage finance than the media have recently given the impression is the case’”.
In general, says Weston-Green, buyers tend to be over-optimistic about their chances of getting a 90% or even a 100% bond. In today’s bank loan conditions, he reminds us, only the borrower’s disposable income is taken into account – the size of his assets will not be considered at all, even though they may be substantial.
“One can, therefore, find that an affluent person hoping to buy for R1,8 million may be expected to put down a deposit of R500,000. This will seem ridiculously unfair to him – but that is simply because he has not carefully studied the conditions on which banks will lend money.”
However, adds Weston-Green, it is also true that banks do not all work on the same affordability criteria and conditions at all times. This could, for example, mean that an application declined by one bank will be accepted by a second, provided that the client places a deposit of 20 to 25% of the property value, while a third bank might very well be happy to give the desired 90% bond.
“It is in these instances,” says Weston-Green, “that a good bond originator can be so very helpful.”
Camille Fulford, a consultant from the Rawson Property Group’s bond origination division, Rawson Finance, is now stationed in the Rawson Developers’ sales office and is on hand at all times to help guide buyers in their bond applications – and, says Weston-Green, she has been achieving a success rate of above 70% (Rawson Finance itself, managed by Mike van Alphen, recently revealed that they have improved their success rate from 62 to 66% in the last quarter).
In today’s market, adds Weston-Green, there is a growing number of cash buyers able to pay the full sum required and keen to get the initial 6 to 8% rental yields that are standard on all Rawson Developers’ Southern Suburbs projects these days.
Often, however, he says, cash buyers are not aware that in addition to the obligatory 10% deposit which has to be paid within ten days of signing, the buyer also has to come up with a guarantee that the remainder of the sum owed will be paid on transfer. This, says Weston-Green, can be issued by a bank or an attorney, but increasingly he finds that Rawson clients are using the services of a firm known as Deposit Advantage.
This highly innovative firm, whose guarantees are backed by the Lombard Insurance Group, working closely with the Rawson Developers’ sales team, says Weston-Green, is able to give the guarantees required if the client has assets or the prospect of soon acquiring them. A client might, for example, be waiting for the sale of another property or he might have shares or fixed term investments which are not immediately available or which it might not suit him to liquidate at that point in time. Alternatively he might have capital in an access bond which at the moment he prefers not to draw on. In other cases he might be waiting for funds to become available through a pension fund or annuity pay-out. These are just some of the situations in which Deposit Advantage can assist.
“Deposit Advantage”, said Weston-Green, “has had no comebacks or failures on the Rawson clients to whom they have issued guarantees and this has been a big help to us in achieving good sales figures.”
