Guide to Understanding the Bank Loan Process When Selling Your Property

 

When selling your property and the buyer intends to pay through a bank loan, it’s important to understand the process. This guide will provide you with a comprehensive understanding of the bank loan process.

 

Bank Loan Process on the side of the Seller

1.Reservation Fee Payment: The buyer pays a reservation fee of 1%, which will be deducted from the total selling price.

               The reservation fee is a payment made by the buyer to secure their intent to purchase a property. Typically set at 1% of the total selling price, this fee is deducted from the total selling price, effectively reducing the buyer’s total payment for the property.

 

  1. Acceptance of Offer: The seller reviews and signs the Offer to Purchase or Contract to Sell.

               The acceptance of an offer to purchase or signing a Contract to Sell occurs when the seller reviews and agrees to the terms outlined in the Offer to Purchase or Contract to Sell submitted by the buyer. This agreement marks a significant step where both parties commit to the proposed terms and conditions of the sale, leading towards a legally binding contract.

 

  1. Submission of Documents: The seller submits the necessary forms, including ID with specimen signature, copy of property documents, and the signed offer to the bank.

               The submission of documents involves the seller providing essential paperwork to the bank. This includes their identification with a specimen signature, copies of property documents like the TCT, and the signed offer from the buyer. These documents are crucial for verifying ownership, facilitating bank financing if applicable, and progressing towards the completion of the property sale.

 

  1. Property Appraisal: The bank appraises the property. The seller must sign an authorization letter for this appraisal.

               Property appraisal involves the bank assessing the value of the property to determine its market worth. The seller is required to sign an authorization letter allowing the bank to conduct this appraisal. This step is crucial as it helps the bank evaluate the property’s value, which influences the loan amount they may offer to the buyer for the property purchase.

 

  1. Loan Processing: The bank begins processing the buyer’s loan application.

               Loan processing starts when the bank initiates the buyer’s loan application. This involves reviewing the buyer’s financial details, verifying information, and assessing the property’s eligibility as collateral. The process aims to determine the buyer’s creditworthiness and finalize the loan terms, facilitating the financing needed for the property purchase.

 

  1. Letter of Guarantee: Once the loan is approved, the bank issues a Letter of Guarantee (LOG), ensuring the seller will receive the approved loan amount from the buyer.

               Once a buyer’s loan application is approved, the bank issues a Letter of Guarantee (LOG) to the seller. This document assures the seller that they will receive the approved loan amount from the buyer, securing the financial aspect of the property transaction.

 

  1. Payment of Loan Difference: The buyer pays the seller the difference between the total selling price and the approved loan amount.

               Once the bank issues the Letter of Guarantee for the property purchase, the buyer settles the remaining balance to the seller, covering the difference between the total selling price and the approved loan amount. This payment finalizes the transaction, ensuring the seller receives the full agreed-upon price for the property.

 

  1. Deed of Absolute Sale: The seller signs the Deed of Absolute Sale to initiate the title transfer.

               The Deed of Absolute Sale is a document signed by the seller to formally transfer the title of the property to the buyer. This legal instrument initiates the process of transferring ownership rights from the seller to the buyer, marking a critical step in finalizing the property transaction.

 

  1. Title Transfer and CGT Payment: After the LOG is issued and the buyer pays the loan difference, the title transfer process begins. The buyer pays the Capital Gains Tax (CGT), which will be deducted from the total purchase price.

               After the issuance of the Letter of Guarantee (LOG) and the buyer’s payment of the loan difference, the title transfer process commences. As part of this process, the buyer settles the Capital Gains Tax (CGT), which is deducted from the total purchase price. Additionally, the seller must hand over the Original Transfer Certificate of Title (TCT) and other relevant documents to facilitate the transfer of title to the buyer. This series of actions ensures the legal transfer of ownership rights from the seller to the buyer.

 

  1. Submission to Bank: Once the title is transferred to the buyer’s name, the seller submits the new title to the bank.

               Once the title of the property is successfully transferred to the buyer’s name, the seller submits the new title to the bank. This step notifies the bank of the updated ownership details, ensuring that the property’s records align with the completed transaction between the buyer and the seller.

 

  1. Loan Take-Out: The bank processes the loan take-out proceeds in the name of the seller.

               Loan take-out refers to the process where the bank disburses the loan proceeds in the name of the seller.

 

  1. Release of Loan Proceeds: The bank releases the loan proceeds (the approved loan amount) directly to the seller.

               The release of loan proceeds refers to the bank’s action of disbursing the approved loan amount directly to the seller in a property transaction. This occurs after all contractual obligations and legal requirements have been met, ensuring the seller receives the funds agreed upon in the sale agreement.

 

Important Notes

– If the buyer’s loan application is not approved, the 1% reservation fee is forfeited in favor of  the seller.

The entire process typically takes around six months.