An instalment sale agreement is an agreement between a buyer and a seller about the purchase conditions of a property. This type of agreement mandates that the seller needs to be paid in full within 5 years but not before at least 1 year has passed. It creates a more direct relationship between the buyer and the seller as opposed to a relationship between the buyer and a lending institution. This is because the buyer does not necessarily need a homeloan from the beginning.
The instalment sale needs to be registered against the title deeds of the property before the seller can receive any money. The registration is done by a conveyancing attorney and is paid for by the buyer, registration should be complete within a few weeks.
At the end of the agreed upon repayment period if the buyer does not pay the remaining outstanding balance in full or if he /she misses a payment he will lose all the money he has already paid and the seller will regain possession of the property. This puts the buyer in a vulnerable position and they should ensure they keep up with their payments and make provision for the final payment. The monthly repayments should not be less than the minimum bond payment the seller needs to pay.
Here or a few reasons why an instalment sale may work for you:
- The property will stay in the sellers name until it is fully paid off, and if the buyer misses a payment the the property will once again revert to the seller.
- Depending on how the buyer is financing the payment of the property it could speed up the process. He may decide to pay cash or take out a loan of some sort.
Be comfortable with the person you enter into an installment sale with as you will waste alot of time if it is someone who simply cannot afford to pay the instalments. Many buyers can afford the repayments but get declined a homeloan for other reasons, because of this an instalment sale would be attractive to some people looking to buy a home.
Yes2Property answers all questions to the best of our ability but you should always seek professional legal advice when necessary.