The practice amongst estate agents of inflating the purchase price of a property so the Purchaser is able to access a higher bond/finance to include transfer and bond costs and even to finance the improvements he proposes to effect to the property is discussed in this article.
The purchase price is often inflated in an addendum concluded subsequent to the Offer to Purchase and this document is not presented to the bank granting the bond finance and compromising the bank’s loan to valuation policy in so doing. In other words the Seller and Purchaser agree … so that the true or real price is as per the addendum and not the Offer to Purchase. The Conveyancer who is prepared to take on a matter of this nature must realise that what he/she is doing is unethical and subject to harsh disciplinary action by the Law Society to which he/she is affiliated.
As a Nedbank panel attorney for bond registrations we have been informed that any panel attorney firm guilty of being involved in these types of practice will be removed from the panel with immediate effect. In a Bulletin dated 21st February 2013, addressed to Nedbank Conveyancers attending to their bond registrations, Mr Dawie Smuts in his capacity as Liaison Manager Gauteng & Inland Region stated in referring to collusive practices of Sellers and Purchasers increasing the purchase price of the property with the intent to circumvent Nedbanks current loan to value policies stated as follows:
“In some instances it was reported (to Nedbank) that estate agents, originator consultants and attorneys firms actively collaborate with buyers and sellers in this practice. Nedbank Home Loans views this as a fraud given the misrepresentation to the bank with significant potential risk and financial loss to the banks.”
In this circular to bond panel attorneys he cautions firm action will be taken against the legal firm involved including removal from their bond registration panel.
Several Banking institutions granting home loans require the Conveyancer attending to the bond registration to obtain a Certificate from the Conveyancing Attorney confirming the purchase price is correct as per the Offer to Purchase.