"In broad terms," said 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 that 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, said 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, 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, added 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," said 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, said Weston-Green, she has been achieving a success rate of above 70% (Rawson Finance itself, managed by Mike van Alphen, recently revealed that it has improved its success rate from 62 to 66% in the last quarter).
In today's market, added 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 said, cash buyers are not aware that in addition to the obligatory 10% deposit, which has to be paid within 10 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, said 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 firm, whose guarantees are backed by the Lombard Insurance Group, working closely with the Rawson Developers' sales team, said 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 that 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 payout. 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."
