How to check a buyer's bond pre-approval in South Africa

When you sell privately, nobody checks the buyer's finances for you. If you accept an offer from someone who can't get a home loan, your property sits off the market for weeks while the sale falls apart. A few checks before you sign can save you that time.

Pre-qualification, pre-approval and bond approval

Buyers often wave a letter at you and call it "approval". There are three different things, and only the last one is a real loan:

• Pre-qualification is an estimate of what the buyer could afford, based on what they told a bank or bond originator. Usually nobody has checked their credit record or payslips. Treat it as a rough guide only.
• Pre-approval (also called a pre-approval certificate) means a bank or bond originator has checked the buyer's credit record, income and expenses, and says they're likely to get a loan up to a certain amount. This is much stronger, but still not a loan.
• Bond approval (a bond grant) comes after the buyer has signed your offer to purchase. The bank values your property, checks the buyer again, and only then approves the loan for this specific purchase.

Even a buyer with a real pre-approval can be turned down at the final stage. The bank might value your property lower than the price, or the buyer's situation might change.

What to ask for

Before you accept an offer from a buyer who needs a bond, ask for:

• Their pre-approval certificate or letter.
• How much deposit they have, and where it is.
• Whether they need to sell another property first.

How to check the letter is real

Fake pre-approval letters exist. Check:

• The name matches the buyer's ID document.
• The amount covers your asking price, minus any deposit the buyer says they have. Remember the buyer also needs cash for transfer and bond costs.
• The date. Pre-approvals only last a limited time, often about three months. An old letter may no longer reflect the buyer's position.
• The issuer. Look up the bank's or bond originator's phone number yourself, on their official website. Don't use the number printed on the letter. Call and ask them to confirm the reference number.

The bank or originator can only discuss the buyer with the buyer's permission. Ask the buyer for written consent before you call, or ask the buyer to set up a three-way call.

Cash buyers

If the buyer says they're paying cash, ask for proof of funds: a recent bank statement or a letter from their bank. Before transfer, their attorney will need to issue a guarantee for the full price, so the money has to be real and available.

Protect yourself in the offer to purchase

Most offers from bond buyers include a bond condition: the sale only goes ahead if the buyer gets a bond for a set amount by a set date. Make sure your offer to purchase:

• Names the bond amount, so the buyer can't claim they wanted a bigger loan.
• Gives a short deadline, such as 21 to 30 days, after which the sale lapses if the bond isn't approved.
• Says what happens to the deposit if the buyer pulls out for other reasons.

Be careful with offers that depend on the buyer selling another property first. If their sale fails, yours fails too. If you accept one, add a deadline and a clause that lets you keep marketing your property and accept a better offer.

Your conveyancing attorney can check the offer to purchase before you sign. It's much cheaper to fix a clause now than to deal with a failed sale later.

After you accept

Once the bond is approved, the buyer's bank issues a guarantee to your transfer attorney for the loan amount. Transfer can then go ahead. Until that guarantee is in place, keep your paperwork ready, but don't make plans that depend on the sale going through.

For the full selling process, read our guide "How to sell your property privately in South Africa". You can list your property on LetDirect for a once-off fee. During our limited launch promo, listing is free: rent R0 (normally R99) and sell R0 (normally R199).