What you need to know about the new banking regulations

Starting this month, the South African banking sector will be implementing major regulatory changes aimed at improving transparency, protecting consumers and strengthening the country's financial system against fraud and money laundering.

But while these reforms are broadly positive, home buyers and sellers should be aware that the new requirements may add time to the property sales process.

Among the key banking changes are:

Mandatory disclosure of fees, meaning that banks must not only clearly communicate all charges relating to any account they open, including home loan accounts, but also obtain written confirmation from the customer that these are understood.

Biometric (physical) verification of identity for all high value transactions, including many related to property.

Stricter background and affordability checks on credit or loan applications, which can be expected to slow approval timelines.

Previously, home loan approvals could be expected within two to five working days. Under the new regulations, this could stretch to as much as seven working days or even more and while this may seem minor, it has real implications for Offers to Purchase that include clauses that require the buyers to obtain bond approval within a certain time frame for the sale to proceed.

It could result, for example, in an offer becoming null and void because insufficient time was allowed for the buyer to meet this suspensive condition. This would then allow a seller to accept a different offer, leaving the original buyer out in the cold. 

Consequently, buyers now need to double check that their Offers to Purchase include realistic timeframes for bond approval, ideally with some leeway for delays and the new banking regulations are implemented.

At the same time, sellers should be aware that extended timelines do not necessarily indicate that the prospective buyer has financial problems but just reflect compliance with the new regulations.

Agents and legal advisors should meanwhile be prepared to help both parties adjust their expectations and ensure that suspensive conditions are drafted accordingly.

None of the changes are designed to hinder the property market; they are in fact intended to protect everyone involved. But awareness and preparation will be key to avoiding unnecessary heartache or financial disruption.

If you're considering buying or selling, now is the time to plan ahead. Allow a little more time, be clear on all conditions and work closely with your bank and real estate professionals to ensure a smooth process under the new framework.