Learner Guide 2

Table of Content

Contents
Table of Content .......................................................................................................................... 2
Introduction .............................................................................................................................. 13
1. Introduction ................................................................................................................................ 13
2. About the Real Estate Qualification ............................................................................................ 13
2.1 Qualification Alignment ...................................................................................................... 14
2.2 Learner Support .................................................................................................................. 16
3. Assessment ................................................................................................................................. 16
3.1 Formative Assessment ........................................................................................................ 16
3.2 Summative Assessment ...................................................................................................... 16
Learning Map ............................................................................................................................. 18
Module 1: Marketing Strategy for a New Venture ....................................................................... 19
1. Introduction to Marketing Principles .......................................................................................... 20
1.1 Introduction to Real Estate Marketing ................................................................................ 20
1.1.1 The Foundation of Marketing ...................................................................................... 21
1. Activity: Marketing Concepts ...................................................................................... 23
1.1.2 The Market in Marketing............................................................................................. 23
2. Activity: Market Features ............................................................................................ 24
1.1.3 The Process of a Marketing Plan ................................................................................. 24
2. Background of the Marketing Plan ............................................................................................. 26
2.1 Business Review .................................................................................................................. 27
2.1.1. Target Market ......................................................................................................... 27
2.1.2 Business Scope ........................................................................................................ 28
3. Activity: Virtual Organisation Selection ....................................................................... 28
2.2 Product and Market Review ................................................................................................ 29
2.2.1 Pricing elements to consider: ...................................................................................... 30
2.2.2 Brand positioning ........................................................................................................ 30
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2.3 Target Market Effectors ...................................................................................................... 31

2.3.1 Target Market Effectors Elements ............................................................................... 31
2.3.2 Target Market Segmentation ...................................................................................... 32
4. Activity: Target Market Segmentation ........................................................................ 32
2.4 Product Attributes............................................................................................................... 33
5. Activity: Branding ........................................................................................................ 33
2.4.1 Product Life Cycle ........................................................................................................ 34
2.5. Problems and Opportunities ............................................................................................... 34
6. Activity: Problems in Real Estate business .................................................................. 36
3. The Marketing Plan ..................................................................................................................... 37
3.1 Sales Objectives .................................................................................................................. 37
3.1.1 Elements of Sales Objectives ....................................................................................... 38
3.2 Target Markets and Objectives ........................................................................................... 38
3.2.1 Target Market Segmentation ...................................................................................... 39
7. Activity: Target Market Identification (1) .................................................................... 39
3.2.2 Market Factors ............................................................................................................ 39
3.2.3 Marketing Objectives .................................................................................................. 40
8. Activity: Marketing Objectives .................................................................................... 41
3.3 Strategies ............................................................................................................................ 41
3.4 Communication Goals ......................................................................................................... 42
3.4.1 Determine Communication Goals ............................................................................... 42
3.4.2 Operationalize Communication Plan ........................................................................... 43
3.5 Marketing Mix Tools ........................................................................................................... 43
3.5.1 Product, Name and Packaging ..................................................................................... 45
3.5.2 Distribution ................................................................................................................. 45
3.5.3 Promotion ................................................................................................................... 46
9. Activity: Sales Strategy ................................................................................................ 47
3.5.4 Advertising .................................................................................................................. 48
10. Activity: Message Strategy ...................................................................................... 49
3.5.5 Merchandising............................................................................................................. 50
3.5.6 Public Relations ........................................................................................................... 50
3.5.7 Media .......................................................................................................................... 50

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11. Activity: Real Estate Marketing ............................................................................... 53

3.6 Budget, Payback Analysis, Calendar .................................................................................... 53
3.6.1 Marketing Plan Budget ................................................................................................ 53
3.6.2 Pay Back Analysis ........................................................................................................ 54
3.6.3 Marketing Calendar ..................................................................................................... 55
12. Activity: Marketing Plan .......................................................................................... 57
4. Marketing Execution ................................................................................................................... 58
4.1 Execution ............................................................................................................................ 58
4.2 Evaluation ........................................................................................................................... 58
13. Activity: Execution and Evaluation .......................................................................... 59
5. Developing a Business Plan ......................................................................................................... 60
5.1 Steps in Business Planning .................................................................................................. 60
5.1.1 Researching a Business Plan ........................................................................................ 62
14. Activity: Researching a Business Plan ...................................................................... 62
5.2 Planning and Preparing a Business Plan .............................................................................. 63
5.2.1 Vision........................................................................................................................... 63
5.2.2 Mission ........................................................................................................................ 65
15. Activity: Vision, Mission, Objectives ........................................................................ 65
5.2.3 Strategic Objectives ..................................................................................................... 66
16. Activity: Planning and Preparation .......................................................................... 67
5.3 Development of the Business Plan ...................................................................................... 68
5.3.1 Format of the Business Plan ........................................................................................ 70
5.3.2 The Operational Plan ................................................................................................... 70
5.3.3 The Financial Plan ........................................................................................................ 71
17. Activity: Developing a Business Plan ....................................................................... 72
5.4 Presentation and Update .................................................................................................... 72
18. Activity: Presenting a Business Plan ........................................................................ 73
5.5 Implementation .................................................................................................................. 73
5.6 Review................................................................................................................................. 73
19. Activity: Reviewing a Business Plan ......................................................................... 74
5.7 Business Plan Summary....................................................................................................... 74
20. Activity: Business Plan Areas ................................................................................... 75

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1 Self Assessment ...................................................................................................................... 77

2 Portfolio Activities ................................................................................................................... 77
Module 2: Sales and Marketing of Real Estate ............................................................................ 78
1. Introduction to the Sectional Titles Act ...................................................................................... 80
1.1 Summary of the Act ............................................................................................................ 81
1.1.1 The division of buildings into sections and common property .................................... 83
1.2 The procedure to open a Sectional Title Register ............................................................... 84
1.2.1 The rights and duties of the purchaser........................................................................ 85
1.2.2 The process of division into sections and common property ...................................... 86
1.2.3 ‘Off-plan’ sales as opposed to sales of existing units by a developer .......................... 86
1.2.4 Sectional Title sales by persons other than a developer ............................................. 87
1.2.5 Compulsory disclosures ............................................................................................... 87
1.3 Documentation and Certification Requirements ................................................................ 88
21. Activity: Submission Documents ............................................................................. 89
2. Market a Property ....................................................................................................................... 91
22. Activity: Marketing Elements .................................................................................. 91
2.1 The Product and Service Elements of Real Estate ............................................................... 93
2.2 Buyer behavior and profiling ............................................................................................... 94
23. Activity: Buyers Profile ............................................................................................ 95
2.3 Real Estate Marketing Process ............................................................................................ 95
2.3.1 Sourcing properties ..................................................................................................... 96
2.3.2 Advertising properties ................................................................................................. 98
24. Activity: Design a newspaper advertisement .......................................................... 99
2.3.3 Selling your properties ................................................................................................ 99
2.3.4 After sales service ..................................................................................................... 100
2.4 Show Houses ..................................................................................................................... 100
3. Selling a Property ...................................................................................................................... 103
3.1 The Selling Cycle ................................................................................................................ 103
3.1.1 The Purpose of Canvassing ........................................................................................ 104
3.1.2 Creating a Presentation Folder .................................................................................. 104
25. Activity: Presentation Folder ................................................................................. 105
3.1.3 Personalised Marketing ............................................................................................. 105

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3.1.4 Meeting People ......................................................................................................... 105

3.1.5 Saleable stock ............................................................................................................ 106
3.2 Qualifying the Buyer.......................................................................................................... 107
26. Activity: Qualifying the Buyer ................................................................................ 108
3.2.1 Negotiating with the Buyer ....................................................................................... 110
3.3 Organising Sales Teams ..................................................................................................... 111
3.3.1 Building Motivated Sales Teams................................................................................ 112
3.3.2 Compilation of Sales Teams ...................................................................................... 113
3.4 Listings Systems ................................................................................................................ 113
3.5 Value-Based and Cost-Based Pricing ................................................................................. 113
3.5.1 Property Value .......................................................................................................... 114
3.5.2 Factors that influence Property Values ..................................................................... 114
3.5.3 The Comparative Market Analysis CMA .................................................................... 115
3.6 Obtaining a Mandate ........................................................................................................ 116
27. Activity: Mandates ................................................................................................ 117
3.7 Making Offer to Purchase ................................................................................................. 118
3.7.1 The offer to purchase procedure .............................................................................. 118
3.7.2 Termination of the offer to purchase ........................................................................ 119
3.7.3 The cooling-off right .................................................................................................. 119
3.7.4 Defects and the voetstoots clause ............................................................................ 119
3.8 Negotiating and Closing the Sale ....................................................................................... 120
3.8.1 Negotiating techniques ............................................................................................. 121
3.8.2 The agreement of sale ............................................................................................... 121
3.8.3 Amendments and counter offers .............................................................................. 122
3.8.4 Contractual capacity .................................................................................................. 122
4. Letting and hiring properties .................................................................................................... 124
4.1 Legal and statutory requirements ..................................................................................... 125
4.1.1 The Rental Housing Act ............................................................................................. 125
4.1.2 The Matrimonial Property Act and the Immigration Act ........................................... 126
4.1.3 The Stamp Duties Act ................................................................................................ 126
4.1.4 The lessor’s obligations at Common Law .................................................................. 127
28. Activity: Legal Requirements ................................................................................. 128

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4.2 The Lease agreement ........................................................................................................ 128

4.3 Administering the Lease .................................................................................................... 129
29. Activity: 10 minute spot test: ................................................................................ 129
5. After-sale Service ...................................................................................................................... 131
5.1 Completion of relevant documentation ............................................................................ 131
5.1.1 Loan Application........................................................................................................ 132
5.2 Complying with Legal and Financial Obligations ............................................................... 134
5.2.1 The Deed of Sale ....................................................................................................... 135
5.2.2 Special Clauses and Addenda .................................................................................... 136
5.2.3 The Electrical Compliance Certificate ........................................................................ 136
30. Activity: Electricity Compliance ............................................................................. 138
5.2.4 Beetle Infestation Certificate .................................................................................... 138
5.3 Communication Management between Parties ............................................................... 138
5.3.1 Terms of the Mandate............................................................................................... 139
5.3.2 Representing the Mandator ...................................................................................... 139
5.3.3 Mandator’s Expectations .......................................................................................... 139
5.3.4 The Nature of the Remuneration Payable to the Estate Agent ................................. 139
Conclusion ........................................................................................................................................ 141
1 Self Assessment .................................................................................................................... 141
2 Portfolio Activities ................................................................................................................. 141
Module 3: Business Principles in Real Estate Transactions ......................................................... 142
1. Budget Principles ...................................................................................................................... 143
1.1 Budget Approach .............................................................................................................. 143
1.1.1 The Purpose of a Budget ........................................................................................... 143
1.1.2 Budget Rationale ....................................................................................................... 144
1.1.3 Budget Elements ....................................................................................................... 144
1.2 Developing the Budget Income / Expenditure Sheet ........................................................ 146
1.2.1 – Budget Pro formas ........................................................................................................ 146
1.2.2 Income and Expenditure ........................................................................................... 146
31. Group Activity: Budget Planning ........................................................................... 147
1.2.3 Budget calculations ................................................................................................... 148
32. Activity: Calculate ROI Percentage ........................................................................ 149

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2. Personal Financial Planning ...................................................................................................... 149

2.1 Personal Budgeting ........................................................................................................... 149
2.1.1 Cutting expenses ....................................................................................................... 150
2.1.2 Getting out of Debt ................................................................................................... 151
2.1.3 Insurance................................................................................................................... 151
33. Activity: Personal Financial Planning ..................................................................... 152
3. Taxation .................................................................................................................................... 153
3.1 Personal Tax in the Real Estate Environment .................................................................... 153
3.2 The Principles of Value Added Tax .................................................................................... 153
3.2.1 Taxable supplies ........................................................................................................ 154
34. Activity: Going Concerns ....................................................................................... 155
3.3 Capital Gains Tax ............................................................................................................... 156
3.3.1 Capital vs. Revenue ................................................................................................... 157
35. Activity: Capital Gains Tax ..................................................................................... 158
3.3.2 Base Cost of an Asset ................................................................................................ 159
3.3.3 Exclusions from Capital Gains Tax ............................................................................. 159
3.3.4 Inclusions in Capital Gains Tax................................................................................... 159
3.4 Transfer Duty Tax .............................................................................................................. 160
36. Activity: Transfer Duty Tax .................................................................................... 160
3.4.1 Value of property subject to Transfer Duty ........................................................... 161
3.4.2 Transfer Duty Streamlined ........................................................................................ 163
3.4.3 Practical Implications ................................................................................................ 163
Conclusion ........................................................................................................................................ 164
1 Self Assessment .................................................................................................................... 164
2 Portfolio Activities ................................................................................................................. 164
Module 4: Financial Advice in Real Estate ................................................................................. 165
1. Financial Viability ...................................................................................................................... 166
1.2. National Credit Act ............................................................................................................ 166
1.2.1 Pricing ....................................................................................................................... 167
1.2.2 Assisting Buyers applying for credit under the NCA .................................................. 167
37. Activity: National Credit Act .................................................................................. 168
1.2.3 Affect of NCA on home loan finance? ....................................................................... 168

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1.2.4 Over-indebtedness and reckless lending ................................................................... 169

1.2.5 Complaints ................................................................................................................ 169
1.3 Total Cost of Ownership .................................................................................................... 169
1.3.1 Transfer Duty ............................................................................................................ 170
1.4 Contractual Incidence ....................................................................................................... 171
1.4.1 Contract of sale ......................................................................................................... 171
1.4.2 Common Law ............................................................................................................ 172
1.4.3 Contract Clauses ........................................................................................................ 172
1.4.4 Resolutive Conditions ................................................................................................ 173
1.4.5 Suspensive Conditions............................................................................................... 173
1.4.6 Buying Off Plan .......................................................................................................... 173
38. Activity: Latent defects .......................................................................................... 175
1.5 72-hour Clause .................................................................................................................. 175
1.5.1 Contingency Protection ............................................................................................. 175
1.5.2 72 Hours to Perform .................................................................................................. 176
39. Activity: 72-hour clause ......................................................................................... 177
1.6 Financial Products and Providers ...................................................................................... 177
1.6.1 Banks ......................................................................................................................... 178
40. Activity: Financial Sources ..................................................................................... 178
1.6.2 Bond Originators ....................................................................................................... 179
1.6.3 Financing Commercial Real Estate ............................................................................ 180
41. Activity: ................................................................................................................. 181
42. Activity: Calculations (1) ........................................................................................ 181
43. Activity: Calculations (2) ........................................................................................ 182
Conclusion ........................................................................................................................................ 183
1 Self Assessment .................................................................................................................... 183
2 Portfolio Activities ................................................................................................................. 183
Module 5: Office Administration .............................................................................................. 184
1. Introduction to General Administration ................................................................................... 185
1.1 Administrative Quality Management ................................................................................ 185
1.2 Electronic Administration Management ........................................................................... 185
1.2.1 The share-drive ......................................................................................................... 186

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1.2.2 Setting up the structure of the Share-Drive .............................................................. 186

1.2.3 Share-drive Maintenance .......................................................................................... 187
1.2.4 Server levels: ............................................................................................................. 188
1.2.5 A typical Real Estate QMS Model .............................................................................. 189
44. Activity: Administration QMS Model ..................................................................... 189
1.3 Hard Copy Office Administration ...................................................................................... 190
45. Activity: Administrative Filing Plan ........................................................................ 191
1.3.1 Types of Administration Documents ......................................................................... 192
1.4 Access vs. Security............................................................................................................. 193
46. Activity: Access Diagram........................................................................................ 195
2. Office Stationary ................................................................................................................... 196
2.1 Stationary Stock Control ................................................................................................... 196
47. Activity: Office Stationary ...................................................................................... 198
2.1.1 Under-stocking of Stationary .................................................................................... 198
2.1.2 Overstocking of Stationary ........................................................................................ 198
2.1.3 Re-order Stock Level ................................................................................................. 199
2.1.4 Documentation ......................................................................................................... 199
48. Activity: Stationary Requisition Form .................................................................... 200
2.2 Control Measures for Individuals ...................................................................................... 202
2.2.1 Employment and human resources .......................................................................... 202
2.2.2 Performance Management ....................................................................................... 202
2.2.3 Office Communication .............................................................................................. 202
2.2.4 Conflict resolution ..................................................................................................... 202
2.2.5 The Agency and its people ........................................................................................ 203
Conclusion ........................................................................................................................................ 203
1 Self Assessment .................................................................................................................... 203
2 Portfolio Activities ................................................................................................................. 203
Module 6: Self Development in Real Estate............................................................................... 205
1. Introduction to Self Development ............................................................................................ 206
1.1 The Purpose of Self Management ..................................................................................... 208
1.1.1 The Principles of Self Management ........................................................................... 208
1.1.2 Scheduling of Activities ............................................................................................. 209

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49. Activity: Personal Goals ......................................................................................... 210

1.2 Setting Goals ..................................................................................................................... 210
1.2.1 Scheduling Goals ....................................................................................................... 211
50. Activity: Schedule Activities................................................................................... 212
1.3 Time Management Tools and Methods ............................................................................ 213
1.3.1 Time saving tools and methods ................................................................................. 214
2.1 Career Development ......................................................................................................... 215
2.1.1 Career Paths and Opportunities in Real Estate ......................................................... 215
2.1.2 Choosing a Career ..................................................................................................... 217
2.2 Trends in Real Estate Career Development ....................................................................... 219
2.2.1 Requirements for New Entrants ................................................................................ 220
2.2.2 Career Path Strategy ................................................................................................. 223
2.3 Roles of Various Institutions ............................................................................................. 224
2.3.1 Working with Different Structures ............................................................................ 225
2.3.2 Prescribed Qualifications........................................................................................... 225
Conclusion ........................................................................................................................................ 226
1 Self Assessment .................................................................................................................... 226
2 Portfolio Activities ................................................................................................................. 226

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Copy Right
This document was created for Services SETA on behalf of the Real Estate Chamber.

Services SETA holds copyright on this document and it may not be reproduced in any
form without permission. However, the SAQA qualification outline and the unit
standards are public property and Services SETA is the official certification body for
the real estate qualification.

Please contact Services SETA ETQA Department if you are in any doubt about what
may or may not be copied and/or reproduced.

This tool is only for use by registered assessors with the real estate qualification on
their registered assessment scope.

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Introduction
1. Introduction

Welcome to Learning Unit 3 of the Further Education and Training Certificate in Real Estate – this is
an NQF registered qualification (SAQA Reg. No 59097) Level 4. This Qualification is for any individual
who is, or wishes to be involved in the property and real estate industry, and it serves to support and
advance the functioning of individuals in this industry.

With effect 15 July 2008, as per Regulations 633 of the Estate Agency Act of 1976, all estate agents
must complete an NQF qualification to be able to write their Estate Agents Board Examination in
order to work as an Estate Agent in South Africa.

Learner Note:

The attainment of the Qualification represents the prerequisite for admission to the
professional examination for estate agents, to be conducted by the Estate Agency
Affairs Board, the successful completion of which will entitle the candidate to be
registered as a non-principal estate agent by the Estate Agency Affairs Board.

You have already completed Learning Unit 1 of this qualification – you are now ready to move on to
Learning Unit 2!

2. About the Real Estate Qualification

Based on the qualification description and requirements, the Real Estate Qualification will be divided
into 3 Learning Units with modular sub-divisions, based on the exit level outcomes and related
assessment criteria:

Real Estate
Qualification

The Real Estate Real Estate Real Estate

Platform Legislation Practice

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2.1 Qualification Alignment

The Real Estate qualification has three exit level outcomes with related assessment criteria that must be
achieved by the learner for certification against the Real Estate Qualification, as is indicated below:

Exit Level 1. Analyze, evaluate and 2. Demonstrate knowledge of 3. Perform the Real
Outcomes apply the Real Estate Code the Real Estate environment Estate function.
of Conduct and Ethics. and the various laws, rules and
regulations that impact on the
Real Estate function.
Assessment 1.1 The factors that 2.1 The various environments 3.1 The concept of self-
criteria influence the development that impact on the Real Estate development is explained
of a code of ethics are function are explained in in the context of the Real
described with examples. relation to how they impact the Estate environment and
1.2 The contents of the Real success of Real Estate the necessary self-
Estate Code of Conduct are transactions. development goals
explained with reference to 2.2 The various laws, rules, defined and implemented
own work context. regulations and Codes of in own work context.
1.3 The implications of the Conduct that affect Real Estate 3.2 The principles of
Real Estate Code of Conduct are explained with examples financial planning are
are explained in the context and in relation to matters of applied to the Real
of a Real Estate compliance. Estate function.
organization. 2.3 The money laundering 3.3 Business principles
1.4 The Code of Conduct is legislation and the implications are applied to Real
related to ethical values and in Real Estate transactions are Estate function.
standards within own explained with examples. 3.4 Property is marketed,
organization and by 2.4 A basic knowledge of FAIS sold and/or leased to
referring to ethical best (Financial Advisory and achieve personal
practices. Intermediary Services Act) is business targets.
1.5 The Real Estate Code of explained in relation to how it
Conduct and ethics is impacts on the Real Estate
applied in own work sector.
context.

Learner Note:

The modular structure illustrated above will contain a grouping of unit standards
that pertains to the exit level outcome and related assessment criteria. The following
table illustrates the unit standard alignment in the 3 Learning Units.

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Learning Unit 3: Real Estate Practice

Stream 1: Real Estate

ELO US Type NLRD US Title Level Credits

3. Perform the Market, sell and lease
Real Estate Core 246736 Level 4 20
property
function
Apply business principles
Core 246738 to the Real Estate Level 4 8
function
Advise role players on Real
Core 246734 Level 4 6
Estate financing options
Manage self-development
Core 246739 in a Real Estate Level 4 8
environment
Demonstrate knowledge and
understanding of a mortgage
Elective 13418 Level 4 6
bond as a form of debt
security
Demonstrate knowledge and
Elective 13420 understanding of the bond Level 4 6
registration process
Manage administration
Elective 110009 Level 4 4
records
Develop, implement and
Elective 114583 evaluate a marketing Level 4 8
strategy for a new venture

Stream 2: Specialization Valuation

ELO US Type NLRD US Title Level Credits
3. Perform the Market, sell and lease
Real Estate Core 246736 Level 4 20
property
function
Apply business principles
Core 246738 to the Real Estate Level 4 8
function
Advise role players on Real
Core 246734 Level 4 6
Estate financing options
Manage self-development
Core 246739 in a Real Estate Level 4 8
environment
Identify and co-ordinate
Elective 15059 facilities management Level 4 5
opportunities
Identify and apply property,
Elective 15089 asset and investment Level 4 5
management principles
Manage administration
Elective 110009 Level 4 4
records

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Develop, implement and

Elective 114583 evaluate a marketing Level 4 8
strategy for a new venture

2.2 Learner Support

Please remember that as the programme is outcomes based – this implies the following:

• You are responsible for your own learning – make sure you manage your study, practical,
workplace and portfolio time responsibly.
• Learning activities are learner driven – make sure you use the Learner Guide and Portfolio Guide
in the manner intended, and are familiar with the Portfolio requirements.
• The Facilitator is there to reasonably assist you during contact, practical and workplace time of
this programme – make sure that you have his/her contact details.

3. Assessment

Learning Outcomes

Please refer to the beginning of each module for the learning outcomes that will be
covered per module.

3.1 Formative Assessment

In each Learner Guide, several activities are spaced within the content to assist you in understanding
the material through application. Please make sure that you complete ALL activities in the Learner
Guide, whether it was done in class, or not!

3.2 Summative Assessment

You will be required to complete a Portfolio of Evidence for summative assessment purposes. A
portfolio is a collection of different types of evidence relating to the work being assessed. It can
include a variety of work samples.

The Portfolio Guide will assist you in identifying the portfolio and evidence requirements for final
assessment purposes. You will be required to complete Portfolio activities on your own time, using
real life projects in your workplace environment in preparing evidence towards your portfolio.

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Portfolio Activity:

DO NOT WAIT until the end – the programme is designed to assist you in evidence
preparation as you go along – make use of the opportunity!

Remember:

If it is not documented, it did not happen!

In some evidence, the process you followed is more important than actual outcome /
end-product.

Therefore …
Please make sure all steps for the Portfolio Activities are shown where required.

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Learning Map

Module 1: • Introduction to Marketing Principles

Marketing Strategy • Background of the Marketing Plan
for a New Venture • Target Market Effectors
• Product Awareness, Attributes and Life Cycle
• Sales Objectives
• Target Market and Objectives
• Marketing Strategies
• Communication Goals
• Marketing Mix Tools
• Budget, Payback Analysis, Calendar
• Marketing Execution
• Developing a Business Plan
Module 2: • Introduction to the Sectional Titles Act
Sales and Marketing • Market a Property
of Real Estate • Selling a Property
• Letting and Hiring Properties
• After-sale Service
Module 3: • Budget Principles
Business Principles • Personal Financial Planning
in Real Estate • Taxation
Transactions
Module 4: • Financial Viability
Financial Advice in • National Credit Act
Real Estate • Total Cost of Ownership
• Contractual Incidence
• 72-Hour Clause
• Financial Products and Providers
Module 5: • Administering the Office
Office • Confidential Information
Administration • Office Stationary
• Control Measures for Individuals
Module 6: • Introduction to Self Development
Self Development in • The Purpose of Self Development
Real Estate • Setting Goals
• Time Management Tools and Methods
• Career Development
• Roles of Various Institutions

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Module 1: Marketing Strategy for a New

Venture
Learning Outcomes

The following learning outcomes are covered in this module.

S/O Specific Outcome Learning Outcomes

No
1 Demonstrate knowledge Define the concepts product, price, place and promotion
of marketing concepts in terms of the marketing mix.
applicable to a new Explain key marketing concepts in terms of their
venture operation. implication for own venture.
Compare Marketing media in terms of their advantages
and disadvantages for effective marketing of products
and/or services of own venture.
Identify the target market and positioning of own venture
accurately.
2 Analyse the Sources of market information about similar products
product/service and/or services are identified with a view to identifying
requirements of the target the needs of a specific target market.
market of a new venture. Outline competition for the provision of products and/or
services in terms of the services, prices and promotions
offered by the business venture.
Assess external and environmental factors impacting on
consumer or customer behaviour for impact on marketing
decisions.
Assess the competitive advantages and disadvantages of
the product/service using a marketing analysis approach.
Identify changes to the product and/or service delivery
which would enhance the marketing of the new venture.
3 Demonstrate an Evaluate the different techniques and methodology used
understanding of the for market research and select one for own business
market research process research.
and interpret the findings Design a planned market research for own venture to
relevant to the new include all aspects of the marketing of products/services
venture. offered by the business venture.
Analyse other studies and published data on the market in
terms of own business.

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S/O Specific Outcome Learning Outcomes

No
Gather and interpret factual information and interpret it
in terms of own business, and formulate
recommendations using the factual information.
4 Develop and implement a Develop and implement a marketing plan to reflect
marketing plan for a new research findings and recommendations for own venture.
venture. Reflect a cost effective mix of marketing methods in the
plan, and design a process to monitor the marketing plan.
5 Evaluate and modify the Monitor the marketing plan for achieving the desired
marketing plan. outcomes and consider possible modifications to the plan.
Recognise the positive, negative and interesting facts of
the implementation of the plan with a view to making the
necessary amendments to the plan.

1. Introduction to Marketing Principles

The purpose of this module is to introduce you to the concept of marketing, and all its related,
interdependent concepts. The focus will be on understanding the principles of marketing as it
applies to your Real Estate New Venture, and to outline a clear process to follow in developing a
marketing plan for your organization.

• 1.1 of this module the focus will be on a broad introduction to

marketing,
• 1.2 establishes the background to the marketing plan.
• 1.3 establishes the elements of the Marketing Plan, and
• 1.4 looks at the actual implementation of the marketing plan.

1.1 Introduction to Real Estate Marketing

Marketing, in its narrowest sense, is seen as the art of selling and advertising. As a broader concept,
it is not so much the art of selling products as knowing what to provide to satisfy consumer needs.
The core concepts and nature of marketing, the marketing concept, marketing segmentation and
marketing strategy all contribute to a sound marketing plan that allows the organization to
operationalize the science of marketing in order to achieve sales. (Van Rensburg:160).

Learners Note:

Marketing is more than sales. Marketing is the set of activities used to:

1. Get your potential customer's attention

2. Motivate them to buy
3. Get them to actually buy
4. Get them to buy again (and again…)
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Tip:

Marketing is how you define your product, promote your product, distribute your
product, and maintain a relationship with your customers.

1.1.1 The Foundation of Marketing

The following tables provide a description of some of the basic concepts in marketing.

Concept 1: Needs
Every human has needs ranging from basics (food, clothes, shelter) to higher needs for
companionship and self-actualization. People use certain goods and services to satisfy needs.

Needs pre-date marketing

A need cannot be created through marketing, but it can be satisfied through marketing. Different
people satisfy their needs in different ways, depending on a range of variables.

Because people are complex beings, their needs are hardly ever simple – more often it contains a
combination of nuances that includes genuine need with perceived need and want.

Example Box:

As an example – a person may need to rent a house (genuine need), but has a
particular “taste” in different renting options due to complex factors due to
individual, social, geographic, religious influences (perceived need) and also have the
additional requirements based on location, pricing, status(want). The total sum of
these factors makes up the micro and macro “needs” of an individual / target group.

Tip:

The art of good marketing often lies in:

• pre-empting the need, thereby having the product available when the need
arises
• Identifying the need correctly in relation to the product
• or creating the perception of a need that will suit the product.

Concept 2: Products

Products satisfy needs, and therefore imply a “need-satisfying offer”.

Products may be goods (tangible, i.e. clothes, food, motorcars, houses) or services (intangible, i.e.
manner of offering the goods).

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Most products are a combination of both – when you go to a restaurant, the purpose is to satisfy a
variety of needs, through a combination of products (goods and services).

Self Reflection:

Identify your needs in going out to buy clothes, and the related products that your
favourite shopping mall offers in return.

Concept 3: Value, Exchange and Transaction

Exchange is the actual act of buying and selling – it is the way in which people are able to obtain
product, such as property that satisfy their needs. Exchange describes the act of obtaining a desired
product from someone by offering something in return – once agreement is reached on the terms of
exchange, a transaction takes place.

Value refers to the relative or perceived value that the product has because of factors such as
pricing, availability, quality, status.

Self Reflection:

The manner of transaction becomes part of the marketing strategy, as there are
certain needs attached to the terms of exchange.

Value is also closely linked to these.

How does your need in terms of exchange differ between obtaining a property to a
hamburger?

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1. Activity: Marketing Concepts

Your facilitator will divide you into pairs. With your partner do the following activity.

The purchase of a house is not simply a means of a roof over your head. Identify the
need-satisfying properties that a house has for different people – identify at least 3
“types” of consumers in your discussion of the concepts below, and compare in a
table.

Refer to:
• Need
• Product
• Exchange.

Notes:

1.1.2 The Market in Marketing

Many entrepreneurs (and organizations) are so excited about what their new gizmo or service can
do that they forget to assess its value to the customers. In the end, the business can succeed only if
enough people recognize that value and are willing to pay for it. The organization should begin by
asking customer and market questions, such as the following (Harvard:25):

1. How will it benefit the customer?

2. How many people stand to benefit? Size of the potential market?
3. Is the market stable or growing? If growing, at what annual rate?
4. What percentage of the total market could the product or service reasonably hope to
capture over the next year / few years?
5. Is another product or service from competition available to fill part of this demand? Features
of the product compared to competitors?
6. Are potential customers aware of their need for this product or service? Is the need latent or
undiscovered?

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2. Activity: Market Features

How can you reach the potential customers and make a transaction – directly,
through distributors or through retail stores?

Select one of the following products, and determine some of the market features by
using the questions above as a guideline:

• Exclusive herbal and natural food store

• Bed & Breakfast establishment
• Penthouse development

1. Customer size and benefits

2. Other products in competition

3. Product visibility / need / target market

1.1.3 The Process of a Marketing Plan

Ten steps to Marketing Planning

Step 2 Step 4
•Business •Problems and •Sales •Target Markets
Review Opportunities Objectives and Marketing
Objectives
Step 1 Step 3

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Product and Market

Scope Target Market Effectors
Review
•Company's Strenghts and •Company and product •Consumer / Business-to-
Weaknesses review Business targets
•Core competencies •Category and company •Product awareness and
•Marketing capabilities sales attributes
•Behaviour trends •Trial and retrial data
•Distribution
•Pricing

Step 6 Step 8
•Plan Strategies •Communicatio •Tarket •Budget
n Goals Marketing •Payback Analysis
Tool Mix •Calendar

Step 5 Step 7

Product and Market

Scope Target Market Effectors
Review

•Product •Distribution •Advertising Media

•Naming •Personal Selling / Service •Internet Media
•Packaging •Promotion / Events •Merchandising
•Pricing •Advertising Message •Public Relations

Step Topic Description

Marketing Background
1 Business Review Marketing Database or situation analysis – understanding of the
scope of your business, analysis of the company, product and market
place relevant to the target market and competitive situation.
2 Problems and Summary of challenges that emerge from the marketing database to
Opportunities form the basis of the marketing plan
Marketing Plan
3 Sales Objectives Projected level of goods or services to be sold – everything else in the
marketing plan is designed to meet these objectives – from defining
the size of the target market and establishing the market objectives,
to the amount of advertising, personnel, distribution channels /
stores and product to be utilized.

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4 Target Markets The group of people with a set of common characteristics that has
and Objectives similar purchasing needs and buying habits, and the behaviour you
want from this target market in measurable terms that need to be
achieved.
5 Plan Strategies Positioning for the image of your product / service and strategy to
fulfill the marketing objectives. Brand positioning of your product
within your target market relative to your competition and according
to your marketing objectives. A marketing strategy is a statement of
how the marketing objectives will be achieved in quantifiable,
measurable steps, the methodology and tactical marketing tools to be
used.
6 Communication Target market awareness and attitudes necessary to deliver
Goals positioning and fulfill marketing objectives
7 Tactical Disciplined marketing planning develops tactical plans, which
Marketing Mix incorporate executions that, when implemented, allow you to meet
Tools your marketing objectives and meet the overall marketing strategies
and communication guidelines. established earlier. Each marketing
tool mix has its own objective, strategies and include the following
tactical elements:
Product, Naming, Packaging, Pricing. Distribution, Personal Selling /
Service, Promotion / Events, Advertising message and media,
merchandising, Public Relations.
8 Budget, Payback Total cost of implementing the plan, analysis of whether the
Analysis, marketing plan, programmes and implementation strategies will
Calendar generate projected revenues in excess of expenses, and the schedule
of execution of the marketing plan.

9 Execution Actual operation – getting the product, service or store ready,

executing the marketing mix tools, such as seasonal selling,
advertising, merchandising, publicity, sales
10 Evaluation Measuring the level of success of the overall marketing plan and its
specific elements. Research and testing as an information gathering
exercise and learning tool for future improvements and corrections /
adjustments

2. Background of the Marketing Plan

Steps 1 & 2 establish the marketing background against which the marketing plan must be drafted.
In this section we are going to review these two steps in order to establish our market before
drafting the actual plan. There are three sections to a Business Review:

1. Scope
2. Product and Market Review
3. Target Market Effectors
M

STEP 1 BUSINESS REVIEW

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N

N
U
G

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A

A
R

R
K

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C
T
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Scope Product and Market Review Target Market Effectors

• Company strengths • Company and product • Consumer / Business-

and weaknesses review to-Business targets
• Core Competencies • Category and company • Product awareness
• Marketing sales and attributes
capabilities • Behaviour trends • Trial and retrial data
• Distribution
• Pricing

STEP 2 PROBLEMS AND OPPORTUNITIES

STEP 1 BUSINESS REVIEW

2.1 Business Review

All businesses need to answer these three questions:

No Question Answer / Indicator

1 Who is it for? Target Market
2 What does it do? Scope
3 How is it different? Brand positioning

Tip:

Business Scope is different to Communication positioning – in business scope we

recognize the product, in communications scope you sell it.

2.1.1. Target Market

Who is it for?

Consumer behaviour is the process and activities people are involved in as they move through the
purchase decision making process. Consumers behave in certain ways and change their ways over
time due to many factors related to social, personal, geographic, psychographic trends.

A specific target market needs to be established in general in terms of the buyer’s profile for the
area and then a more specific buyer’s profile can be compiled for a particular property.

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2.1.2 Business Scope

What does it do?

Business Scope identified the following elements of your product:

• Company Strengths and Weaknesses

o What do you have that the market wants / needs / consumes?
o Where are you stronger than or more vulnerable to your competitors – technology,
distribution, pricing, operational efficiency, product superiority?
• Core Competencies
o What is your organization especially good at? Operations, marketing, strategic or
operational management? Exceptional product? Accessibility and availability?
o How can we use that to our competitive advantage?
• Marketing Capabilities
o What are our marketing capabilities?
o What do we have – high awareness, desirable brand name, large customer list, high
repetitive retention

3. Activity: Virtual Organisation Selection

Throughout this module you will be using a Virtual Organization to complete your
exercises that will eventually lead to a Marketing Strategy and Plan with all its
elements, and it will serve as a base exercise to implement the marketing strategy
and plan design process and elements in your own organization over a period of
time.

The following list of organizations will be the business of choice for the Marketing
Plan that will be drafted during this module:

Select one for your Virtual Organisation for this module.

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No Identifier Name of Company Line of Business

1 Yummy Tummies Exclusive Bakery

2 CELABIZZ Event Planning Organisers

5 Call on Me Cellular Phone Shop & Service

6 Page One Book Store

7 One-the-Move Courier service

2.2 Product and Market Review

Market Review • What are your organizations long and short term goals?
• Operational budget?
• Planned profit margins on each product?
• Organizational history – previous successes and failures?
• Company’s biggest mistakes to date?
• Single thing your company will always be known for?

Product Review • List the range of products you offer – category and product (For
example, letting, new developments, houses)
• Product type – consumable, specialist, necessity / luxury,
• Product description – strengths and weaknesses through National Credit
process, appearance, competitor comparison
• Consumer behaviour trends – sales seasonality, geographic territory
sales, demographic dependency sales
• Distribution sales (face-to-face, telephone sales)
• Pricing – accessibility, repeat / once off nature
• Competitive review – comparison to competitors against same indicators
as above

Pricing • Pricing is a prominent part of the marketing strategy – if the price is too
high, it may discourage purchase and encourage competitor sales as an
alternative – therefore allowing too many entry points into your market

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2.2.1 Pricing elements to consider:

No Element Description
1 Price of your product / Price within a comparable bracket? Do unique brand, features
brand relative to the and benefits justify higher / lower prices?
competition
2 Distribution of sales by Do competitors raise and lower prices at certain periods and
price point relative to places, i.e. in holiday towns, tourist areas, seasonal adjustments
competition
3 Price elasticity of If product goes “on sale”, do sales go up or stay the same? Can
demand of your product price create desirability, i.e. is product price elastic?
4 Cost structure of the Are their price point products, stores, brands that sell more or
product category less than yours?
Is promotions / partnerships / specific distribution outlets /
discounts / credit / return policies/ charges etc important to your
product?

2.2.2 Brand positioning

No Anchor … Indicator …
1. Market Share What is your market share? Percentage sales of your company
compared to overall sales in country / works? Geographic / time
period trends in market share?
2. Target Market Who is primary target market, and percentage sales they account
for? In comparison to competitors
3. Positioning Positioning pre-emptive, or reactive in relation to customers?
4. Awareness and Attitude Consumer awareness of and attitude towards your company and
scores products?
5. Distribution / Store Strategy for distribution / penetration and coverage compared to
Penetration / Market competitors?
Coverage Strategy
6. Customer Service Policy Policy on customer service as back-up to product?
7. Promotion Reliance on promotions? Success / failures out of promotions?
Comparison to competitors
8. Advertising Message Advertising strategy – creates awareness / attitude / education /
message / vision and mission?
9. Media Strategies Media and internet exposure of company and products – (e-
commerce)
10. Merchandising Merchandising strategy communicates branding and
organizational position / philosophy?
11. Testing and Research Targeted tests and research conducted into competitive status?
Development Reaction to results of tests and research?

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Mentored Discussion: Brand Positioning

From the list above, have a class-room discussion on the importance on the
following topics:
• The advertising message: The importance of choosing the correct phrasing of
the message that you want to send to your clients?
• Promotion: Does your current workplace make use of promotion? If yes, how
effective is this?

2.3 Target Market Effectors

In order for any marketing plan to be successful, the organization must know who the customer is,
and who is not. What are their values, perceptions, awareness and behaviour towards your product?

In Product and Market Review you analyzed a first level market as predicted by product
performance - company and product sales, purchase by price points, and use of distribution
channels. We now need to look at target market segmentation, their wants and needs, preferences
and placement.

2.3.1 Target Market Effectors Elements

The Target Market Effectors are based on 4 elements:

No Element Description
Key Target Market Target market segments that purchase your product:
• Description of segment
• Size / number of potential purchasers
• Money value of the segment
• Profit attributed to that segment
1 Awareness The segments’ awareness of your product
2 Attitude The segments’ attitude towards your product (Purchase attributes
ranked in comparison to competitors)
3 Trial Percentage target market that has tried your product, number of
purchases made in the trial (i.e. new yoghurt flavour compared to
new face cream products)
4 Retrial How many customers make a repeat purchase after initial trial?
The distribution of Target market segment – Awareness and Attitude – Trial – Retrial will determine
the foundation for your product success

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2.3.2 Target Market Segmentation

No Segmentation Description
Element
1. Volume and Volume of purchases
Concentration Demographics of the target market, and number that purchases the product
Segmentation
2. Industry Category vs. Who is the company aiming at (Company target market description)
company target compared to who actually purchases?
Segmentation
3. Demographics Sex, Age, Income, Education, family household size, region / geography,
Segmentation cultural diversity (race, religion, traditional / historical culture)
4. Product Usage Use of product or product range for its intended purchase?
Segmentation Examples
• Baking soda – intention (baking) vs. actual (fridge deodorizer)
• Haemorrhoids cream Preparation H – intention (medicine) vs. actual
(beauty product)
5. Psychographic / • Personality descriptors – what type of people are they? Perfectionist / easy
Lifestyle Segmentation going / social / academic / physical
• Activities – what do they do? Outdoor / indoor / artistic / cultural /
political / travel and tourist
• Purchase Attitudes – do they buy easily? Economy minded / impulse
buyers / price conscious / style conscious / quality conscious / technology
conscious / cash / credit / service oriented
6. Attribute • Product attracts a diverse target market because of a specific attribute of
Segmentation the product, i.e. Windows, HP (Hewlett Packard), board games (Monopoly,
Trivial Pursuit)

4. Activity: Target Market Segmentation

Refer back to your Virtual Organisation you have chosen. Do a target market
segmentation exercise for it. Use the table below to write your findings / answers.

Segmentation Element Description

Volume and
Concentration

Industry Category vs.

company target

Demographics

Product Usage

Psychographic / Lifestyle

Attribute

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2.4 Product Attributes

Product attributes or benefits derived from consumers perceptions of the product. When a
consumer has a different need perception than the marketing strategy, misalignment may cause the
consumer to turn elsewhere to satisfy his need.

Example Box:

Businessmen purchasing clothes may not necessarily want the cheapest price, but
rather quality and value for money. If the main attribute of the menswear is
marketed as “cheap”, it may not satisfy the consumer need

In such a case repositioning may have to take place, i.e. aligning the marketing strategy with the
perceived benefits of the product

5. Activity: Branding

Complete the following exercise on positioning and perceived benefits:

Identify the main branding feature and perceived benefits of each of the following
...

1. Pam Golding

2. BMW

3. Pepsi

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2.4.1 Product Life Cycle

All products have a life cycle. A product will go through phase of:

Maturity
Introduction
Phase

Evoke Phase

• Introduction (aggressive awareness and branding campaigns, market establishment through

trial and retrial consumption.
• Maturity Phase (Awareness and target market established, products standardized and
sophisticated (and fierce) competition to retain market share.
• Evoke Phase (Where a product needs to be repositioned or revamped – either with its
history as the main feature, or under a “new, improved” status).

Self Reflection:

An interesting study in product life cycle and re-launch is the Hush Puppies
Footwear.

• What was the initial target market, and how has that evolved?
• What are the main attributes of this product that forms the basis of its
marketing strategy?
• Can you identify another product that has gone through the above product
life cycle?

2.5. Problems and Opportunities

STEP 2 PROBLEMS AND OPPORTUNITIES

Problems are derived from situations of weakness. Opportunities are developed from strengths or
positive circumstances.

Problems and opportunities should be concise, one sentence statements that draw conclusions.

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Learners Note:

Problems and opportunities may be identified in the following areas:

• Sales Review – sales up or down?

• Competitor Review – competitors weaker or stronger?
• Target Market Review – targeted consumer more / less / aligned?
• Awareness and Attitude / Attribute Review – product awareness, acceptance
and value?
• Trial and Retrial Review – product sustainability?

Below is an extract of a well known property expert’s opinion on current problems facing the real
estate market.

Case study:1

The Real Estate Generation Gap – The Baby boomers are trying to sell but who is buying?

A reader recently forwarded an interesting article to me (which I encourage everyone to do) about the real
estate generation gap. This article does a fantastic job in presenting a very real problem with our current
real estate situation. With an already soft real estate market the prospect of even more homes fuelling the
inventory makes the situation potentially much worse.

The Problem
Baby boomers have fuelled the housing market for the past 10-15 years as their kids moved out and a
strong economy allowed them to buy or build a bigger house. As retirement draws near, many of these
boomers find they no longer need as much house or are possibly looking to move. Typically that wouldn’t
be a problem, but it is. The problem is that many of those in Generation X do not seek or have a desire to
own a large home, or aren’t even at a stage in their careers where that type of purchase can be made. As
more and more boomers seek retirement and the sale of their homes, who are the buyers?

A False Sense of Worth

Another big problem with the boomer generation is that many find the bulk of their net worth tied up into
real estate. Many of these individuals purchased or built a new home during the rapid expansion of the 90’s
and saw home values double or triple in some places. This growth fuelled the idea of using their homes to
fund a large portion of their retirement. As home prices level off and begin to fall in some areas these
people will not be able to get what they want for their home. Some will simply refuse to sell at the
discounted price while others will sell and take a significant hit.Suddenly they realize that they don’t have
the money they thought they did.

Unfortunately this is all too real. I met with a woman just this week that was planning on retiring in the
coming year and was seeking advice. Her retirement account was valued at under R180,000 and she said
she realized it wasn’t enough. So I asked what her plans were, if she was going to continue working part
time or had other savings and she said no. She told me that she had planned on using her home for the
majority of her retirement when she sold it and moved, but she was upset because she can’t sell it for what
she feels it is worth right now and doesn’t know what to do.

1
The Real Estate Generation Gap [The Boston Globe]

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How serious is the Problem?

Clearly the soft housing market is a cause for concern for these people, but how serious is it? According to
the article:

If every single member of Generation X wanted to buy one of the baby boomers’ 34 million homes, and every
single boomer wanted to vacate, all the homes would get sold, with 15 million Gen Xers left over. But the
numbers don’t actually work out like that, since most young would-be buyers are coupled up. In reality, there
aren’t nearly enough Gen X households to go around — and it’s not a generation that particularly likes the
big homes that many boomers have gone for, anyway.

That is a problem. Clearly not every boomer will sell just like not every Gen X person will be buying, but the
numbers are fairly alarming. There are many more boomers than our generation and we don’t even care to
live in the houses they do, who is going to buy?

The problem is that our younger generation doesn’t want their Opperheimers or large homes. Our
generation is waiting longer to get married, having fewer kids and focusing on building careers. We don’t
have a need for larger homes nor can we afford what our parents are asking for them. The boomers are left
holding the bag, and I’m not sure how this will ultimately play out.

6. Activity: Problems in Real Estate business

Your Facilitator will divide you into groups to discuss the above case study that
addresses the problems facing real estate businesses currently and in the future.

Review the comments made by the expert in real estate above, and discuss the
following questions:

• From the extract, what are some of the most prominent problems facing a
new real estate business at the moment?
• How can you position your new company to overcome the problem and
create opportunities for Generation X.
• What would you consider as an appropriate marketing pitch in the above
situation?

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3. The Marketing Plan

Steps 3 - 10 establishes the actual marketing plan elements that must be addressed in developing
the marketing plan. In this section we are going to review these seven steps in order establish or
marketing plan.

STEP 3 SALES OBJECTIVES

STEP 4 TARGET MARKETS AND MARKETING OBJECTIVES

STEP 5 PLAN STRATEGIES

Brand Positioning and Marketing

MARKETING PLAN

STEP 6 COMMUNICATION GOALS

STEP 7 TACTICAL MARKETING MIX TOOL

• Product • Distribution • Advertising Media

• Naming • Personal Selling / • Internet Media
• Packaging Service • Merchandising
• Pricing • Promotion / Events • Public Relations
• Advertising Message

STEP 8 BUDGET, PAYBACK ANALYSIS, CALENDAR

STEP 9 EXECUTION

STEP 10 EVALUATION

3.1 Sales Objectives

Learners Note:

Sales Objectives are self-defining:

They project levels of goods or services to be sold. Everything that follows in the plan
is designed to meet the sales objectives – from confirming the size of the target
market and establishing realistic marketing objectives, to determining the amount of
advertising and promotion amounts to be budgeted, to the actual hiring of
marketing and sales personnel , distribution channels / stores, finally to the amount
of product produced.

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3.1.1 Elements of Sales Objectives

Challenging & If the sales targets are not set realistically, operational costs are bound to
Attainable increase dramatically in the effort to attain these goals.
On the other hand, if your sales objectives aren’t realistic, and sales exceed
expectations, you may not have planned for the additional demands on infra-
structure, cash flow, production, distribution requirements, after sales service
etc.

Time specific Your sales targets, like your marketing plan, have a shelf life. Short term sales
targets are generally for one year.
Long term objectives may be set over a period of three to five years, depending
on requirements of the product such as real estate, capital expenditure,
equipment purchases. Even short term yearly objectives must be measurable on
a quarterly, and even monthly basis to ensure the path laid out is still followed,
and intervention strategies are implemented timeously, where required.

Measurable • Money (rands and cents)

• Units sold
• Transactions
• Persons served

3.2 Target Markets and Objectives

Once you have developed sales objectives, you must determine to whom you will be selling your
product.

Tip:

Your company exists because of the target markets you choose to serve. Since we
define marketing as the process of identifying the target market(s), defining the
needs and wants of the target market(s), and fulfilling those needs and wants better
than the competition, the determination of the target market is the most critical step
in the marketing planning process.

The biggest marketing mistake is to attempt to be all things to all people. The marketer must decide
which target segment(s) will form the core of the business and receive the emphasis of effort and
budget.

Your target market is the key to your product’s existence, and your marketing
answers/ Let the target market drive your marketing plan.

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3.2.1 Target Market Segmentation

Learners Note:

Segmentation is a selection process that divides the broad consuming market into
manageable customer or non-customer groups with common characteristics.

Segmentation allows the marketer to exploit the common characteristics – you are
able to pinpoint specific clusters of consumers who have unique, yet similar
demographics, attitudes, lifestyles, concerns, purchasing habits, needs and wants.

Tip:

There are two broad segments for most businesses within which you will develop
additional strategies for targeting:

• Current Customers
• New Customers

7. Activity: Target Market Identification (1)

Refer back to your Virtual Organisation you have chosen. Answer the following
questions regarding Target Market Identification.

1. Who are the current customers for the organization you have selected?

2. Who would be a potential target market / customer base for the organization
that you selected?

3. What would you advise them to do to attract the new target market?

3.2.2 Market Factors

Learners Note:

Understanding the target market is key to marketing planning in a real estate

environment. Target markets should be locked to sales through marketing objectives
that define the behaviour needed for sales.

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The factors that need to be considered in establishing your target market are as follows:

No Factor Example
1 Gender and positioning Female homemakers
2 Age 25 – 49
3 Occupation Lower, middle, higher, skilled / unskilled / professional /
managerial
4 Household size Single, 2 – 3+
5 Household Income Between R5 000 to R12 000 per month
6 Educational level Semi-literate, educated – high school / degree / professional
vocational qualification
7 Psychographic Personality descriptors, lifestyle activities, purchase attitudes
8 Attribute Indicators Value, quality , styles, fashion, endurance
9 Geographic / Indian / white / black,
demographic Hindu / Christian, community culture
influences Urban / rural / farm / informal settlement / flat or town-house
dwellers,
10 Primary / Secondary Volume and concentration – small town number and buying
Target Market power compared to Sandton / Soweto

3.2.3 Marketing Objectives

Learners Note:

Marketing objectives define the target market behaviour required to produce sales –
behaviour such as retention of current customers, increased purchases from existing
customers, trial from new customers, retrial / repeat purchases new customers,
secondary marketing (i.e. word of mouth of customers).

A Marketing Objective must:

1. Be specific Focus on a single goal.

2. Be measurable Quantifiable in terms of a target markets
behaviour and resulting sales.
3. Relate to a time period Six months, one or more years, or even specific
months of the year.
4. Focus on affecting target market Retain customers, Trial of a product, larger
behaviour purchases, more frequent purchases.

Tip:

Marketing objectives are not slogans, like “Provide the best customer service” or
capture the lion-share of the market”. It must be measurable, time specific,
quantifiable.

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8. Activity: Marketing Objectives

Refer back to your Virtual Organisation you have chosen. Write a marketing
objective for your virtual organisation for the next 2 months. Use the table below:

1. What is your goal?

2. What results do you want?

3. How would you attract clients to come back to your organisation?

3.3 Strategies

STEP 5 PLAN STRATEGIES

Learners Note:

A Marketing Strategy is a broad directional statement indicating how the marketing

objectives will be achieved.

Within your plan, the marketing strategy represents a first overview of various marketing elements
and how they will be utilized to achieve the marketing objectives.

The most commonly addressed strategy issues are as follows – though you should consider what is
most appropriate for your particular situation:

• Build the Market or steal the Market • Personal selling / service / operation
Strategies Strategies
• National, regional and local market • Competitive Strategies
Strategies • Promotion / Events Strategies
• Seasonality Strategies • Advertising Message Strategies
• Spending Strategies • Advertising Media Strategies
• Competitive Strategies • Internet Media Strategies
• Target Market Strategies • Merchandising Strategies

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• Product Strategies • Marketing Research & Testing (R&T)

• Naming Strategies Strategies
• Packaging Strategies • Public Relations Strategies
• Pricing Strategies • Distribution / penetration / coverage
Strategies

3.4 Communication Goals

STEP 6 COMMUNICATION GOALS

The four A’s, representing Awareness, Attitude, Action, Action Again is outlined in the following
table.

A
AWARENESS

A
ATTITUDE

A
ACTION

A
ACTION AGAIN

1. Product Awareness starts with Aided or Unaided Awareness of the product

2. Once the consumer is aware of the product, they form an opinion / position / attitude
around the product – would they try it/ switch to it?
3. The consumer purchase the product on a trial basis – as a first time user, a lasting
impression is now formed, and the product must earn its keep.
4. The consumer takes the critical decision to repeat the purchase – this is the beginnings of a
retained customer, a product loyalty that must be nurtured, maintained and protected from
competitive poachers.

3.4.1 Determine Communication Goals

What do you want to achieve with your communications plan? This is a critical element to identify,
as these goals will form the basis of your communications plan review.

• These are my goals

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• These were the results

• Did it meet the goals?
• If yes – do more of it!
• If not –change the tactic!

Mentored Discussion: Communication Strategy

Your facilitator will lead a class-room discussion the importance of having a

communication strategy for a new business. With your facilitator, address the
following questions:

1. How important is a communication strategy for a new

and existing business?
2. What types of communication methods are there?
3. How would you measure the effectiveness of your
communication strategy against your marketing plan
and target group?

3.4.2 Operationalize Communication Plan

Once the communications plan is in place, a clear operational strategy must be developed to launch
the plan efficiently and effectively. That may be an activity required by another department, or your
own marketing team – the point is that no effective and efficient operational implementation can
happen if the plan is not clear, the goals undefined, or the data for collection, analysis,
interpretation and action not clearly defined.

3.5 Marketing Mix Tools

STEP 7 TACTICAL MARKETING MIX TOOL

• Product • Distribution • Advertising Media

• Naming • Personal Selling / Service • Internet Media
• Packaging • Promotion / Events • Merchandising
• Pricing • Advertising Message • Public Relations

The marketing mix is the combination of elements that go to frame the marketing strategy for a
company in relation to products and services, to help them to achieve their marketing objectives.

Traditionally, the marketing mix has focused on four elements:

• Product
• Place
• Price
• Promotion

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However, this has been extended in recent years as certain features in relation to the marketing of
services have become recognized as being important.

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There are an additional 3 Ps that now make up what has been referred to as the '7 Ps'.
• Process
• Physical Environment
• People

3.5.1 Product, Name and Packaging

The product, naming and packaging will probably have more impact on your brand positioning than
any other marketing mix tools. If these three elements do not align with you r brand positioning,
there is little hope to achieve the desired position in the market place.

Tip:

The product perception is closely linked to the product positioning, and the
perception is linked to the packaging that holds the product and carries the product
name.

The product is a tangible object that is marketed to customers. In the service business, the product
takes on intangible qualities and offerings, such as future benefits or promise.

Functionality, Features & Benefits

In order to begin to understand the product from a customer’s point of view, list the functionality,
the features, and the benefits that the product has.

Functionality- Why is the product useful, what need does it fulfill

Features- What differentiates the product from others of its type i.e. what makes it special?
Benefits- What are the benefits of owning the product? i.e. full service, warranty, resale potential
and prestige

Products rarely sell on features alone – customers buy benefits more than anything else, whether
real or perceived, related to the product or self.

3.5.2 Distribution

Distribution is the transmission of goods and services from the producer or seller to the user. There
are 5 main areas that affect your distribution plan:

• Penetration / market coverage / shelf space

• Outlets and channel types
• Competition
• Geography
• Timing

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No Element Description
1 Penetration / market The product may be under penetrated (insufficient stores /
coverage / shelf office locations to launch product) or over penetrated (too
space many stores in a given area
2 Outlets and channel Depending on the store / outlet position, target market and
types market reach
3 Competition Competition may dominate certain channels, and your
product takes a lesser positioning in those outlets
4 Geography Distinct differences may be observed in product
distribution depending on the geographical location and
related dominating demographics of that region
5 Timing When, where and how quickly a product is launched into a
region / stores / outlets, i.e. in a new product launch.

Self Reflection:

1. What is your current workplace’ distribution strategy?

2. Does it work? Is it aligned to the above elements?

3.5.3 Promotion

Promotions are where incentives are offered to clients to purchase from a particular real estate
company. Some well-known promotions that are offered on a continuous basis by some larger
agencies are a customer concierge service and the accumulation of loyalty points.

Types of Promotion Events / Tools

A wide variety of events are available as marketing communications tools. This list will serve as an
idea starter:

• Media announcement of new product / entity

• Carnival / Parade
• Book release / lecture / demonstration
• Infomercials
• Seminar / research presentation
• Product couponing / sampling event
• Proof of purchase incentives / prizes/discounts
• Flyers / pamphlets / newspaper & magazine inserts
• Bill boards, TV advertisements, store signage
• Advertisements – magazines, newspapers
• Bonus packs,
• Store samples, stamps

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Mentored Discussion: Promotion

Your facilitator will lead a class-room discussion on the importance of promotion.

From the list above, choose 4 promotional tools that would be applicable to

a) Your virtual company; and

b) Your own work environment.

Discuss the following:

1. The effectiveness of those promotional tools in each context.

2. The cost involved in utilizing the promotional tool in your environment.
3. The relationship between promotional tool and types of client that you
serve.

Personal Selling

Personal selling is the face-to-face marketing of properties as well the agency by talking directly to
the client. Virtually all estate agencies start off by selling themselves to a relatively small number of
clients and this can be done successfully by means of personal selling where the client can be
approached in a unique and personal fashion.

Sales strategies may range from any of the following:

• Door-to-door sales
• Telesales / e-commerce
• Sales reps calling on organizational buyers
• Sales staff in front-line positions (stores)
• Merchandiser displays
• Promotional sales events (Free samples / tastings in-store)
• Store / outlet staff training (Example: Clinique training Edgars staff)

9. Activity: Sales Strategy

If you think of the product in your Virtual Organization, briefly outline what are your
sales / service strategy, i.e. how will you actually sell the product? Write down 3
selling strategies that would best suit your business and your personal style.

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3.5.4 Advertising

Now that you have decided how to market, position, price. Distribute, sell and promote your
product, you are ready to prepare the advertising segment of your marketing plan. We know that
advertising can build awareness and positive attitude towards a product – but it can also move the
target to action to buy the product.

Advertising is the most visible way to communicate a marketing message. There are a wide variety
of ways in which the message can be conveyed, i.e. print, television, radio, outdoor and the Internet.
This is a one way form of communication that is targeted at a specific audience and takes place in
order to advertise the property to buyers that has been mandated to the agency or to convey the
agency’s culture and message to potential sellers

Process for creating the advertising message

Define your Prepare your Detail what

advertising message CUES testing will go into
objectives strategy execution

Tip:

Advertising Objectives:

Increase unaided awareness among the target market from 18% to 25%. Establish a
leadership image with 25% of the target market.

Message Strategy
The message strategy is a combination of elements:-

• Who
• Point
• Word
• Care
• Believe
• Feel
• Do

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10. Activity: Message Strategy

Refer back to your Virtual Organisation you have chosen. Use the template below
and write up a short message strategy for your Marketing Campaign.

1. Who? - Who are you talking to? Define your target market thoroughly.

2. POINT - What is your point? Develop your message – not the slogans and clever images, but what you
want to say to the target market. You could Audiotape your message strategy.

3. WORD - Identify the most important word in your message - is it Quality? Service? Family friendly/
Hip/cool?

4. CARE - Why should I care? What is in it for me?

5. BELIEVE - Why should I believe you? Who else supports you / how do I know this is true?

6. FEEL - How should I feel? What emotion is foremost?

7. DO - What do you want me to do? (Be specific!) Should I visit the store / the web-site / buy the CD / eat
more fruit from your store / buy my vitamins from you / wear your Jeans …?

8. MUST HAVE - Mandatory elements that relate back to product branding or positioning that must be
included

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3.5.5 Merchandising

Merchandising is a tangible communication link between your product and the consumer. It is the
method used to communicate product information, promotions, and special events and to reinforce
advertising through non-media communication vehicles.

Merchandising is a way to make a visual or written statement about your company, and may include
brochures, video presentations, banners, posters, shelf talkers, table tents. All of these are used to
communicate product attributes, positioning, pricing, and promotion information.

3.5.6 Public Relations

Public relations are geared toward affording the estate agency publicity. Here the
main objective is to communicate perceptions regarding the agency to the public
and can therefore make a considerable contribution towards the agency’s marketing
efforts. The distribution of press releases to the media is an important tool towards
improving public relations by communicating the desired message to potential
clients of the estate agency.

Consider adding PR to your marketing mix if any of the following applies to your business:

• You want to improve the brand reputation and credibility from awareness to loyalty
• You need to communicate with a variety of audiences
• Your customers are overloaded with messages from competitors
• Your customers do not believe advertising as easily as before
• Your product or service is complex, technical, new, or unique
• You want to add value to an existing product through additional information
• You face potential damaging issues of crises that must be “information managed”
• You are going to introduce a new product
• You are going into a new product partnership

3.5.7 Media

World Wide Web

The Web allows for a cheap way of promoting your product. It is a great tool because it allows the
target customers to educate themselves about your product by reading about it, seeing a demo, and
if you a software company download a copy (and therefore serve as your distribution channel).

Tip:

Remember, you are trying to reduce the perceived risk of purchasing your product.
By providing a Web page, you are moving the target market through the
communication cycle from unawareness to purchase.
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Also, you are trying to reach innovators and early adopters. These people are actively searching for
better ways to meet their needs. The Web is a natural place for them to go to look for you.

The difficulty with the Web is all of the noise out there. It is very crowded and difficult to be noticed.
Register with all of the search engines, such as Yahoo and Google, making sure that there are
keywords in your web site that will attract your target audience.

Direct Mail
An average response rate for direct mail is about 1%. This depends on the offer, the mailing list, the
target audience, the creativity (how the direct mail piece looks), and the timing of the mailing.

Classified Advertisements
Although it may nice to be able to take out a full colour, full page advertisement
in an industry magazine, it is very expensive and will not reach your target
market of the innovators and early adopters. This target market will read the
classified ads in the magazines looking for and willing to try new things.

The key for classified advertisements is frequency. Running an advertisement

once will create awareness, but not necessarily action.

Press Releases
A press release is an announcement of a new product release. Editors may take this information and
publish it as news in their magazine or newspaper. This is a great way to get free publicity.

Product Reviews
Magazines have product review editors that review it in an article or column. This can provide great
exposure. However, it can also be risky. What damage will it do if you get a bad review? Before
pursuing this promotional activity, it may be safest to fully complete testing, and have contacted
many new customers to get their feedback on the product. Make sure there are no surprises.

Radio
It is a good way to reach a large audience if you have a broad based marketing strategy and are
marketing a mainstream product/service. Costly but not as expensive as television, the key is
repetition in popular listening hours. Depending on the radio stations available a certain degree of
targeting can be done i.e. geographic through national, regional or local stations and demographic
depending on the demographic profile of the radio stations listeners.

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Television
Again this is a good way to reach a large audience if you have a broad based marketing strategy and
are marketing a mainstream product/service. However the costs involved generally put television
marketing only within the reach of large national companies. This is a very specialized form of
marketing that is normally left to specialized advertising companies to design.

Resource:
Refer to your resource guide for additional source information on Real Estate
Marketing Tips on the Website.

11. Activity: Real Estate Marketing

Reflect back to your own working environment and do the following:

1. List the marketing media & methods used in your working environment.

2. Does it work? Give a motivation for your answer.

3. Which factors influences the choice of marketing media most?

4. Which other media could you recommend to your workplace employer and
motivate your recommendation.

3.6 Budget, Payback Analysis, Calendar

STEP 8 BUDGET, PAYBACK ANALYSIS, CALENDAR

3.6.1 Marketing Plan Budget

Part of planning any activity or project is estimating costs, making a projection and managing the
project that it stays within the parameters set in the planning stages.

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Tip:

When we have to estimate costs, we assign a value to a particular activity.

Successful estimation takes into the account:

• The activity or project objectives and outcomes

• The activities related to achieving these outcomes
• Analysing historical cost for identical activities

When preparing your budget, you should begin with a rationale that outlines what the budget is
designed to accomplish. The rationale covers:

• Restatement of sales objectives

• Marketing objectives
• Geography parameters
• Plan time frame
•
Learners Note:

When developing, analysing or evaluating the budget, the following questions need
to be asked:

• What needs to be done, and how long is it going to take?

• Who is going to do it – is provision made for people with the necessary skills
and knowledge, and for outsourcing to experts, where required?
• When must it be done by – can one person do it, or will more than one
person be required to finish it on time?
• How is it to be done – what equipment is needed, is this equipment
available, or must it be bought, rented, or leased?
• Where must it be done – what facilities are required, are they available, or
must they be rented?

3.6.2 Pay Back Analysis

An important part of any budget is the payback analysis. The payback analysis
refers to the projection of whether the marketing plan or specific marketing
programmes in the plan will generate revenues in excess of expenses.

The payback analysis should review both short-run and long-run projected sales
and associated costs to estimate the initial programme payback.

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Payback analysis can be calculated by analyzing the following figures:

• Net Sales and revenues

• All direct marketing costs associated with the sale of the product to the customer (Less
promotion & advertising)
• Gross margin
• Profit / loss

Mentored Discussion:

• Do you understand what “Payback Analysis” is about? Can you describe it in

your own words?
• Do you understand how to calculate payback analysis?
• Do you understand the relationship between estimate and actual budget –
can you describe the relationship between the two elements?

3.6.3 Marketing Calendar

After the marketing plan and budget has been finalized, it is time to summarize the plan on a single
page. This one page plan should be in the form of a Marketing Calendar that will serve as a visual
summary of the marketing plan for a designated period or financial year.

Self Reflection:

What do you think should go into a marketing calendar – and why would it be
important for you?

A marketing calendar should contain the following elements:

• Headings, including product / service / store name, time period, date prepared, geographic
reference
• Visual summary of marketing programme week by week, outlining all marketing tools
executions and including all other marketing related activities such as research
• Visual summary of media weight levels by week

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Example Box: Example of a Marketing Plan

APRIL MAY JUNE

WEEK

WK 1

WK 2

WK 3

WK 4

WK 1

WK 2

WK 3

WK 4

WK 1

WK 2

WK 3

WK 4
Marketing Programmes
Ongoing Price /
Item

Major
Promotions:
Clearance Sale
Half Price Sale
Easter Sale
Youth Day Sale

Media Support
Television Ads
Screening
Newspaper:
18 insertions,
full pager
Newspaper: 18
insertions – half
pager
Direct Mail:
4 mailings 10
000 per store

Non-Media Activities
Point of
Purchase
Displays
In-store Signage
Change
In-store
sampling &
tasting
In store price
promotions
In store volume
discount
Other
Market
Research

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12. Activity: Marketing Plan

Refer back to your Virtual Organisation you have chosen.

1. Based on the example above, draw up a similar marketing plan for your
virtual organisation for the next 2 months.
2. Discuss how a marketing plan can be useful in your current working
environment.

MONTH
WEEK
WK 1

WK 2

WK 3

WK 4

WK 1

WK 2

WK 3

WK 4

WK 1

WK 2

WK 3

WK 4
Marketing Programmes

Media Support

Non-Media Activities

Other

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4. Marketing Execution

Steps 9 & 10 focus on the implementation of the Marketing Plan and evaluation of elements thereof.
In this section we are going to review these two steps in order to establish an implementation
process from the marketing plan.

STEP 9 EXECUTION

STEP 10 EVALUATION

4.1 Execution

A marketing plan unless and until it is successfully implemented / executed, is nothing but a
comprehensive list of good intentions. Successful marketing plan execution generally requires the
coordination of many areas, and the participation and support of several people / divisions in the
organization.

Ongoing follow up and review of the implementation is essential at regular intervals to ensure all
role players:

• Understand their role and importance of their contribution

• Have the required tools to “make things happen”
• Are actually doing what needs to be done, in the manner intended
• Receive feedback from results of their activities

4.2 Evaluation

Evaluation refers to the evaluation of plans and tools before large scale implementation. Some
questions to ask before implementing a test / evaluation strategy are as follows:

• What do I want to do with the information once I have it? (Goal / Purpose)
• What is the risk of not having the information?
• What is the cost of obtaining reliable information?
• What are the time constraints?
• How valid and translatable is the testing environment?

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Following is a list of elements that you may consider testing:

• Positioning Concepts
• Product Testing
• Brand name testing
• Promotion testing
• Advertising message communications
• Media tests
• Sales trend comparisons
• Sales growth rate vs. profitability rate

13. Activity: Execution and Evaluation

Refer back to your Virtual Organization that you selected – you now have a
marketing plan that you can operationalize.

1. Briefly outline a proposed project or execution plan which can be achieved in

a period of three months. Identify which elements you may consider testing
in (and through) your evaluation of the plan during and after execution.

2. How would you be able to apply the concept of evaluation in your own work
environment – what would your action plan be?

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5. Developing a Business Plan

Business planning is about results. You need to make the contents of your plan match your purpose.
Don’t accept a standard outline just because it’s there.

A business plan is any plan that works for a business to

• look ahead,
• allocate resources,
• focus on key points,
• And prepare for problems and opportunities.

Learners Note:

Unfortunately, many people think of business plans only for starting a new business
or applying for business loans.

But they are also vital for running a business, whether or not the business needs new
loans, new investments and new focus. Businesses need plans to optimize growth
and development according to priorities

A normal business plan (one that follows the advice of business experts) includes a standard set of
elements, as shown below. Plan formats and outlines vary, but generally a plan will include
components such as descriptions of the company, product or service, market, forecasts, sales team,
and financial analysis.

Tip:

Your plan will depend on your specific situation. The description of the sales and
management team is very important for investors while financial history is most
important for banks. However, if you’re developing a plan for internal use only, you
may not need to include all the background details that you already know. Make
your plan match its purpose.

5.1 Steps in Business Planning

The steps that are generally followed in establishing a Business Plan is outlined below:

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Research

Planning

Preparation

Development

Update

Implement

Review

Mentored Discussion: Business Planning

Your facilitator will lead a discussion on the topic of Business Planning.

• Can you identify the activities that would be related to each process step?
• Why do you think it is necessary to follow the steps as outlined?

If you fail to plan, you plan to fail!

Below is an overview of the activities that would take place in each phase of developing your
Business Plan.

Step Phase Actions

1 Research • Legal requirements
• Product / service Idea
• Market Analysis
2/3 Planning & • Vision, Mission
Preparation • Strategic Objectives
• Operational Objectives
4 Development • Operational Plan

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Step Phase Actions

• Financial Plan
• Marketing Plan
5 Update • Present
• Pilot
• Lessons Learnt – update
6 Implement • Operational Schedule
• Resource Allocation
7 Review • Operational Targets
• Financial Plan
• Return on Investment

5.1.1 Researching a Business Plan

In order to read, understand and evaluate a Business Plan, it is important to understand the
elements of a Business Plan.

In this section we are going to practice the development of a Business Plan for your virtual
organization by following the above process steps.

14. Activity: Researching a Business Plan

Refer back to your Virtual Organisation you have selected. Complete the first part of
your Business Plan by brainstorming the following elements for your virtual
organisation.

1. Name of Company:

2. Line of Business:

3. Idea:

4. Market Analysis:

5. Legal Requirements:

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Example Box:

An example of the Idea that must be developed, are illustrated below:

Identifier Indicator Virtual Organization Information

Name of Company Millenium Bank
Line of Business Banking and broker services
Idea We are going to give a cash bonus to every 2000th
person who signs up for a Millenium Cheque or Savings
Account
Market Analysis Young adults between 25 and 35, urban, employed and
income above R3 000-00 per month
Legal Requirements Banking Act, Companies Act

Self Reflection:

Refer back to your virtual organisation you have chosen. Recall the Market Analysis
that you did by asking yourself: Who is my customer? Who am I aiming this product /
service at?

All of these factors determined your marketing strategy, and develop the product /
service demand in a specific target market.

5.2 Planning and Preparing a Business Plan

Planning and preparing a Business Plan involved three aspects:

• Develop a Vision and Mission

• Develop strategic objectives
• Develop operational objectives.

5.2.1 Vision

The vision, mission and value statements from the start of the strategic planning process as they
represent the ultimate goals of your organization.

Simply put, if your company is viewed as expedition embarking on a journey to financial success, the
vision represents the perceived destination of where that success lies, the mission describes the
means used to reach that destination and the values represents the spirit that the journey will be
undertaken in.

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Learners Note:

Vision, mission and value statements normally form part of a strategic plan and are
complemented by a full strategic plan. Strategic planning does not however form an
essential part of middle/supervisory management’s normal tasks - the focus is
normally on developing a plan that is aligned with the organizations strategy.

The Vision is a strategic statement that describes the perceived idealistic situation that an
organization wants to strive towards; this is usually governed by a specific timeframe.

A vision is an over-riding idea of what the organization should be. Often it reflects the dream of the
founder or leader. Your company's vision could be, for example, to be "the largest retailer of
automobiles in SA", "the maker of the finest chocolate candies in Limpopo", or "the management
consultant of choice for non-profit organizations in the Southwest." A vision must be sufficiently
clear and concise that everyone in the organization understands it and can buy into it with passion.

Tip:

The vision is a strategic statement that describes the perceived idealistic situation
that an organization wants to strive towards; this is usually governed by a specific
timeframe.

Why do we need a Vision?

A Vision …

• promotes change, it serves as a road map for organizations as they move through
accelerated change, and thus it is a vehicle for driving change.
• Provides the basis for a strategic plan.
• Enhances a wide range of performance measures. It has been found that companies with a
clear vision statement outperform those companies that do not possess a vision.
• Helps to keep decision making in context, it provides focus and direction. Organizations with
a clear vision help employees to focus their attention on what is most important to the
organization, discouraging them from exploiting short-term opportunities they may
otherwise seize.

Learners Note:

A Vision motivates individuals and facilitates the recruitment of talent. It should

enable employees to see how their effort contributes to the organization’s success,
and should also indicate the attributes valued by organization, for example
innovation and knowledge.
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A Business Plan ...

Has a positive consequence on staff morale. When top management effectively communicates the
vision, there is a significantly higher level of job satisfaction, commitment, loyalty, pride, and clarity
about the organization’s values, productivity and encouragement.

Learners Note:

According to John Reh, a management specialist that deals with vision, mission and
strategies in organizations, the following:

Vision:
What you want the organization to be; your dream.

Mission / Strategy:
What you are going to do to achieve your vision.

Operational Plan / Tactics:

How you will achieve your strategy, and by when.

5.2.2 Mission

Your mission or strategy is one or more plans that you will use to achieve your vision. To be "the
largest retailer of automobiles in the US" you might have to decide whether it is better strategy for
you to buy other retailers, try to grow a single retailer, or a combination of both.

A strategy looks inward at the organization, but it also looks outward at the competition and at the
environment and business climate.

To be "the management consultant of choice for non-profit organizations in the Southwest" your
strategy would need to evaluate what other companies offer management consulting services in the
Southwest, which of those target non-profits, and which companies could in the future begin to
offer competing services.

15. Activity: Vision, Mission, Objectives

Refer back to your Virtual Organisation you have selected.

1. Select 2 or 3 popular brands in the market place like Coke, Nike, All Gold,
Vital Health – can you identify their vision?
2. What would their mission be?
3. Can you identify the strategic objectives they would have to establish to
accomplish the mission, and therefore the vision?

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Mentored Discussion: Mission

Your facilitator will lead a discussion on the topic of developing a Mission.

• What will you do so that your targeted customers choose you over everyone
else? Are you going to offer the lowest fees? Will you offer a guarantee? Will you
hire the very best people and build a reputation for delivering the most
innovative solutions?

• If you decide to compete on lowest billing rates, what will you do if a

competing consulting firm drops their rates below yours? If you decide to
hire the best people, how will you attract them? Will you pay the highest
salaries in a four-state area, give each employee an ownership position in
the company, or pay annual retention bonuses?

5.2.3 Strategic Objectives

The strategic objectives are measurable, specific goals that are developed to achieve the vision and
mission.

It is important that strategic objectives should be S.M.A.R.T

Simple
S
Measurable
M
Achievable
A
Relevant
R
Timeous
T

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The above implies the following:

• The goals must be understandable to all, written in simple language that is clear and
unambiguous.
• It must have specific targets (i.e. train 200 people in three months) that can be measured in
an objective manner
• It must be realistic and achievable – bold objectives need bold investment in time and
resources. Staff cannot achieve the impossible with nothing!
• It must be relevant to the community, organization, or problems identified in the
organization – the solution must directly address the problem to be relevant.
• It must be timeous – time frames must be realistic, but spaced so that the initiative has
maximum impact. If a flu epidemic breaks out, the objective must be to detect it in the short
term, contain it in the medium term, and prevent it in the long term – but the overall time
frame would be driven by the size and urgency of the intervention.

Mentored Discussion: Business Goals

Your facilitator will lead a discussion on the topic of Business Goals.

• What do you think is the value of Business Goals?

• Why do you think the Business goals must be SMART?

16. Activity: Planning and Preparation

Refer back to your Virtual Organisation you have chosen. Complete the 2nd part of
your Business Plan by brainstorming the following elements for your new venture /
initiative on the following page ...

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1. Company Vision:

2. Company Mission:

3. Strategic Objectives:

4. Notes on proposed Strategy / Tactics:

5.3 Development of the Business Plan

In developing the Business Plan, three main areas need to be addressed:

• Operational Plan
• Financial Plan
• Marketing Plan

It is also important that the plans are documented in a professional, easy to read format that will
become the “bible” of your strategy, implementation and review.

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5.3.1 Format of the Business Plan

If you have the main components, the order doesn't matter that much, as long as you cover all the
elements below:2

1. Executive Summary: Write this last. It's just a page or two of highlights.
2. Company Description: Legal establishment, history, start-up plans, etc.
3. Product or Service: Describe what you're selling. Focus on customer benefits.
4. Market Analysis: You need to know your market, customer needs, where they are, how to
reach them, etc.
5. Strategy and Implementation: Be specific. Include management responsibilities with dates
and budget.
6. Management Team: Include backgrounds of key members of the team, personnel strategy,
and details.
7. Financial Plan: Include profit and loss, cash flow, balance sheet, break-even analysis,
assumptions, business ratios, etc.
8. Marketing Plan: Method of creating product / service awareness, creating consumer
demand, product branding and positioning.

5.3.2 The Operational Plan

Learners Note:

Your tactics are the specific actions, sequences of actions, and schedules you will use
to fulfil your strategy.

If you have more than one strategy you will have different tactics for each.

A strategy to be the most well-known management consultant, as part of your vision to be "the
management consultant of choice for non-profit organizations in the Southwest" might involve
tactics like advertising in the Southwest Non-Profits Quarterly Newsletter for three successive issues,
advertising in the three largest-circulation newspapers in the Southwest for the next six months, and
buying TV time monthly on every major-market TV station in the southwest to promote your
services.

Or it might involve sending a letter of introduction and a brochure to the Executive Director of every
non-profit organization in the Southwest with an annual budget of over $500,000.

2 Tim Berry: www.bplans.com

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Step 1 WBS In a project or intervention, the Operational Plan would be a

detailed Work Breakdown Structure (WBS) that outlines all
the activities that need to happen to achieve each of the
project objectives
Step 2 Schedule The next step would then be to attach time lines to the
proposed activities. In a project it is normally the practice to
start at the proposed end date, and plot activities backwards
to ensure that it will take place within the time allowed.
Step 3 Resource Allocation The next step would be to plot your resources required –
human, administrative, material, equipment and physical
resources. Normal practice would be to develop a resource
allocation sheet that outlines resources required per
objective, and often per WBS activity

5.3.3 The Financial Plan

In addition to the resources mentioned above, it is essential that a financial plan is drafted in
conjunction with the operational plan.

1. Budget

The first element of the Financial Plan will be a budget. A budget is an outline of proposed
expenditure for the company / project / intervention.

The basis for the budget will be resources – all resources cost money, and are required to implement
activities, which lead to goal achievement. Your budget will therefore reflect standard expense lines
such as the following:

Human Resources
• Salaries and Wages
• Contractor fees
• Training and development

Physical Resources
• Rent, telephone, internet
• Water & electricity
• Stationery and office supplies
• Fuel / travelling, accommodation & catering
• Mail & postage

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Material and Equipment

• Products, marketing equipment
• Electronic equipment (laptops, faxes, copiers, cell phones)

2. Cash flow Statement

A business or project / intervention cannot survive without cash flow. It is therefore important to
plot the income in relation to the expenditure. If the money comes from a donor, the budget and
cash flow statement will tell the donor how much money is needed, for what and by when – very
few donors or banks will provide the funds without a sound financial plan in place.

3. Balance Sheet

The proposed budget and Cash Flow Statement will form the basis of your financial review during
and after the venture in the form of a Balance Sheet. This is a document that shows your budget,
proposed cash flow per month and actual expenditure per month, so that variances can be tracked,
explained, corrected or adjusted and reported.

17. Activity: Developing a Business Plan

Refer back to your Virtual Organisation you have chosen. Continue with the 3 rd part
of your Business Plan by brainstorming the following elements for your new venture
/ initiative.

1. Operational Plan:

2. Financial Plan:

3. Marketing Plan (from previous sections in this module):

5.4 Presentation and Update

On completion of your Business Plan, it is important to discuss your intentions with your
stakeholders. In the case of a company, this would be your Board Members and shareholders. In a
community initiative, this would mean the community leaders and relevant parties that have a
vested interest or legal position within the community or area.

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Quite often an agreement to pilot on small scale will be reached to test the viability of the initiative
and the business plan elements.

On completion of such a pilot / test phase, it would be important to take the results of the pilot
evaluation to update the business plan by incorporating the lessons learnt during the pilot phase.

18. Activity: Presenting a Business Plan

Refer back to your Virtual Organisation you have chosen. In your class, continue
with the 4th part of your Business Plan by developing a 20 minute presentation to be
presented to the rest of the group, who will be acting as your stakeholders.

Presentation Notes:

5.5 Implementation

As per your Business Plan, you are now ready to meet with your operational managers, supervisors
and staff to outline the plan and operational requirements. Each Manager will then be responsible
for the scheduling, resource allocation and management of his portion of the Business Plan.

5.6 Review

Throughout the implementation of the business venture / initiative, it would be critical to monitor
and review the implementation progress against the Business Plan.

The areas that are most commonly monitored are as follows:

• Operational Targets
• Financial Plan
• Return on Investment

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19. Activity: Reviewing a Business Plan

Refer back to your Virtual Organisation you have chosen and continue with the last
part of your Business Plan by identifying the review mechanisms and quality
indicators you would use to monitor your virtual business venture.

In other words, how will you conduct monitoring, and what will you monitor?

Review Notes:

5.7 Business Plan Summary

In summary of the Business Plan, we must understand that a business plan is part of a process. You
can think about the good or bad of a plan as the plan itself, measuring its value by its contents.

There are some qualities in a plan that makes it more likely to create results, and these are
important. However, it is even better to see the plan as part of the whole process of results, because
even a great plan is wasted if nobody follows it.

Planning is a Process, Not Just a Plan !!

A business plan will be hard to implement unless it is simple, specific, realistic and complete. Even if
it is all these things, a good plan will need someone to follow up and check on it.

The plan depends on the human elements around it, particularly the process of commitment and
involvement, and the tracking and follow-up that comes afterward.

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Learners Note:

Successful implementation starts with a good plan.

There are elements that will make a plan more likely to be successfully implemented.

Some of the clues to implementation include:

• Is the plan simple? Is it easy to understand and to act on? Does it communicate its contents
easily and practically?
• Is the plan specific? Are its objectives concrete and measurable? Does it include specific
actions and activities, each with specific dates of completion, specific persons responsible
and specific budgets?
• Is the plan realistic? Are the sales goals, expense budgets, and milestone dates realistic?
Nothing stifles implementation like unrealistic goals.
• Is the plan complete? Does it include all the necessary elements? Requirements of a
business plan vary, depending on the context.

Learners Note:

There is no guarantee, however, that the plan will work if it doesn't cover the main
bases.

There are many different formats and templates for a Business Plan, but all contain the same critical
areas.

20.Activity: Business Plan Areas

Look at the following aspects that are included in a Business Plan, and identify the
content and purpose of each.

No Business Plan Area Purpose Content

1 Vision

2 Mission

3 Business Description

4 Market Analysis

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No Business Plan Area Purpose Content

5 Product/service need

6 Business Structure and

resources

7 Business location

8 Analysis of competition /
resistance / challenges
9 Projected Budget

10 Projected Cash Flow

11 Projected Income /
Return on Investment

12 Personal Investment and

Skills

13 Implementation Schedule
/ Operational Plan

14 Marketing Plan

15 Quality Indicators /
review mechanisms

Resource: Business Plan

Refer to resource guide for an example of a Real Estate Business Plan.

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1 Self Assessment

Self Assessment
You have come to the end of this module – please take the time to review what you
have learnt to date, and conduct a self assessment against the learning outcomes of
this module

2 Portfolio Activities

Portfolio Activity:

Refer to your Portfolio Guide for the assessment activities related to this section.

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Module 2: Sales and Marketing of Real

Estate
Learning Outcomes

The following learning outcomes are covered in this module.

S/O Specific Outcome Learning Outcomes

No
1 Market a property Demonstrate understanding of the real estate marketing
context and mix with examples.
Outline the product and service elements of real estate
products.
Discuss buyer behaviour and typical profiles in the real estate
market with examples.
demonstrate all marketing processes in various work
contexts.
Compile a marketing and advertising plan in relation to own
business context.
Compile a comparative market analysis and assessment in
relation to own targets, business context and desired market
share.
Analyse results of sales and leasing of residential property to
determine future sales focus and opportunities.
2 Sell a property Demonstrate understanding of prospecting techniques and
methodologies with examples in various real estate contexts
Demonstrate understanding of and apply methods for
organising sales teams in various real estate contexts in own
work context.
Listing and multi-listing systems are described with examples.
The property is valuated in order to determine selling price
List a property and obtain mandate within given time frames.
Explain and apply the principles of cost-based and value-
based pricing to determine viable purchase prices.
Present a property by establishing relationships between all
stakeholders
Explain the procedure for making an offer to purchase with
examples.
Negotiate and close a sale according to regulations, policies
and procedures that apply to Real Estate negotiations
3 Let and hire a property. Explain the procedure for an offer to let/hire with examples.

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S/O Specific Outcome Learning Outcomes

No
Perform the actions to qualify Lessees and negotiate a
transaction for letting and hiring property in accordance with
business policies, procedures, legal and statutory
requirements.
Explain and apply the principles of value-based and cost-
based pricing to determine market related rentals from a
letting and investment perspective.
Complete and submit all documentation relating to the
letting/hiring of a property to the relevant stakeholders
within given timeframes
Explain and demonstrate administering of leasing of
properties in own work context.
Draw a differentiation between procurement and
administration functions in letting and hiring property.
4 Apply a working Explain the purpose of the Sectional Titles Act with specific
knowledge of reference to the different role-players within Real Estate.
Community Scheme Explain Key definitions relating to sectional title with
legislation and its examples.
related regulations and Describe the method of division of buildings into sections and
acts. common property, and acquisition of separate ownership in
sections coupled with joint ownership in common property,
as being the prime purpose of the Act.
Analyze the practical distinctions between ownership of a unit
under sectional title and ownership of a conventional
detached dwelling on its own separate piece of land.
Outline the consequences of the opening of the Sectional Title
Register on the rights of the developer and the purchaser of a
unit in a scheme.
Demonstrate understanding of the overall actions and
activities necessary for the division of buildings into sections
and common property, and for the acquisition of separate
ownership in such units.
Explain the requirements relative to the documentation and
certificates as prescribed by the sectional titles act and
regulations relative to the submission of a draft sectional
plan.
5 Apply after-sales Demonstrate understanding of the documentation arising
services in the sales after the sale is completed and submitted to relevant
process in a real estate parties/institutions within given time frames
context. Describe the sales and marketing benefits of facilitating the
management of suspensive or resolutive contractual
conditions
Explain the sales and marketing benefits of assisting the
parties in understanding and complying with legal and
financial obligations.
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S/O Specific Outcome Learning Outcomes

No
Explain the sales and marketing benefits of explaining the
conveyancing process, special contractual clauses and
addenda to the parties.
Explain the value of managing communication between and
with the parties.

1. Introduction to the Sectional Titles Act

A Sectional Title life-style brings together people from diverse backgrounds,

age-groups, interests and philosophies. Often, the only common factor is
ownership of a Unit in the Scheme in which they live. Inevitably, integrating
such diverse backgrounds into a stable, happy and successful Scheme presents
problems.

The Sectional Title Act No. 95 of 1986 prescribed Management and Conduct rules that apply to every
Sectional Title Scheme and laid down the framework for running such a Scheme. The Act allows
some rules to be changed, providing none of the changes go against the spirit of the Act. The
procedures to effect these changes are prescribed in the Act and must be carefully followed.

Key definitions of the Act:

Words Definition
Sectional Title developer the registered owner of land that lies within the area of a local
authority on which a building or buildings have been built, or will be
built and which has been divided or will be divided into two or more
sections under a sectional title scheme
Architect /land surveyor A professional person who has been appointed by the developer to
draw up a draft sectional plan according to the provisions of the Act.
Actual measurements must be taken for the plan to be drawn up.
Section This can be either a specific portion of a building or a separate
building as indicated on the sectional plan. A section comes into
existence when the sectional plan is registered. Each section is
distinguished in terms of a number and the plan indicates its
boundaries. If there is a common wall between two sections, the
boundary is the median line of the boundary walls. The median line
of floors and ceilings also form the boundary of a section. (Each
section is therefore represented by the interior of the actual
apartment).
Undivided share in An undivided share means that the owners cannot dispose of an
common property undivided share in sectional title independently as in separate title
co-ownership. Common property relates to the land on which the
scheme is built along with the part of the building/s that does not

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make up part of any section (e.g. lifts, stairs, garden, swimming

pool, refuse room etc).
Unit The total portion of the building purchased by an individual owner.
It consists of a specific section in the building together with its
undivided share in the common property. A unit is deemed to be
immovable property and as such it can be mortgaged. The section
and undivided share cannot be separated as the make up the unit
which is transferred into the name of the purchaser. (The owner
possesses the unit which is represented by the section/apartment
and the undivided share in the common property).
Exclusive use area The sectional plan can indicate that certain portions of the common
property are reserved for use by the owner of a particular section
(e.g. a parking bay or private garden). This right must be ceded to
the new owner and a notarial deed is registered in his/her favor
against the title deed of the sectional title scheme. This right may be
sold and transferred to another owner in the sectional title scheme
and can even be mortgaged or leased.
Participation quotas The formula to determine the size of the owner’s undivided share in
the common property, monthly levy contribution, value of the
owner’s vote and the amount that the owner would be liable for in
the event of a judgment debt against the body corporate. In a
residential scheme the PQ of a section is determined as a
percentage expressed to four decimals. The floor area of the section
is divided by the floor area of all the sections

1.1 Summary of the Act

In buying into a scheme owners will acquire a SECTION (or Sections), and a share
of the COMMON PROPERTY. These are collectively known as a UNIT. In practical
terms, a Section is usually a flat or townhouse, but may also be a garage,
domestic staff room, parking bay or external storeroom.

In many Schemes, the garage and external rooms may NOT be sections, but may be part of the
common property in which you may have EXCLUSIVE USE.

The outside of the building is owned by the Body Corporate. In the interest of keeping uniformity,
therefore, minor changes may be approved (in writing) by the trustees. This includes all external
changes, i.e. aerials, satellite dishes, awnings, enclosures, changing of exterior colour schemes, etc.

The role-players involved in a sectional title scheme are the developer along with his/her appointed
architect and/or land surveyor who must draw up the draft sectional title plan for the development.
This draft plan gets submitted to the Surveyor-General in Pretoria for approval. Once the draft has
been approved, the developer may apply to the Registrar of Deeds to have the sectional register
opened and to have the sectional plan registered. The units can then be transferred to individual
owners who make up the Body Corporate of the scheme.

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Learner Note:

The success or failure of most schemes rests almost entirely with the Trustees. The
role of a Trustee is not an easy one. It is time-consuming, often frustrating, requires
sensitivity, the patience of a saint, the wisdom of Solomon, and, just occasionally,
the hide of a rhinoceros! A Trustee is a manager, negotiator, mediator, and peace-
maker.

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Mentored Discussion: Sectional Titles Act

Your facilitator will lead a class-room discussion on the impact of the New Sectional
Titles Act in the Real Estate Environment. In the discussion, answer the following
questions:

1. What was the impact of the Act on Real Estate business and agents?
2. How did the market respond to the Act?

1.1.1 The division of buildings into sections and common property

Property that is divided into sections and common property makes it possible
for a person to own a unit in that property. This is the prime purpose of The
Sectional Titles Act - before this Act came into operation it was impossible to
buy a portion of a building as a portion could only be rented on a temporary
basis. This was due to the common law principle that all permanent
attachments on land form a single legal object with the land which is
inseparable.

This meant that the owner of the land was also automatically the owner of the buildings on the
separate title land. Sole ownership of a separate title property includes the land and all permanent
improvements. The land (erf) is described on the Title Deed of the property along with any
restrictive conditions that have been registered against the title deed and any other limited real
rights that burden the property like servitudes, mortgages and long term leases.

The Sectional Titles Act overcomes this state of affairs whereby a purchaser of a unit, which
comprises one or more sections, coupled with an undivided share in the common property, now on
transfer becomes the sole owner of the section/s as well as joint owner of the common property.

Learner Note:

It is of particular importance that an estate agent who is party to the selling or

leasing of a sectional title unit understands the nature of sectional title ownership
and the following aspects need to be taken into account:

• When the offer to purchase/lease is drawn up, the sectional title unit must
be accurately described as the object that that is bought and sold / hired and
leased.
• The opening of the sectional title registers as a prerequisite for transfer.
• The opening of the sectional title register as a prerequisite for the payment
of monies (deposits paid by purchasers) held on behalf of the developer to
the developer.
• Requirements relating to the sale of a unit off-plan.
• Requirements relating to the sale of a unit in an existing building.
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• Requirements relating to the transfer of a unit.

• The management rules of the scheme.
• The prospective owners’ rights and duties with respect to conduct rules.
• The prospective owners’ rights and duties with respect to participation
quotas.

1.2 The procedure to open a Sectional Title Register

The procedure that has to be followed in order to open the Sectional Title register needs to be
understood so that the agent can explain the necessary activities to clients. The rights of the
developer and the purchaser also need to be understood and explained. These aspects are as
follows:

• After the draft sectional plan has been approved by the Surveyor-
General, the developer applies to the Registrar of Deeds to register the
sectional plan and to open the sectional title register in terms of Section
11 (1) of the Act. The opening of the register means that the units come
into existence and can be transferred to the purchasers. The application
must be done in terms of prescribed documents which include a schedule that has been certified
by a conveyancer whereby any servitudes and conditions of title that may exist on the land as
well as other conditions which may be imposed by the developer are documented. In the event
that the developer has registered a mortgage bond over the property, the mortgagee’s consent
must be obtained.
• The Registrar will register the sectional plan and give it a specific number once the requirements
of the Act have been complied with. Simultaneously with the registration, the Registrar opens
the sectional title register for the property and issues the developer with a certificate of
registered sectional title for each section along with its undivided share in the common
property. The developer is also issued with a certificate of real right with respect to any
exclusive use areas that have been denoted on the sectional title plan.
• At this stage the property (land plus improvements) has legally been divided into sections and
common property in terms of Section 13(1) of the Act.
• The developer is now in a position to grant transfer of ownership in the individual units to
individual purchasers and the estate agent or conveyancer holding monies in trust payable to
the developer, may now pay such monies over to the developer.

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1.2.1 The rights and duties of the purchaser

The purchaser, once transfer has been affected, must:

• make use of his/her section and or exclusive use area in any way, provided
he/she does not cause a nuisance to any other occupier of a section in the development scheme.
If a particular section or exclusive use area has been earmarked to be used in a particular way in
terms of the registered sectional plan, the purchaser may only use it in the prescribed fashion
unless all the other owners in the scheme give their consent for it to be used differently. (The
construction of an improvement on an exclusive use area may not take place without consent
from the trustees, which may not be withheld unreasonably);
• allow any person authorized in writing by the body corporate at reasonable times to enter
his/her section/exclusive use area to inspect, maintain, repair or renew parts like plumbing,
electrical wiring, cables etc.;
• maintain his/her section/exclusive use area in good repair and in a clean and neat condition;
• carry out all work on the section that may be instructed by the local authority and be liable to
pay the expenses thereof; and
• Notify the body corporate immediately of any change in ownership in the section.

The purchaser, once transfer has been effected, is entitled to

• Subdivide the section or consolidate two or more sections, provided that the trustees of the
body corporate have consented as well as the mortgagee of the section. A plan for subdivision or
consolidation must be approved by the Surveyor-General and the plan must then be registered
at the Deeds Office;
• Extend the boundaries or floor area of the section (e.g. enlarge a room or build a room on) with
approval of the body corporate, authorized in terms of a special resolution. A conveyancer then
has to certify that the PQ of the section will not be deviated from by more than 10% as a result
of the extension (if the deviation is more, the mortgagees of all the sections must consent to the
registration of the extension of the sectional title plan which needs to be approved by the
Surveyor-General and registered in the Deeds Office;
• Take out insurance to cover any damage to his/her section, although the body corporate has
taken out insurance.
• make use of the common property, but may not appropriate any part of the common property
for his/her exclusive use unless such a right has been obtained to this effect
• transfer his/her registered right to the exclusive use of a specific part of the common property
to any owner of a section in the particular sectional title development scheme; and
• enforce his/her rights by normal legal proceedings in a prescribed fashion by serving written
notice on the body corporate in which the body corporate is given one month to institute
proceedings and should it fail to do so a Court application can be made

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1.2.2 The process of division into sections and common property

When dealing with the division of a property into sections and common property in terms of the
Sectional Titles Act, one needs to distinguish between three different scenarios:

a unit that is to be sold ‘off-plan’, in other words where

the sales are to take place before the sectional plan
has been registered

the sale of a unit by a developer in an existing building

and by an owner other than the developer in an

existing building

1.2.3 ‘Off-plan’ sales as opposed to sales of existing units by a developer

It is possible for a developer to sell units ‘off-plan’ before the sectional title register has been
opened. Section 26 of the Alienation of Land Act 68 of 1981 however, states that no person may
receive any consideration (including the deposit) when a unit not yet in existence is sold.

The term ‘consideration’ refers to any portion of the purchase price and interest (excluding rent or
occupational interest). In the event that a deposit is payable to an estate agent or conveyancer, the
amounts thus paid by purchasers must be kept in the estate agent’s or conveyancer’s trust account
until the date of registration of the sectional title plan.

Learner Note:

If the units in an existing residential building are to be sold and there are tenants
occupying the apartments, section 10 of the Sectional Titles Act prohibits the
developer from selling the units unless the following requirements of the Section
have been complied with

• The developer must, in writing, offer the unit for sale to the tenant (delivered
personally or by registered post)
• This offer must be kept open for 90 days for acceptance by the tenant
• If the tenant has refused the offer or the 90 days have expired, the developer
may sell the section in question to another party
• The developer may not, for a period of 180 days thereafter, sell the unit to
another person at a lower price than that at which it was offered to the tenant,

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unless the developer first offers it at the lower price to the same tenant for 60
days. Should the tenant now not accept the second offer at the lower price, or if
the period of 60 days expires, the developer may sell the unit to another party.
• Notice to vacate may be given subject to the provisions of the lease

Any contract of sale that the developer enters into that is contrary to the above
provisions will be null and void and any contravention of these regulations is a
criminal offence.

Any contract of sale that the developer enters into that is contrary to the above provisions will be
null and void and any contravention of these regulations is a criminal offence

Learner Note:

Before the transfer of an existing unit can be affected, the Registrar of Deeds
requires an affidavit by the developer declaring that the relevant deed of sale is not
contrary to any of these provisions in the event that they apply to the particular
existing unit.

1.2.4 Sectional Title sales by persons other than a developer

There are no restrictions in the Act pertaining to sales of an existing unit by an owner who has
purchased from the developer or another owner. The only requirement is that the seller must notify
the body corporate as soon as the sale has taken place and a new owner is to become a member of
the body corporate.

Tip:

It is however, impossible for the transfer of such a unit to be effected unless the .
body corporate has issued a clearance certificate to the effect that all amounts due
have been paid in full or that satisfactory provision has been made for the payment
thereof.

1.2.5 Compulsory disclosures

When a sectional title unit is sold it is imperative to ensure that the agreement of sale is valid in
terms of disclosures that need to be made. The following disclosures must
be made in the deed of sale.

• Where the developer or the body corporate has reserved the right to
extend the scheme, it must be disclosed in every agreement of sale. If it
has not been disclosed the purchaser may have the agreement declared
null and void.

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• If the scheme is not a residential only scheme, the total PQ’s that have been allocated to the
sections and the PQ of the section that is being sold must be disclosed in the agreement of sale.

Tip:

If this has not been done, the agreement can be cancelled by the purchaser due to
non-disclosure.

• If the developer intends varying the values that have been attached to the owner’s voting power
and the liability of payment to the body corporate in terms of a monthly levy or to the judgment
creditor of the body corporate, the variation must be disclosed in the deed of sale unless the
sectional title register has been opened containing the variation. If the disclosure in the deed of
sale has not taken place or the register does not reflect the variation, such variation would be
invalid and have no force and effect.

Self Reflection:

Disclosures are very important to property buyers. What do you think could happen
if you fail to disclose information to any of the parties?

1.3 Documentation and Certification Requirements

The developer of a sectional title development scheme must appoint an architect or land surveyor to
prepare the draft sectional plan after an inspection of the property has been undertaken and
subsequent measurements have been taken in accordance with Section 6(1) of the Act. The plan
must contain specific information as prescribed in terms of Section 5 (1) of the Act as well.

Should the architect/land surveyor find that the building in question does not comply with the local
town planning scheme or that it does not comply with the building regulations, he has to apply to
the local authority for condonation of the non-compliance. The accuracy of the draft sectional plan is
regulated in terms of the Act which requires the architect/land surveyor to diligently comply with
obligations set out in the Act.

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21. Activity: Submission Documents

List the documents that have to accomplish the draft sectional plan to the Surveyor-
General for approval.

1.

2.

3.

4.

Tip:

Beetle certificates are usually not required where the property is a Sectional Title
unit. In many sectional title properties, the section consists of the inside of the unit
up to the middle of the containing walls, floors and ceilings.

Beetles infest the wood in a building especially the roof trusses. The unit, which the
owner is responsible for, excludes the roof trusses. The body corporate is therefore
responsible for beetle damage. But remember, the owner is a member of the body
corporate, and is therefore responsible for a portion of the body corporate's
expenses!

The Surveyor-general will approve the draft sectional plan if all the necessary
documentation has been submitted and he is satisfied that the plan has been drawn
up in accordance with the provisions of the Act. Environmental legislation must also
be adhered to.

Once the draft sectional plan has been approved by the Surveyor-General, the
developer may apply for the opening of the sectional title register at the Deeds Office. The
conveyancer’s certificate in terms of any servitudes and conditions of title that may exist over the
property as well as conditions to be imposed by the developer must accompany the application. The
mortgagee’s consent must also be obtained in writing and attached to the application.

The Registrar of Deeds will then register the sectional plan and it will receive an official number and
the developer will also receive a certificate of registered title for each unit (section plus undivided
share in the common property). The property is now deemed to be divided into sections and
common property and can be transferred to new owners.

Self Assessment:

Assess yourself by checking your understanding to the following questions:

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1. What is the purpose of the Sectional Titles Act?

2. What are the differences between ownership of a sectional title property and
that of another title property?

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2. Market a Property

The marketing mix in real estate context is essentially a method to communicate to existing and
potential clients. According to Marketing Communications (2004) as edited by Koekemoer this
communication consists of the following elements:

Advertising

Personal
Technology
selling

Direct
Response Promotions
marketing

Sponsor- Public
ships relations

Self Reflection:

Refer to Module 1 where an in-depth study was given on these elements.

22.Activity: Marketing Elements

Your facilitator will divide you into groups. With your partner describe various
methods and tools in which you would market a property using the following
elements:

Element Method Tool

Advertising

Personal Selling

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Element Method Tool

Promotions

Public relations

Sponsorships

Direct response

Technology

Learners Note:

An integrated approach to marketing would be advisable to estate agencies; thus

integrating all the above aspects to a degree. In this way the organization can derive
the maximum benefit out of its expenditure relating to marketing. The most
effective blend of these activities needs to be found by each organization depending
on their unique business plan and strategy.

Example Box:

One agency may find it in its best interest to spend the majority of its allocated
budget on advertising and a lesser amount on public relations. It is then found that
the public relations exercise resulted in extremely favorable publicity for the agency
due to positive feedback received from clients. This positive publicity then leads to
the advertising campaign being received very well as it has provided credibility to the
advertising.

The objective is to produce a mix that provides the ultimate synergy to marketing as a whole and
results in the best possible returns both financially and exposure wise for the estate agency.

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Mentored Discussion: Marketing Mix

Your facilitator will lead discussions on the approaches above. In the class, discuss
the following:

1. Advantages and disadvantages of doing marketing on the Internet.

2. In which scenario will an estate agent make use of public relations as a
marketing tool?
3. What are some of the promotions an estate agent can offer to prospective
clients? Is this a viable tool to use?

2.1 The Product and Service Elements of Real Estate

In a business context products refer to goods or services that can be purchased or sold. According to
Kotler, Armstrong, Brown and Adam in marketing (7th edition, 2006) products are those things that
satisfy a want or need that can be offered to the market. Both physical products and intangible
services are products that can be in demand and thus offered to the market for financial gain.

Goods can be described in terms of the following categories according to their degree of materiality:
Material goods are those that possess physical features, e.g. an immovable property that is for sale
and that can be viewed and assessed according to a potential purchaser’s wants
and needs.

Services entail tacit, non-material goods that do not possess physical features and
cannot be assessed before purchase, e.g. the real estate agent’s service in terms of marketing and
selling the property. A third category is where both goods and services are sold, e.g. the property
developer who markets and sells his/her stock in the form of immovable property

Services are the non-material equivalent of goods. A service is provided in return for payment and as
such is an economic activity but it does not result in ownership, which is the essential difference
between services and physical goods.

It has been said that a service is a ‘process that creates benefits by facilitating either a change in
customers, a change in their physical possessions, or a change in their intangible assets.’ The service
provider supplies a level of skill and experience and by so doing they participate in the economy.
Their investment in expertise requires marketing and constant upgrading in order to compete in the
marketplace.

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Services can be described according to their attributes:

• They are intangible and non-material.

• Because they are difficult to conceptualize, they need to be marketed by means
of creative visualization.
• The client also finds it difficult to evaluate or compare services before they
actually experience the actual service delivery.
• Service provision is a labor intensive exercise as they normally require much human activity and
the human factor is often the key success factor in service industries.
• There is also a high degree of interaction that takes place between the service provider (the
estate agent) and the service consumer (the property purchaser and seller) which means that
human relationships are of utmost importance during and after service delivery.

Learners Note:

The estate agent’s ultimate goal with respect to service delivery is building long-term
business relationships with both sellers and purchasers of property as the ‘product’
that he/she sells in order to make a living is the service that is rendered before,
during and after the sales transaction.

2.2 Buyer behavior and profiling

Once the estate agent has listed suitable properties to market, buyers need to be sourced. The
question that many new agents grapple with is where to find qualified buyers for the properties that
they have listed.

Before contemplating where to find potential buyers, it is necessary to determine the profile of the
potential buyers.

• Where do potential buyers live currently?

• What is their average income?
• What professions are they in?
• What is their average age group?

• What sort of life-styles do they lead?

• What is their average family size?
• What are their hobbies/sporting activities?
• What newspapers do they read?

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• What magazines are they most likely to buy?

• What radio stations/TV channels do they support most often?
• What shopping centers are they likely to frequent?
• What are their most common property requirements?

• Do they have any specific likes or dislikes that need to be taken cognisance of?
• How do they normally finance their investments?
• When are the best days and times to show them available properties?
• How long do they normally take before making a purchasing decision?

It is therefore clear that canvassing for buyers is also a task that cannot be attempted in a random
manner, but needs to be planned carefully. A specific target market needs to be established in
general in terms of the buyer’s profile for the area and then a more specific buyer’s profile can be
compiled for a particular property.

23.Activity: Buyers Profile

Your facilitator will divide you into groups. With your partner choose a residential
suburb of your choice. Use the guidelines above to draw up a buyers profile for that
area. You will have to do some research. Write down your sources.

Profiling question Answer

2.3 Real Estate Marketing Process

An overview of the marketing processes involved in the world of real estate including the sourcing of
properties, advertising, selling and providing after-sales service is discussed in this section.

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After Sales
Adveriting
Service
•Inspect •Sell existing
properties •Draw up properties •Keep your
•Analyse marking on listings promise to
current stock the clients
plan
Sourcing Selling

2.3.1 Sourcing properties

The very first activity that an estate agent has to undertake is to source properties to sell. Some
people in the industry refer to this activity as ‘canvassing’ or ‘prospecting’. When joining an existing
agency, there will be properties on the agency’s books that have been mandated to the agency to
sell and the new agent will be expected to source some new mandates for the agency. In order to
do this in a professional manner, the agent must be knowledgeable about the market that he/she is
working in.

The agent also needs to recognise what the major sources of business are in
order to tap into them to gain mandates. The agent, who controls the
mandates, controls the market! It is a well-known fact that the most
business conducted in the world of real estate emanates directly from
acquaintances, friends, relatives and neighbours.

If there are existing listings, those properties need to be inspected by the new agent after examining
and studying the listing. An analysis needs to be made of current stock containing the following
information:

In order to obtain new listings the agent must draw up a plan of action. A plan of action requires:
• An aim/objective (how many listings are needed to earn a required amount of money per
month).
• The establishment of a geographical area (called the farming area*).
• A time-frame.
• A summary of selling trends in the area (e.g. selling price to listing price ratios, volume of
sales in units and value).
• A summary of a possible target market of buyers and their price range (e.g. young
professionals, retirees).
• The market share of competing agencies; future developments in the area.

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Example Box: “Farming Area”

The estate agent’s farming area is a designated area of potential that is workable and
in which the agent can become an authority. It can be a geographical area or a
property type, i.e. separate title (freehold), sectional title, share block or
development properties, with residential, commercial, industrial, leisure or
agricultural use attached to it.

Learners Note:
There are certain tried and tested methods of sourcing for new agents including:

• A letter of introduction to the home owners in the farming area

• Telephone canvassing
• Visits in person
• Brochures with business cards in post boxes.

All of these methods should reflect the image that the agent and the agency wish to project. No visit
to a potential seller should be attempted without the agent first ensuring a sound knowledge of the
amenities in the area, all properties that are for sale in the area, finance and basic taxation
knowledge and a well thought through, professional and rehearsed presentation. An agent must act
with integrity at all times and not ‘hassle’ clients.

Mentored Discussion: Sourcing of new properties

The facilitator will lead a class-room discussion on the advantages and disadvantages
of the following sourcing methods:

• A letter of introduction to the home owners in the farming area

• Telephone canvassing
• Visits in person
• Brochures with business cards in post boxes.

Tip:

After the initial meeting, the agent should follow-up with a letter of appreciation and
the relevant information regarding price, commission etc., as requested by the seller

Self Reflection:

Select the true statements with reference to an exclusive sole mandate:

• It must be in writing
• It must be signed by the estate agent only
• The seller is still entitled to sell the property and the agent will not be
entitled to claim for damages
• The agent must supply the seller with a written marketing plan
• The seller can withdraw the mandate, even if it is irrevocable.

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Self Reflection - continued:

• The mandate must have an end date

• The agent must supply the seller with a copy of the mandate as soon as the
mandate expires
• The mandator can extend the sole mandate verbally

2.3.2 Advertising properties

Once a mandate has been obtained to market and sell a client’s property, the agent must go about
drawing up a marketing plan to suit the needs and requirements of the seller/ mandator, the specific
property and the agency’s budget in order to attract the target market that would respond to the
marketing plan that has been devised.

Advertising has three main objectives:

1. To inform buyers of what stock is available.
2. To persuade buyers to call you.
3. To expose consumers to your stock and company on a regular basis.

Both the property’s functional and emotional benefits need to be stressed and features that are
converted into benefits contribute value.

The specific attribute or attributes of the property that are the most appealing must be recognised
by the agent and used in the copy to make a connection with the reader.

Learners Note:

Remember to focus on the strong points of the property and not to give too much
information, and to avoid abbreviations and real estate jargon.

Tip:

A newspaper advertisement is a highly effective way of exposing the property to

interested parties. Remember that every advertisement must be created with a
specific buyer in mind in accordance with your buyer’s profile and should be written
to:

• attract attention,
• arouse interest,
• create desire,
• inspire confidence and
• induce action in the people are interested in buying, i.e. potential purchasers

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The advertisement should also contain a price if possible as many potential purchasers lose interest
if there is no price. There should also always be reference to area or location and the agency’s logo
and the agent’s details must not be forgotten. The copy and picture should be changed after 2 or 3
exposures and a back-up buyer’s profile targeted.

24.Activity: Design a newspaper advertisement

Your facilitator will divide you into groups. Do the following:

1. Source examples of the following advertisements on residential properties in the market and
bring copies of these to the class-room.
• News paper advertisement
• Brochure
• Printed Web Page advertisement.
2. Identify the elements of the information on the advertisement that are presented on all the
examples.
3. Compare the advertisements in your groups.

4. Based on the above, design your own advertisement for a residential property of your choice.

2.3.3 Selling your properties

The main objective of an estate agent is to sell his/her listed properties. A willing and able purchaser
needs to be introduced to the home, who then enters into a binding agreement of sale with the
seller.

The selling activity starts when the agent starts building a relationship with the seller at their initial
meeting and culminates when the seller accepts the offer to purchase made by the purchaser that
was introduced to the property by the agent.

The marketing activities were then completed successfully when the ‘right
buyer’ made an acceptable offer to the seller.

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The act of selling a property does however not end once the agreement has been signed. The agent
needs to provide the buyer and the seller with after-sales service in order to ensure that the service
that was promised during the sourcing of mandates and the marketing of the property are delivered.

2.3.4 After sales service

A good estate agent who provides a professional service will always ensure that his/her clients are
catered for as well after the sale as they were before the sale. In order to obtain the mandate to sell
the client’s property the agent markets and promotes him/herself as well as the agency that he/she
works for. Promises are made that need to be kept!

2.4 Show Houses

The main benefits of having show days is that it creates an opportunity to promote the
company and the agent working in the area, contributes toward creating area
dominance and is an excellent source of buyers and sellers. Furthermore, it provides a
service to the clients and creates a platform for the agent to give feedback to the seller regarding
price and buyers’ interest.

Once again the planning stage is extremely important to ensure a successful house showing. A
thorough knowledge of the area and the property in question is imperative and the agent must
ensure that visitors are personally welcomed. The entrance to the home must be attractive and
appealing and all documentation must be at hand and professionally prepared.

Learners Note:

A visitor’s book should be utilised to record visitor’s details and comments and the
agent should be wearing an identification badge and have brochures with
information regarding this and other similar properties to give to visitors as well as
area maps. Business cards as well as agreements of sale must also be on hand as the
house is the agent’s office for that day.

Tip: Generate Valid Open House Leads

• Use an Open House Register that asks for buyer's name, address, email address,
and phone number. Be sure to fill out the first name on the register completely.
(People tend to follow what other visitors have done before them).
• Hold a drawing for a gift certificate from a local department store.
• Award a gift certificate, basket, or other prize for the person who guesses the
correct selling price and date of the house you are holding open. The prospect
will have to give you a valid phone number in order to win. If there is a tie, the
person who guesses the nearest selling date wins. Call every prospect back to let
them know the results.

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• Hold a drawing for a pair of first-run movie tickets at every open house you hold.
• Have a list of "switches" (other good properties that are not open).
• Have a "REO list" (foreclosure) of properties that are not open.
• Have a list of probate or other distressed properties available for those clients
who want a "great deal" and "don't mind doing work".
• Have a loan officer available to pre-qualify your prospects on the spot.
• Offer a free neighbourhood "email newsletter" (or regular newsletter) for people
who would like to know more about the neighbourhood.
• Offer complimentary information on tax breaks for those who are 55 and older.
• If you have a "really hot" prospect, use this technique from Tom Hopkins send
them home with a quart of ice cream so they won't look at any other open
houses.

Progress reports are an important part of providing a professional service to the

seller and should form part of the marketing plan.

These written reports should be made on a regular basis, i.e. weekly or

fortnightly as agreed with the seller and serve as an excellent communication
tool between agent and seller and aid largely in building a solid relationship
with the client.

They keep the seller informed as to the progress that is being made with the marketing, feedback
from buyers and create the opportunity to talk to the seller about a possible price review backed by
current market information.

Learners Note:

Reports such as these on a regular basis will ensure that the client never feels
neglected or that the agent made futile promises just to get a mandate. This serves
as proof that the agent is actively involved in marketing the property and should put
the seller’s mind at ease and keep him/her informed.

Self Reflection:

1. Why do you think it is important that an estate agent provides an after-sales

service to his/her clients?
2. What can you suggest to a new estate agent to create area dominance in the
canvassing stage of the selling cycle?

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3. Selling a Property

Selling a residential property takes hard work, dedication and specific knowledge. This section will
give learner estate agents an insight into the actual practice of selling and all the aspects that it
entails from the first meeting with a potential property buyer until the sale has been successfully
concluded with the seller.

3.1 The Selling Cycle

The process of selling a property is a cycle that is ongoing and consists of the following elements:

We have covered the planning and preparation and the actual marketing the property earlier on in
the previous section which included aspects of sourcing properties, advertising and selling. We also
covered the importance of a good after-sales service.

We will now focus on canvassing/prospecting for buyers and sellers, i.e. properties to sell, estimating
property value and listing the property, i.e. qualifying the seller, presenting the property, qualifying
the buyer, obtaining of the offer and the negotiating and closing elements of the selling cycle.
During this phase of the selling cycle the skill of handling and overcoming objections is extremely
important

There are some factors that need to be considered by the estate agent before he / she starts
working directly with clients.

• Know your company policies and procedures.

• Know your stock.
• Make and confirm appointments well in advance.

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3.1.1 The Purpose of Canvassing

Canvassing for properties to sell is the first step in the selling cycle. Finding the right stock is
paramount to an estate agent’s success because the agent that dominates the farming area
dominates the sales. Canvassing is a golden opportunity to start creating area dominance by
meeting with potential sellers, finding saleable stock, meeting potential buyers (remember sellers
are also buyers) within the farming area and personalising your marketing.

In order to canvass in a professional and effective way in order to create area dominance, the agent
must adhere to the following:

Plan his/her canvassing Get to know the area Personalise his/her marketing
activities with care activities

Create a presentation folder Set up ways to meet people Preplan a marketing campaign
face to face

List saleable stock Devise ways to stay in touch Develop a personal business
plan

3.1.2 Creating a Presentation Folder

Whilst canvassing for stock the agent has the opportunity to promote him/herself and the company
that he/she works for, to point out their strong points and points of difference and to control the
clients’ perceptions.

Tip:

You should build up a personal presentation folder that can be utilised for this
purpose.

• sales in the area,

• current listings,
• a copy of a CMA (explained fully in 1.4 of this chapter),
• a good marketing plan,
• copies of advertisements and marketing brochures,
• letters of recommendation from previous clients; and
• copies of documentation used by your agency.

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25.Activity: Presentation Folder

You are required to list the type of information that will make up your presentation
folder.

3.1.3 Personalised Marketing

In your endeavours to create area dominance, it is very important when canvassing for properties to
personalise your marketing activities. If the homeowners know you and can identify with you and
what you stand for and what you do, they will support you. Here are some ideas on how to
personalise your marketing:

• Do postal drops in the area, advertising some properties.

• Send out regular newsletters re the property market in the area.
• Do some promotions in the local newspaper.
• Personalise brochures and stationery.
• Sponsor some local events.
• Become involved in community development.

3.1.4 Meeting People

Making an effort and going out to meet people is an important activity when starting out. The
homeowners in your “farming” area need to be told about you and what you do and what you stand
for.

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Tip:
• Your current friends, acquaintances and family members are your personal
sphere of influence and should be informed about your new occupation so
that they can refer business to you.
• Meetings can be set up with home-owners in your “farming” area so that
you can meet them and present what you stand for to them personally.
• Telephone canvassing is another way of making contact, but needs to be
done professionally so as not to irritate the client.
• Private sellers can be contacted and you can offer your service in the event
that they are unsuccessful.
• Listings that have expired can be revisited.
• The company’s previous client base is a wealth of information and can be
called on.
• Having a show house in the area will draw not only potential buyers, but also
homeowners in the area, so invite them to your show day!
• Do not forget to make use of the agency’s referral network and to follow-up
on these leads that are handed to you on a plate.
• Other agent’s listings can also be followed up on, as long as they are not sole
mandates.

3.1.5 Saleable stock

When an estate agent undertakes a canvassing drive, it is necessary to ensure that the stock that is
canvassed is in fact saleable. For example, no one has the time or money to waste on stock that is
extremely overpriced.

The following criteria should be kept in mind when canvassing for saleable stock:

The sellers motive to sell

Price must be market related

Kerb appeal

Location

Condition of property

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The seller’s motivation is probably the most important factor when canvassing for saleable
properties, but the price at which the property comes onto the market will determine how long it
will take to sell.

3.2 Qualifying the Buyer

There are a number of different situations that give rise to the necessity of qualifying a buyer:

• A potential buyer walks into the office.

• A telephonic response to an advertisement.
• At a pre-arranged meeting with a prospective purchaser.
• At a show house.

Learners Note:

Determining the buyer’s motivation and needs is critically important. One of the first
things that must be established is how urgently the buyer needs to find a new home
in your area.

The agent needs to ascertain the soonest and latest dates on which the buyer needs to take
occupation, i.e. move in. The reasons for having to take occupation on a particular date and
whether the proceeds from the sale of the buyer’s present home need to be utilised to finance the
purchase of a property are good indicators of the buyer’s buying position.

It is a good idea to make use of a ‘Buyer’s listing form’ when qualifying a buyer where the questions
that need to be answered are listed. The buyer’s financial position must also be analysed and such a
pre-printed form can make it easier for the agent to ask the relevant questions.

An agent needs to enquire whether the buyer is in a position to pay a cash deposit and relevant
transfer costs and transfer duty and in what income bracket he/she is. The necessity for a mortgage
loan must also be established and whether proceeds from the sale of the buyer’s present home will
be utilised to finance this acquisition.

Here are a few questions additional to the ones above that can be included:

• All relevant personal details including the size of the family?

• Dependant on public transport?

• Other areas they may be interested in?

• How long have they been looking?

• Have they seen any other properties in the area that the liked?

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• Why have they not bought yet?

• Do they own a property or are they renting?

• Is their current property on the market and for how long?

• How much do they intend investing in a new home?

• Would the purchase be subsidised?

• Do they have preference for a particular bank?

26.Activity: Qualifying the Buyer

Role-play activity. Your facilitator will divide you into groups. With your partner do
the following:-

a) Get a copy of a Buyer’s Listing Form’ from your workplace.

b) In your group, use the listing form and role-play an interview with the buyer.

Thereafter the purchaser’s property requirements need to be discussed and documented. Before
the agent can service the buyer he / she must get to know and understand the needs and desires of
the buyer if a successful sale is to be negotiated. This would include aspects such as the location,
physical size of the land and or improvements, the style of the house and preferred accommodation,
and proximity to schools and other amenities.

Buyers also need to be qualified legally. The agent must ascertain whether the buyer is legally
entitled to purchase a property in terms of common law, the Matrimonial Property Act 88/1999 and
the Immigration Act 13/2002. Should the purchaser wish to purchase the property in the name of a
company, close corporation, trust or jointly in a partnership or as co-owner with other parties, the
estate agent must ensure that he / she knows the legal implications and contractual capacity
requirements pertaining to the particular situation.

Learners Note:

A South African citizen can enter into an agreement to purchase property if he/she is
a major (over the age of 21 years) or has been declared a major by the High Court in
the event that he/she is older than 18 years. On marriage a minor also irrevocably
becomes a major. A minor of 7 years old or older can enter into an agreement with
a guardian’s assistance in the form of written consent, or the guardian can enter into
the agreement on behalf of the minor.

Legal qualification of a buyer would furthermore entail establishing

whether the buyer is an un-rehabilitated insolvent, as insolvents may not
enter into agreements without their trustee’s written consent.

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If the buyer is buying the property in his/her personal capacity and is married in community of
property, a mortgage cannot be registered over the property and a spouse may not bind himself /
herself as surety without the other spouse’s written consent attested by two witnesses. The buyer
can purchase the property without the spouse’s consent, but property ownership is registered in the
names of both spouses.

(When that property is sold, the seller requires his/her spouse’s written consent attested by two
witnesses). If the buyer is buying in his/her personal capacity and is married in terms of an ante-
nuptial contract (out of community of property) each spouse has full contractual capacity of his/her
own properties.

Learners Note:

Foreign buyers may purchase property in South Africa, but must be in possession of
a permanent or temporary residence permit. They qualify for a mortgage loan of
50% of the purchase price and must open a non-resident bank account in South
Africa. Illegal immigrants do not qualify to purchase property. If someone, e.g. a
tourist from a foreign country, has entered the country on a permit stamped in
his/her passport, he / she is entitled to purchase a property in South Africa.

3.2.1 Negotiating with the Buyer

When the selling cycle is in the ‘Negotiating with the Buyer’ phase, the estate agent needs to
understand and put into practice the following steps:

• Know the client and property.

• Prepare and plan.
• Point out of benefits.
• Recognise the buying signals.
• Handle objections.
• Finally make the written offer to purchase.

Negotiating with the buyer is a culmination of everything that has transpired up until now in the
selling cycle.

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3.3 Organising Sales Teams

No estate agency can rely only on a brand, salesmanship and personality to get business today. They
have to be more strategically positioned and be able to differentiate themselves from their
competition by being well-organised and by appointing and training the right sales people.

In any real estate office where there is more than one estate agent who must canvass for properties,
market them to potential purchasers and wrap up the selling transaction, these agents need to be
organized into sales teams.

The advantage of having teams that work together, rather than having agents competing with one
another in the same office is obvious.

Multiple skills are bundled together to better serve the client, which are both beneficial for the client
as well as for the people on the team. Sales teams also help build client confidence and
communicate value.

Sales people are however normally highly competitive individuals who may have difficulty being
good team players. In order for team selling to work effectively salespeople is required who are
willing to make sacrifices for worthwhile team goals.

The following are critical success factors in organizing sales teams:

• Building trust amongst team members is essential and team members must possess a strong
sense of trust in the other team members
• Having the right people who have the right attitude, e.g. who have a desire to serve their clients
• Members must all be self-motivated to work equally hard as to not let other team members
down
• Having people who are trained to engage in healthy conflict that results in conflict resolution
• Having people that can be counted on e.g. they must be willing to be held accountable for their
actions and do what they say they will do
• All team members must be capable of utilizing good communication tools, processes and
systems

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3.3.1 Building Motivated Sales Teams

Tip:

One major personnel testing company has defined the following as the personal
traits of a successful salesperson:

• Stability
• Self-sufficient
• Self-confident
• Goal-directed
• Decisive
• Intellectually curious and
• Accurate.

The following five traits have also been identified:

• Optimistic
• Flexible
• self-motivated
• a people person and
• Empathetic.

When a property guru in South Africa was questioned on which characteristics a

successful estate agent should have, she responded with:

• Determination
• confident attitude
• passion for property and
• Integrity.

All sales teams need to be motivated externally by good compensation systems with built-in benefits
and incentives.

Sales people also thrive on recognition and they need to be secure in their knowledge that the will
be heard in the event that they encounter problems.

Team building is of utmost importance for any team to function optimally.

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3.3.2 Compilation of Sales Teams

Sales teams can be organized in a variety of ways depending on the size of the office and the area
that needs to be covered. Agents can work individually or in partnership with one or more other
agents, depending on the turnover of properties in the particular area (often referred to as a farming
area) as well as geographical size. The size of the area must be workable by the number of agents in
the partnership.

Teams can be arranged according to the different property types that need to be serviced in the
area, i.e. commercial properties, industrial properties, leisure properties, agricultural properties,
residential separate title properties, residential sectional title properties and new property
developments. If the area is relatively large, it can be subdivided into segments, where each
segment is allocated an agent or partnership. This type of team allocation will prevent agents in the
same office competing with one another.

3.4 Listings Systems

Properties that are for sale can be listed with estate agencies that belong to a multi-listing
organization. Once the property has been mandated to such an agency, the relevant agent loads the
property’s details onto the multi-listing network and then arranges an ‘open-house’ or ‘open-hour’
for all participating agents in the area. They then go and view the property at the given time and give
their view of an estimated possible expected selling price.

All members of the multi-listing organization have national access to the listed property’s
information and can refer potential buyers to the agents working in the particular listing area.
Commission is shared by the agencies whose agents have contributed to the sale, i.e. the listing
agency and the selling agency at rates that they have agreed on in their multi-listing membership
agreement.

3.5 Value-Based and Cost-Based Pricing

One of the most important services provided by estate agents is establishing a market related price
at which a property can be marketed. An estate agent is NOT a property evaluator and cannot
therefore do a valuation on a property. What has to be done, however, is an assessment to estimate
the probable price at which the property will sell, i.e. an estimation of the probable market value.

This estimation of market value can be based on either value-based pricing or cost based pricing in
terms of residential property. The value of income generating properties is based on the current and
future possible earning potential of the property.

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The value-based approach to pricing is straightforward and a relatively simple process that is
applied by the estate agent. This method can be applied to the estimation of value of residential
property where dwellings are of similar utility and it is assumed that the sales have taken place as
close to the date of valuation as possible. Provision needs to be made for adjustments as no two
properties have exactly the same utility and the time factor has to be taken into consideration as
well

The cost-based approach is applied by adding together the values of component parts of the
property to arrive at its total value. The value of the land is assessed as if vacant by analyzing the
sales of another vacant land and comparing them with the subject property. Thereafter, the value
of the improvements needs to be assessed in terms of replacement cost and then depreciation
(from new) needs to be assessed and deducted from the new replacement cost. The land value is
then added to the depreciated replacement cost.

3.5.1 Property Value

Sellers often want estate agents to market their properties at inflated prices. Such a seller is either
not a motivated, serious seller or is uninformed. It is the agent’s duty to explain to the seller how
the property market functions and that it is not in the seller’s best interests to under- or over-price a
property. A bona fide sale takes place at fair market value and the best price to begin marketing at is
as close to fair market value as possible.

Learners Note:

The following are distinct advantages of pricing a property correctly:

• A faster sale
• The best price is achieved
• Less inconvenience
• Better response to advertisements
• More qualified buyers
• No ridiculous offers
• A secure sale.

The method of estimating what a property WILL sell for is based on those prices that HAVE BEEN
paid recently in the market for comparable properties. This is called the method of Comparative
Market Analysis (CMA) and the value that is derived, is based on what a buyer would be prepared to
pay for a similar property i.e. the principle of substitution. This is an example of a value-based pricing
technique and is applied to most second-hand properties that are to be sold in the near future.

3.5.2 Factors that influence Property Values

An estimation of a property’s market value takes place after thorough investigation and analysis. It
still however, remains an expression of opinion and does not lend itself to precise calculations. The
estimation that is made is only as good as the information on which it is based as well as the
interpretation of that information.
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Before the actual CMA can be done, the estate agent needs to have a wide background to the
property market and take cognisance of current market trends in the world with respect to property
markets, current trends in Africa with respect to property markets, as well as within South Africa,
the particular province, the specific town, the exact area and location. The property market is
dynamic and without general and specific knowledge, the agent cannot do a professional analysis of
the current market.

Learners Note:

At a local level the estate agent needs to consider the following as important factors
that influence value:

• The utility of the property, which is influenced by the:

o physical nature (i.e. appearance, accommodation, size, age,

condition, distinguishing features);
o location (i.e. proximity to amenities, view, accessibility); and
o legal use that the property can be put to or restrictions that may
influence the value (zoning, servitudes).
o The relative scarcity of the property

• Demand and supply, which is influenced by disposable income; the

availability of credit; people moving into or out of the area; taste and
preferences of property purchasers

3.5.3 The Comparative Market Analysis CMA

In order to apply a CMA, the agent needs to firstly gather the market information as discussed above
and then select comparable properties to the subject property that is to be assessed.

Obviously the agent needs to firstly inspect the subject property thoroughly and get as much
information as possible from the current owners, including:

• Description of the property (erf number and street address).

• Size of the erf.
• Date of assessment.
• Purpose of assessment.
• Utility attributes (physical nature, location and legal use).
• Financial details (existing bond, purchase price, rates and taxes).
• Reason for assessment.

This information needs to be carefully documented and retained for comparison and report-back
purposes.

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Comparable properties would be comparable with respect to the utility factors, i.e. the physical
nature of the property, its location and legal use. A number of properties that have recently sold
(these give an indication of what buyers are willing to pay at present) would be selected and
documented according to the following guidelines:

• Description of the property (erf number and street address).

• Size of the erf.
• Date of sale.
• Utility attributes (physical nature, location and legal use and restrictions).
• Financial details (selling price, bond, and cash).
• Reason for selling.

A number of properties that recently came on to the market and have not yet sold (these give an
indication of current competing properties in the market) would be selected and documented
according to the following guidelines:

• Description of the property (erf number and street address).

• Size of the erf.
• Date of coming on to the market.
• Utility attributes (physical nature, location and legal use and restrictions).
• Financial details (price it is being marketed at, refused offers).
• Reason for marketing.

3.6 Obtaining a Mandate

Once the estate agent and potential seller have agreed on the price at
which the property is to be marketed, the agent needs to list the property
in detail and obtain a mandate to market the property.

When presenting the CMA to the seller in order to determine a value at which to start marketing the
property, the agent needs to be well prepared and versed in the functioning of the real estate
market with respect to aspects like supply and demand and scarcity.

The agent should also explain that the price at which the owner purchased and the amount of
money that has been spent on the property in the interim, are not deciding factors when
determining price. If the asking price is set at a fair market value, more qualified buyers will view the
home and thus increase the likelihood of a quick sale and the eventual terms of the agreement will
also affect the price that a willing buyer is prepared to offer.

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Learners Note:

An estate agent cannot commence marketing a property without a mandate. The

most common mandate that an agent is exposed to in South Africa is a seller’s
mandate where the seller instructs the agent to sell his/her property in return for
payment in the form of commission and the agent accepts the instruction. A
mandate can be given verbally, but this is not sound business practice.

The following must be in writing:

• A sole mandate which can be exclusive and irrevocable.

• A power of attorney whereby the agent is authorised to conclude certain
transactions on behalf of the client.

A seller can give an agent an ‘open mandate’ which means that any agent with such a mandate is
entitled to market and sell the property. No agent can in these circumstances claim to have the sole
right to sell that property.

At common law the seller is always entitled to sell his/her property him/herself, even if a sole
mandate has been granted. If, however, the sole mandate has been worded to the effect that the
seller’s right to sell is excluded during the currency of the sole mandate, the mandate becomes an
exclusive sole mandate. This means that the seller would be in breach of the agreement in the
event that he/she sells the property himself / herself during the mandate period and would be liable
for damages.

All terms and conditions of the sole mandate must be explained by the agent to the client and all the
legal consequences of the mandate must be spelt out in the written mandate according to the Estate
Agents’ Code of Conduct. The estate agent must supply the seller with a written marketing plan and
always act in the interest of the client.

27.Activity: Mandates

1. List the differences between open, sole and exclusive mandates.

Open Mandate

Sole Mandate

Exclusive Mandate

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2. What information must you give to your clients regarding each of these categories?

Open Mandate

Sole Mandate

Exclusive Mandate

3.7 Making Offer to Purchase

The estate agent normally uses a pre-printed document for the buyer to make
an offer to purchase a property. The blank spaces need to be filled in correctly
using the necessary care to ensure that all details correspond to what the
buyer’s intentions are and that all legal requirements are adhered to.

The agent must ensure that the buyer understands the meaning and consequences of making the
offer to purchase and explain all the material provisions to him/her.

3.7.1 The offer to purchase procedure

In terms of the Alienation of Land Act 68/1981, a contract of sale of property must be in writing and
signed by the parties to the agreement (or by their legally authorised representatives). In practice
estate agents make use of pre-printed documents. This document can either be named an ‘Offer to
Purchase’ or an ‘Agreement of Sale’.

Learners Note:

The offer must be brought to the attention of the seller either by presenting it to the
seller in person, faxing the document to the seller, or the agent can advise the seller
telephonically of the terms of the offer, explain the meaning and consequences to
him / her and then send it to him for signature. It is only once the offer has been
brought to the attention of the seller that the offer becomes binding if it is
irrevocable.

The offer can be made as a ‘clean offer’ whereby there are no conditions attached and the buyer
undertakes to pay the purchase price in cash. Should there however be conditions attached to the
buyer’s offer (e.g. his/her present house must first be sold or a mortgage bond must be approved or
the land must still be sub-divided and or rezoned), then the offer must be made conditional to this
event happening by a specific date in future. This event or events can be described as suspensive or
resolutive conditions in the offer to purchase.

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3.7.2 Termination of the offer to purchase

From the above discussion it is clear that the offer to purchase comes into being once the written
offer containing all the legal requirements is brought to the attention of the seller. The offer to
purchase will terminate before acceptance under the following circumstances:

• If the offer was made for a certain time period only, i.e. until 17h00 on a certain date.
• If the seller rejects the offer, it terminates automatically on the seller indicating that it is
unacceptable.
• If the buyer or seller dies before the offer has been accepted.
• If the offer is not made to be irrevocable until acceptance, the buyer can revoke it before the
seller signs his/her acceptance thereof. Revocation need not be in writing, but must be
brought to the attention of the seller.

There are certain instances where a buyer of residential property has the right to revoke the offer to
purchase within five days after signing the offer in terms Section 29A of the Alienation of Land Act
68/1981. This right is called the cooling-off right.

3.7.3 The cooling-off right

Learners Note:

The right to revoke an offer to purchase of a residential property, only applies to

buyers who have made offers for R250 000 or less made by a natural person (a trust
or company or CC would not qualify). If the person makes the offer at an auction or
by exercising an option or reserves the right to nominate a purchaser in his/her
place, the offer does not qualify to cool-off. If a previous offer had cooled-off on the
same property it does not qualify to cool-off again.

The buyer cannot waive the cooling-off right and the right must be recorded in the written offer to
purchase. In the event that the same buyer enters into more than one transaction within the five
days of the cooling-off period, it will be deemed that the first offer has cooled-off as soon as the
second offer is made. The buyer must now notify the seller that he has cooled-off in terms of the
first transaction. This does however not apply in the case where a buyer in good faith wants to buy
more than one property during the five-day period.

3.7.4 Defects and the voetstoots clause

All defects that the agent is aware of, or should reasonably be aware of, must be disclosed to the
buyer before the offer to purchase is made. The offer to purchase would normally contain a clause
stating that the property is purchased and sold ‘as is’ and is called the ‘voetstoots clause’.

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At common law, if a defect is patent (i.e. is clearly visible to anyone making a reasonable inspection
of the property) the seller cannot be held liable. If a defect is latent (i.e. it is not visible to anyone
making a reasonable inspection of the property) and it existed at the time when the sale was
concluded, the seller is liable at common law even if he/she did not know of its existence.

The voetstoots clause in the deed of sale, allows the seller to contract out of his/her liability for
latent defects that he/she was unaware of at the time when the agreement was concluded. This
clause however, does not exclude the seller’s liability for latent defects that were to his knowledge
and he/she deliberately failed to disclose in order to mislead the buyer.

Mentored Discussion:

Under the guidance of your facilitator, read the case study below and brainstorm the
procedures that you would follow.

Case study: Ms Y shows an interest in acquiring Mr X’s property. How would you
prepare the offer to purchase to ensure that Ms Y’s interests are not prejudiced due
to the defect in the roof (a latent defect)? When, during the procedure of making
the offer to purchase, will you address the problem with the buyer and the seller?
Include lines for notes / answers.

3.8 Negotiating and Closing the Sale

An estate agent must submit all written offers to the seller. Before presenting the offer to the seller,
the agent must study it carefully and consider the possible reasons that the seller may have for
rejecting the offer.

If the offer is at a price lower than the seller expects, the agent must be
prepared and have a CMA available as well as some supporting material re
current market trends to support and substantiate the offer. Records of all
marketing activities and report backs can also be of value.

The agent should under no circumstances put pressure on the seller to accept an offer that does not
meet with the seller’s objectives.

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3.8.1 Negotiating techniques

Learners Note:

Webster’s dictionary defines the concept of negotiation as:

The act of ‘conferring with another so as to arrive at the settlement of some matter’
and to ‘arranging for or bringing about through conference, discussion and
compromise.’

From this definition one can clearly conclude that negotiation is a process of discussion and
compromise and thus building relationships with the client. Negotiating an offer often revolves
solely around dealing with concerns and or objections.

To negotiate successfully an estate agent needs follow the following guidelines as set out in
Relationship Selling (2nd edition, 2008) by Johnston and Marshall and adapted to a real estate
context:

• Plan and prepare (know the seller/buyer and anticipate their concerns).
• Anticipation enhances negotiations (anticipate the client’s objections, e.g. commission
payment, offer price and address and solve it before it is mentioned).
• Say what you mean and mean what you say (honest answers, no double-talk, find out if they
question something that you do not know).
• Negativity destroys negotiations (do not become emotionally involved, i.e. angry or
despondent).
• Listen and validate customer concerns (the selling process is about change, listen to the
client’s concerns and respond to it in a positive way).
• Always value the value proposition (explain benefits; remember value is more important
than price.

Resource:

Refer to your resource guide for additional information on Johnston and Marshall’s
tips to the nine basic strategies for dealing with a client’s concerns and each can be
effective in the right situation.

3.8.2 The agreement of sale

Once the offer to purchase document has been finalised, the duly completed and
signed offer to purchase is presented to the seller for consideration and signing.
The estate agent should encourage the seller to read the offer and must explain the
meaning and consequences of the material terms to the seller. The agent must
ensure that all regulations, policies and procedures have been complied with.

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If the seller is a natural person married in community of property, his/her spouse must indicate
consent in writing on the agreement. The spouse’s signature must be attested by two competent
witnesses.

Should the seller not accept the offer exactly as it stands, he/she is entitled to make amendments to
the offer. This would amount to a counter-offer.

If the seller decides to accept the offer exactly as it stands, the seller must sign in full in the allocated
space and initial all deletions, changes and at the bottom of every page, indicating that only initialled
pages form part of the agreement. If there is an addendum attached to the offer to purchase, the
seller must sign it in full. Once the offer has been accepted in writing, a legally binding and
enforceable agreement of sale comes into being. If there are any suspensive conditions attached to
the offer that was accepted by the seller, the agreement only becomes binding and enforceable
once the suspensive conditions have been met, i.e. the mortgage loan has been approved.

The accepted agreement of sale must now be brought to the attention of the buyer as soon as
possible as the acceptance only legally becomes binding once the buyer has been informed thereof.

3.8.3 Amendments and counter offers

Once both parties have signed the agreement of sale, it cannot be changed or amended verbally.
Amendments can however be made to the original document by means of an addendum. This
addendum must refer to the agreement of sale and must be signed in full by both parties.

In the event that the seller makes a counter-offer as referred to earlier, and wants to change
something, for example the offer’s price or occupation date, it can be done, but not without risks. A
counter-offer where the seller has deleted the offered price, written in what he is willing to accept
and initials the change, is an outright rejection of the buyer’s offer, which amounts to termination of
the offer.

3.8.4 Contractual capacity

The parties to a contract must have the necessary capacity to enter into the contract. We have dealt
with natural persons, i.e. minors, and married persons and their contractual capacity earlier. We are
now going to discuss the capacity of private companies, close corporations, trusts and individuals
acting in a partnership and jointly as joint-owners.

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Companies and close corporations

Companies and close corporations (CCs) are known as juristic persons and are entities that exist
separately from their shareholders in the case of a company or members in the case of a CC.
Companies and CCs can own immovable properties in their own right. It is important to note that at
least 75% of the member’s interest or 75% of the company’s shares must be held by
members/shareholders resident in South Africa before a property can be registered in the name of a
company or CC.

• When selling a property to a company or CC it is important to obtain a copy of the respective

registration documents.
• A company is registered in terms of a Certificate of Incorporation and a CC in terms of its
Founding Statement.
• The sale agreement will not be valid unless the person signing on behalf of the juristic
person is properly authorised to do so on behalf of the company or CC.
• It is advisable to obtain a copy of the resolution containing such an authorisation and to
annexe it to the contract.
• The name of the company or CC must be cited in the contract and the authorised person
signing on behalf of the company or CC must enter into the contract on behalf of the entity.
• It must be stated clearly that he/she is signing ‘for and on behalf of’ the company or CC that
is party to the contract.

Trusts

A trust is not a legal entity and as such it has no contractual capacity. Its trustees can enter into a
contract only on behalf of the trust and the trustees must be authorised in the trust deed to enter
into agreements on behalf of the trust.

Learners Note:

All trustees must be authorised to act as trustees by the Master of the High Court.
Any agreement entered into by a trustee who has not been authorised is null and
void. It is therefore impossible to enter into a contract on behalf of a trust that has
not yet been formed.

Immovable property bought by a trust is registered in the names of the trustees in their capacities as
such and all the trustees must sign the agreement of sale, or one trustee can be authorised in
writing by all the other trustees, if the trust deed allows it.

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The contractual capacity of partnerships

A partnership is not a legal person and the names of the partners must be recorded in the deed of
sale. All the partners must sign the agreement or a partner or third person can be authorised by the
partners to sign on their behalf.

If the contract deals with a matter that falls within the scope of the partnership’s business however,
each partner has the authority to conclude contracts on behalf of the partnership. If a contract
involves the buying or selling of immovable property and the partnership does not normally deal in
property, the authority to sign on behalf of the partnership must be in writing.

While a partnership exists, the partners are jointly liable for partnership debts, but on dissolution,
the partners are jointly and severally liable.

Joint-owners

When people buy or sell property jointly, each party’s name must be recorded in the contract and
there must be clause in the contract stating that they are acting as joint purchasers or sellers. Each
party must sign the contract and each joint debtor is liable for payment of his/her portion of the
purchase price and each joint creditor is entitled to his/her pro-rata portion of the selling price. If
the parties are jointly and severally liable, each joint debtor can be sued for his/her pro-rata portion
or for the whole amount.

4. Letting and hiring properties

Letting a residential property takes hard work, dedication and specific knowledge. This section will
give learner estate agents an insight into the actual practice of letting and all the aspects that it
entails from the first meeting with a potential property lessee (tenant or person who is renting
property) until the lease has been successfully concluded with the lessor (landlord or owner of the
property).

Learners Note:

Discrimination on the grounds of race, gender, marital status, age, disability and
religion is prohibited in terms of the Rental Housing Act 50 of 1999 that came into
operation on 1 August 2000.

Once the estate agent has selected a suitable tenant for a particular building / property, the
prospective tenant makes an offer to hire the premises. This offer is directed at the property
owner/lessor/landlord. It is good business practice for this offer to be in writing. It must then be
accepted by the lessor in writing. In terms of the Rental Housing Act (residential property) a lessor
must provide the agreement in writing if the lessee requests it.

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4.1 Legal and statutory requirements

The estate agent is responsible to see that all legal and statutory requirements are
complied with and therefore needs to know the Rental Housing Act 50 of 1999, the
Matrimonial Property Act 88 of 1999, the Immigration Act 13 of 2002 and the Stamp
Duties Act 77 of 1968.

4.1.1 The Rental Housing Act

Under the Rental Housing Act a written lease agreement pertaining to a residential property must
contain at least the following details:

• The names and addresses of the lessor and the lessee.

• The description of the leased premises.
• The amount of the rental and escalation, if any.
• Payment frequency, i.e. monthly, weekly.
• The deposit amount, if any.
• Any other charges payable by the lessee in addition to the rental.
• The lease period, or if there is no agreed period, the notice period for termination.
• The lessor’s and lessee’s obligations.

Learners Note:

Refer to the website www.Rental Housing Act No. 50 of 1999.

A list of defects must be attached to the lease as well as a copy of any house rules that may apply in
a sectional title or group housing complex.

• There is a duty not to discriminate unfairly against any tenant in advertising a property to let,
negotiating a lease and behaviour during a lease (including a tenant’s visitors or members of
his/her household). Unfair discrimination includes the grounds of gender, pregnancy, marital
status, sexual orientation, ethnic or social origin, colour, age, disability, religion, conscience,
belief, culture or language.
• The tenant’s right to privacy must be maintained (including a tenant’s visitors or members of
his/her household).
• The landlord has the right to receive prompt and regular payments and can recover unpaid
rental on obtaining a ruling by a Rental Housing Tribunal or a Court Order.
• Complaints of ‘unfair practices’ may be submitted to the Tribunal. These would relate to the
changing of locks, deposits, damage to property, eviction, house rules, intimidation, issuing of
receipts, nuisances, overcrowding and health matters, maintenance, reconstruction and
refurbishment, demolition and conversions to structures.

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Learners Note:

The Tribunal can conduct a hearing and make a ruling if they cannot resolve the
matter by means of mediation. It is an offence not to abide by the Tribunal’s hearing.

Mentored Discussion:

In your class, discuss possible problems with lessees and how to handle such
problems. What are the rights or both the lessor and the lessee?

4.1.2 The Matrimonial Property Act and the Immigration Act

In terms of these acts, it is important to keep the following in mind when leasing a property to
someone:
• A spouse married in community of property can let immovable property ONLY with the written
consent of the other spouse. A spouse can however, hire a property without consent from the
other spouse.
• Immovable property CANNOT be leased to a foreigner unless he/she is in possession of a
residence permit.

4.1.3 The Stamp Duties Act

Stamp duty is imposed on lease agreements of immovable property.

• Leases for less than 5 years in duration are exempt from stamp duty.
• As from 1 January 2005 lessors are responsible for having lease agreements stamped (can be
reimbursed by the tenant) within thirty days of signature of the lease agreement.
• If the lease is executed outside of South Africa, the lessee becomes liable for stamp duty.
• Thirty days from date of signature is to be calculated excluding the first and including the last
day, unless the last day falls on a Sunday or public holiday, then the time is to be reckoned
exclusive of the first and also of the last day.
• A flat rate of 50c per R100 or part thereof is payable, i.e. 0,5% of the dutiable amount.
• If the lease is for a definite period, it must be stamped for that period and if it is concluded for
an indefinite period, it must be stamped for 2 years.
• The dutiable amount includes any considerations payable by the tenant to or on behalf of the
landlord (e.g. rates & taxes) or if improvements are made to the property at the tenant’s
expense, the value of the improvements must be included in the dutiable amount.
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• VAT is not included in the amount on which stamp duty is calculated.

• If values cannot be determined at the time of signing the lease, the duty must be paid annually
within six months from the end of the tax year (Feb) each year, based on payments actually
made. If the lessor is a ‘taxpayer’, payments are to be made within 6 months of the lessor’s year
of assessment, annually.
• Where an instrument that would constitute an agreement of lease if signed by the parties
thereto, is signed by the lessee only, the lease is regarded as having been executed on the date
signed by the lessee, unless the lessor signs within three months from the date of signature by
the lessee. If it has been signed by the lessor only, it is not regarded as having been executed
until signed by the lessee.
• The duty will not exceed 10% of the value applicable for Transfer Duty purposes.
• In a long-term lease, stamp duty is not limited to the full selling value where the value of the
rentals and other consideration over the period of the lease exceeds the full selling value.

4.1.4 The lessor’s obligations at Common Law

• The lessor must deliver the property agreed upon along with those things
without which the property cannot be properly used (e.g. keys and remote
controls).
• The property must be reasonably fit for the purpose for which it is let and it must be in the
condition it was at the time of conclusion of the lease.
• The lessor must provide undisturbed use of the premises on the date as agreed.
• Payment of the cost of executing a lease is normally regulated by the agreement.
• If a lessor breaches the lease and the breach is material, the lessee has a choice:
o Either to abide by the contract and claim specific performance and such damages that
he/she may have suffered, or
o Cancel the contract and claim damages (If the breach is not material, the lessee is confined
to damages and the court has a discretion whether or not to grant specific performance).
• It is the lessor’s duty to maintain the premises in a condition reasonably fit for the purposes for
which they were let. (repair doors, windows, roof etc). If damage is caused due to negligence by
the lessee, the lessor is under no duty to repair it. The lessee is however entitled to a reduction
of the rental proportional to the reduced use and enjoyment in defective premises.
• A lessor may recover damages from the lessee for losses sustained due to the lessee’s breach of
an obligation to maintain the premises in the event that the parties had agreed that the lessee
would maintain the premises.
• The parties may also agree that the lessee is liable for the payment of rates and taxes.

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28.Activity: Legal Requirements

Complete this activity on your own. Answer and discuss the following questions:-

1. In terms of common law, what are the tenant’s obligations towards the property owner?

2. Discuss what is meant by “options to renew and rights of pre-emption”.

3. Describe what is meant by subletting, assignment and cession in terms of a lease agreement
and common law.

4.2 The Lease agreement

A valid lease agreement (which does not have to be in writing to be valid) comes into being once the
parties have decided on:
• the fact that the property is to be leased from the lessor by the lessee and that this is their
intention;
• the exact description of the property i.e. the leased premises and
• the obligation to pay rent by the lessee and the agreed amount.

Learners Note:

It is good business practice for a lease agreement to be executed in writing and

signed by the lessor and the lessee or their duly authorised representatives.

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4.3 Administering the Lease

An estate agent can be given a mandate only to find a tenant for the lessor’s particular property i.e.
procurement of a suitable tenant, or to also administer the lease for the full duration of the term of
the lease.

The letting agent’s obligations should be set out clearly and unambiguously in the mandate. In the
event that the estate agent is mandated to administer the lease after procuring a suitable tenant
and overseeing the signing of the lease agreement by the parties to the contract, it can further be
agreed that the letting agent be responsible for collecting the rentals, doing regular inspections of
the property during the lease period and reporting back to the lessor as well as to attend to
maintenance problems that may arise.

Learners Note:

Tenants must receive written receipts for all payments made.

The written mandate must be set out in such a way that it is clear that the lessor is authorising the
agent to act on his behalf in administering the lease in terms of the following:

• Find a suitable tenant.

• Draw up a lease agreement.
• Collect a deposit.
• Do the inspections before and at the end of the term of the lease.
• Attend to property maintenance.
• Collect arrear rentals etc.

29.Activity: 10 minute spot test:

Try to answer the following questions without referring to your notes. If you find this
difficult, consult your notes and make sure you can answer the questions thereafter –
your facilitator will discuss afterwards so that you can mark your own work:

A. Which of the following statements concerning the conclusion of a lease of

immovable property are correct?

1. At common law a lease of immovable property is invalid unless:-

• The lease is in writing and signed by both the lessor and the lessee.
• The amount of the rental is agreed upon.
• The lessor is the owner of the leased premises.

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2. Which of the following is correct in order to conclude a valid lease

agreement?
• The rental must be fixed by the parties themselves and cannot be left to
be determined by a third party.
• The lessor need not necessarily be the owner of the property let.
• The amount of the rental must be market related.
• The period of a lease agreement must always be specified.
• The rental must be expressed as a definite sum and not by means of a
formula.

B. Which of the following statements concerning the conclusion of a lease of

immovable property are correct?

3. At common law a lease of immovable property is invalid unless:-

• The lease is in writing and signed by both the lessor and the lessee.
• The amount of the rental is agreed upon.
• The lessor is the owner of the leased premises.

4. Which of the following is correct in order to conclude a valid lease

agreement?
• The rental must be fixed by the parties themselves and cannot be left to
be determined by a third party.
• The lessor need not necessarily be the owner of the property let.
• The amount of the rental must be market related.
• The period of a lease agreement must always be specified.
• The rental must be expressed as a definite sum and not by means of a
formula.

5. Which of the following statements are correct?

• On termination of a lease the tenant must vacate the premises, unless
otherwise agreed with the lessor.
• The “huur gaat voor koop” rule applies to short leases only.
• An option to renew a lease need not include the rental.

6. Which one or more statements is/are correct?

• The lessor does not need to ensure that the lessee is not disturbed in his
use and enjoyment of the leased property.
• In the absence of an agreement to the contrary, the lessor is required to
maintain the leased premises in a condition reasonably fit for the
purpose for which they are let.
• In the absence of an agreement on the time of payment, the rent is
payable in advance.

7. Which of the following statements is/are correct?

• A person working for an estate agency but who only lets property and
does no sales, must register as an estate agent with the Estate Agency
Affairs Board.

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• A deposit on a lease must always be paid into the lessor’s bank account
by the estate agent so that the lessor can earn the interest on it.
• The agent has earned his/her commission even if the lessee cannot
afford to pay the rental.
• It is not a requirement for the conclusion of a lease that the parties
specifically agree on the period of lease.

5. After-sale Service

Once a sale has been negotiated and closed there are still many tasks and duties that need to be
undertaken by the diligent estate agent. These duties relate to documentation and administrative
tasks concerning documentation that must be completed and submitted timeously as well as
management of any outstanding conditions in the contract. All legal and financial aspects of the sale
must also be explained to the parties as well as the process of conveyancing and registration of the
property ownership. Effective communication of all these aspects is a necessity in order to ensure
satisfied clients and ultimately repeat business.

5.1 Completion of relevant documentation

An estate agent is obliged to furnish buyers and sellers with copies of the agreement of sale or other
documents signed by the client as soon as they have been signed.

The original contract or a copy thereof must be delivered to the conveyancer that has been elected
to see to the registration of transfer

Sometimes the parties wish to amend certain clauses or the seller is willing to relieve the purchaser
of certain obligations in terms of the agreement.

All variations of material terms of a contract of sale of immovable property MUST be in writing and
signed by the parties. The following can be amended in this way:

• Variations re the price, the property and the parties.

• Variations re the mode of payment.
• Variations re the date for possession and the passing of risk.
• Variations re the liability for transfer costs.
• Variations re the duty of renovations to the property.
• Variations re the passing of unencumbered ownership.

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Learners Note:

The question of rectification i.e. to allow mutual mistakes in contracts of sale of

immovable property to be rectified is possible under the following circumstances:

• If a material or essential term that is incorrectly stated in the agreement can

be rectified in the event that the document as it stands is a valid sale (i.e.
there is a property description and a price, but they are incorrectly stated).
• Rectification cannot be sought if the parties are in dispute as to what their
initial agreement was.
• The remedy of rectification is to allow the parties to a contract to have the
Court correct their contract so that it reflects their true intention.

5.1.1 Loan Application

Both the buyer and the seller must be attended to in many ways after the sale has been concluded.
Both these parties must be given a copy of the deed of sale and the buyer’s deposit in terms of the
agreement must be paid into the agency’s trust account.

The agent must ensure that the buyer has applied for the necessary finance in terms of the sale
agreement. If the buyer needs to obtain finance, the agent can either, with the buyer’s consent,
arrange for a bond originator to contact him/her, or complete the loan application form for the
buyer and ensure that it reaches the bank and is processed by the bank timeously.

Learners Note:

If the loan application is not approved by the bank before the cut off date as stated in
the deed of sale, the agreement is no longer enforceable. The agent must therefore
be aware of the time-frames and ensure that these are adhered to, as the sale can
fall through if the suspensive conditions are not met within these time frames.

The agent must provide the conveyancer with as much information regarding the buyer and seller as
possible, as this will speed up the conveyancing process. The agent must follow-up with the
conveyancing attorney and keep both the buyer and seller informed to the progress that is being
made with the mortgage loan application (if any) and any other conditions agreed on in the deed of
sale as well as the transfer and registration of the property ownership into the name of the buyer.

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The following information and documents must be delivered to the conveyance:

✓ A copy of or the original deed of sale.

✓ A copy of the seller’s and buyer’s ID document or passport (the page with a photograph) if
the parties are natural persons.
✓ Copies of the relevant documentation and resolutions if the seller or buyer is a legal entity
or trust i.e. copies of a company’s Memorandum, Articles of Association and Certificate of
Incorporation; copies of a close corporation’s Founding Statement and copies of a trust’s
Trust Deed.
✓ Buyer’s and seller’s telephone numbers, facsimile numbers and email addresses.
✓ If the seller’s property is mortgaged, the bank’s name and account number.
✓ If the buyer requires a bond, the responsible person for the application, i.e. the buyer, estate
agent, bond originator or bank consultant.
✓ Confirmation that the deposit has been paid in terms of the agreement.
✓ A copy of the marriage certificates of the buyer and seller (if married) and
a copy of the front page of their ante-nuptial contract if so married.
✓ If the transfer is linked to another transfer, this must clearly be indicated
to the conveyancer.

5.2 Complying with Legal and Financial Obligations

The estate agent has a duty to assist the parties in understanding the importance of complying with
legal and financial obligations in terms of their transaction. An estate agent needs to be sure that the
agreement of sale has been accurately filled out and that the necessary documentation needs to be
prepared in order to ensure that the following information is gathered timeously.

In all transactions, requirements of the Financial Intelligence Centre Act, Act 38 of 2001 must be
complied with. This Act compels the agent to properly identify the client and to report suspicious
transactions to the Financial Intelligence Centre. Identifying clients is quite onerous and it is
imperative that one should not simply accept photocopies of identity documents, as they could be
produced fraudulently. The original passport, identity d marriage certificate, ante-nuptial contracts
and other important documents must be obtained. The onus rests on the estate agent to ensure
compliance with the Act

The offer to purchase/deed of sale/sale agreement/contract must be completed with care and skill
by the estate agent and within the agreed and necessary timeframes. The need for accuracy and
urgency cannot be over emphasised when completing these formalities and other supporting
documents.

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5.2.1 The Deed of Sale

The deed of sale consists of an offer to purchase that is made by the buyer to the seller and is
accepted by the seller. On acceptance, the buyer and seller are bound to the terms and conditions
as set out in the deed of sale and it is the estate agent’s duty to ensure that the agreement is valid
and enforceable.

In order for the deed of sale to be valid it must be in writing and contain:
• The seller’s name and ID number.
• The buyer’s name and ID number.
• The purchase price.
• A description of the property being purchased.
• The fact that the contract is an agreement for the sale of property.
• The signatures of the parties or their agents acting on their written authority.
• All material terms that the parties have agreed on.

In order to comply with common law, the following requirements must be met:

• The parties must reach consensus and intend that the terms set out in the agreement
constitute a binding agreement between them.
• The parties must have the necessary capacity to enter into the agreement. (
• The contract must be lawful, i.e. not against public policy or contrary to good morals or in
conflict with statutory prohibitions, e.g. non-resident legislation.
• It must contain the formalities as prescribed by the Alienation of Land Act, i.e. the deed of
alienation must be in writing and signed by the parties.
• Performance in terms of the contract must be possible at the time of the contract.

Learners Note:

Due to the complicated nature of the above state of affairs at common law, it is
necessary for the estate agent to ensure that both parties to the sale come to
agreement regarding fixtures/fittings and accessories. The sale agreement should
spell out the parties’ intentions in writing and any items that could be disputed over
should be specifically mentioned.

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Mentored Discussion: The Escape Clause

Your Facilitator will lead a class-room discussion on the following statements:

An offer to purchase contains a condition that makes the offer “subject to” the buyer
selling another property by a specific date. It also contains a clause whereby the
seller is entitled to continue marketing the property during this time and in the event
that the seller should accept another offer, the first buyer is given 72 hours within
which to waive the benefit of the condition.

1. Discuss the meaning and consequences of this escape clause.

2. An offer to purchase contains a clause that makes the offer “subject to” a
mortgage loan being approved by a financial institution by a specific date.
Discuss the meaning and consequences of this condition
3. Discuss the meaning and consequences of a ‘risk’ clause in a deed of sale for
both the purchaser and the seller of property.

5.2.2 Special Clauses and Addenda

There are always some special clauses in the deed of sale that need to be explained to the parties as
they place an obligation on either one or both of the parties. These special clauses can also be
contained in an addendum to the contract which is signed by both parties simultaneously with the
main body of the agreement.

5.2.3 The Electrical Compliance Certificate

While the Electrical Certificate is a requirement in terms of the Occupational Health and Safety Act it
is not necessary that the Electrical Certificate be lodged with the Registrar of Deeds for transfer
purposes. The absence of an Electrical Certificate will therefore not affect the transfer of your
client’s property.

When a property is sold the new owner will require an Electrical Certificate of Compliance before
the Local Authority will connect the electricity supply. It is common practice for the Seller to be
required to furnish such a Compliance Certificate to the Purchaser. The Seller may have to instruct
an electrician to effect repairs to the installation before the Electrical Certificate can be issued.

The contract of sale used by good estate agencies, have a specific clause relating to the Electrical
Certificate of Compliance. Failure to produce a Compliance Certificate will therefore constitute a
breach of contract and the affected party may recover damages or take any recourse that the
contract or common law allows.

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The certificate should be retained by the Purchaser to hand to the next Purchaser when the property
is again sold. A new Electrical Certificate will only be required if there has been any addition or
alteration to any electrical installation subsequent to issue of the existing Electrical Certificate of
Compliance.

Learners Note:

Validity of Certificate:

An Electrical Certificate Of Compliance remains valid, and becomes transferable

upon the sale of the property, for so long as there are no alterations or additions to
the electrical installation. If any alterations were made, a new Compliance Certificate
would have to be issued for the additional alteration after a re-inspection of the
electrical installations by an "accredited person" in terms of the Occupational Health
and Safety Act.

Some Electrical Certificates have an expiry date. These Electrical Certificates typically
expire 6(six) months after the date of issue.

In most sale agreements the seller undertakes to obtain a new Electrical Certificate
Of Compliance even where no alterations or additions to the existing electrical
installations have been effected since the issue of a previous certificate. This
requirement, thus, while commendable and designed for the protection of the
purchaser, is not strictly necessary in terms of the Occupational Health and Safety
Act.

Selling without an Electrical Certificate

If a householder does not obtain an Electrical Certificate of Compliance, he/she

remains responsible for ensuring that the electrical installations on the property
are safe. Should someone be injured in an accident relating to the electrical
installations, the householder may be liable for both medical costs and damages and
also the resultant costs of having the installations repaired and re-inspected.

The Requirements

Electrical installations are inspected and tested according to the code or standards that
prevailed at the time the property in question was built. A number of items will, however,
become compulsory, from 2005 irrespective of the date of the original installation. Earth
leakages, plugs with shutters and LV Surge Protection, as a requirement for electrical
installations will become law as from 1 January 2005.

As from 1 April 2002 SABS standard 0142-1 established a new code of practice for the wiring
of premises. From 1 July 2002 it will become compulsory for electrical contractors to use the
revised Electrical Certificate Of Compliance form. This new document will follow a standard
format and, amongst other prescribed information, includes the name, registration certificate

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number, identity number, address and telephone number of the electrical contractor
concerned.
30.Activity: Electricity Compliance

Complete this activity on your own. Do research and answer the following questions:

1. When a Compliance Certificate is issued for a completely new building requiring

a new installation, it has to be signed by four parties, namely:

2. What is the most important information to check on the electrical certificate?

Resource:

Refer to your Resource guide for an Example of an Electricity Compliance Certificate.

5.2.4 Beetle Infestation Certificate

The requirement of the issue of a beetle certificate by the Seller to the Purchaser is generally
included in Offers to Purchase in the Western Cape and KwaZulu Natal regions where infestation
does occur, to protect the Purchaser. The conveyancer is obliged to see that this requirement is
fulfilled; unless the requirement has been specifically excluded from the Agreement (i.e. the
Purchaser has waived his right to insist that he be provided with a beetle certificate prior to
registration of transfer).

5.3 Communication Management between Parties

The estate agent has specific legal and ethical obligations towards a client
that also apply as part of after-sales service. These obligations need to be
managed by meaningful and on-going communication with the parties
involved in the transaction. The following areas need to be managed in order
to ensure that no misunderstandings occur during and after the mandate has
been fulfilled: the terms of the agreement with the mandator (mandate), representations made on
behalf of the mandator, the mandator’s expectations, the fiduciary relationship that exists, and the
nature of the remuneration payable to the agent. The agent should also follow up on the
conveyancing procedure and report any progress that is made to both the buyer and seller.
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5.3.1 Terms of the Mandate

An agreement is reached with the mandator when he/she instructs the agent to sell a property. A
mandate can also be given by the buyer of a property. The normal terms of such an agreement
would include an undertaking by the seller or buyer, as the case may be, to pay the agent an agreed
amount of commission on fulfilment of the mandate. If the conditions for fulfilment are not
expressly spelt out, it can be assumed that if the seller is the mandator that the agent must
introduce a willing and able purchaser (able = legally and financially able), who enters into a binding
agreement with the seller. Where the mandator is the purchaser, the agent also needs to bring
about a binding agreement of sale between the purchaser and a seller, BUT the agent does not have
to financially qualify the purchaser as he/she is now the mandator.

5.3.2 Representing the Mandator

The estate agent does not normally have a power of attorney to bind his mandatory in terms of a
contract, but he/she does have the right to do certain things as the mandator’s representative. The
estate agent can for example make representations regarding the resale value of the property or the
progress of subdivision or rezoning. An agent can also give guarantees with respect to property
characteristics like the availability of water for irrigation. As he will probably be binding his client by
giving these guarantees, the agent must make very sure that he is not misrepresenting the facts. The
estate agent can also negotiate an option on behalf of the purchaser as long as there is no option
fees involved.

5.3.3 Mandator’s Expectations

In terms of an open mandate the client remains entitled to sell the property him/herself or through
another agent and is entitled to appoint as many agents as he/she wishes. The client is under no
obligation to sell the property to anyone that has been introduced by the agent. If the seller,
however sells to someone that has been introduced by the agent during the period that the agent
held a mandate, the client will be obliged to pay the agent’s commission if it is found that it was the
agent’s introduction that led to the sale.

5.3.4 The Nature of the Remuneration Payable to the Estate Agent

It is very important that the estate agent discusses the payment of commission with his/her client at
the outset of their relationship. The issues that need to be communicated and agreed on are the
liability to pay commission, the amount and the due date of payment. The commission is payable by
the mandator, unless the parties agree otherwise.

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The amount of remuneration that is payable once the agent has fulfilled the mandate is negotiable
and agreed on by the parties. This amount is earned as soon as the mandate has been fulfilled by the
agent. The date of payment is agreed by the parties.

If the seller is liable for payment, the commission is earned by the agent once a binding agreement
of sale comes into being between the seller and the purchaser that has been introduced by the
agent and the agent was the effective cause of the sale.

Learners Note:

It is important to note that the agreement must be binding, i.e. if it is subject to any
suspensive conditions, it only becomes binding once the conditions have been met.
No commission is payable if the contract is voidable (e.g. due to material
representation) and it is duly set aside.

Conclusion

1 Self Assessment

Self Assessment
You have come to the end of this module – please take the time to review what you
have learnt to date, and conduct a self assessment against the learning outcomes of
this module

2 Portfolio Activities

Portfolio Activity:

Refer to your Portfolio Guide for the assessment activities related to this section.

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Module 3: Business Principles in Real

Estate Transactions
Learning Outcomes

The following learning outcomes are covered in this module.

S/O Specific Outcome Learning Outcomes

No
1 Apply the principles of Explain the concept and theories of budgeting and cash
budgeting to Real Estate flow forecasting in the context of Real Estate functions.
transactions. Compile a sales budget based on targets set for achieving
own goals.
Define an income budget based on commission rates for
personal budget.
Draw up an expenditure budget to determine profit/loss
and breakeven points.
Draw up a cash flow forecast based on expected income
dates to ensure effective management of cash flow whilst
waiting for deals to be finalised.
2 Make the necessary provisions Discuss the financial risks in selling Real Estate with
for own personal financial examples in relation to own goals and personal plans.
planning in line with targets and Draw up own personal plans in order to provide the
achievable income within Real necessary provisions for effective financial planning.
Estate context. Describe where it would be relevant to consult a financial
consultant or insurance broker to determine forecasted
figures for retirement needs.
Demonstrate understanding of adjusting personal budgets
according to long-term provisional needs.
Demonstrate understanding of aligning Work budgets and
targets to own personal provisional needs for short-,
medium- and long-term.
3 Demonstrate an understanding Discuss the principles of personal tax in relation to own
of taxation in the context of Real income structures within Real Estate environment.
Estate from organisational and Discuss the principle of Value Added Tax (VAT) in the Real
personal perspectives. Estate context.
Discuss the tax affairs of buyers, sellers and agents briefly
in relation to tax on property dealings.
Explain the principles of income tax on investment or lease
income with examples.
Explain the procedure for obtaining an assessment from
SARS in relation to real estate transactions.
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1. Budget Principles

Business Activities and Real Estate Activities need money. Without money, the activities come to an
end.

Tip:
An Income and Expense statement is an accounting term for what most people call a
budget.

The Income and Expenditure statement includes income items such as revenue from sales and
interest income. It also includes all anticipated expense items, usually grouped into logical categories
such as cost of goods sold, administration expenses, interest, and taxes. The statement concludes
with various profit figures like operating profit, profit before taxes, and net profit.

The income and expense statement shows these figures over a period of time, annually in most
business plans (e.g., income and expenses for the period January - December 2003) and projected
several years into the future (e.g., 2003-2005 for a three-year projection)

1.1 Budget Approach

Learners Note:
The modern trend in organizations is to manage operational activities as mini-
projects. This allows managers to have defined purpose, scope, resources and
budget allocated to the activities, thereby enabling them greater control over the
measurables and quality indicators that forecast success of failure of the activities,
and its contribution to the organizational goals and strategy.

1.1.1 The Purpose of a Budget

Part of planning any business venture or project is estimating costs, making a projection and
managing the business activity or project in such a way that it stays within the parameters set in the
planning stages.

Tip:
When we have to estimate costs, we assign a value to a particular activity.

Successful estimation takes into the account:

• The business activity or project objectives and outcomes.

• The activities related to achieving these outcomes.
• Analysing historical cost for identical activities.

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1.1.2 Budget Rationale

The benefits of analysing, estimating and tracking costs are it:

• Cost vs. Benefit: enables you to identify whether the potential benefits to be gained, outweigh
the cost.

• Venture / Project Viability: it can assist you in deciding whether the business activity or project
should actually commence.

• M and E: monitoring and evaluation to keep track of how much of the business activity or
project budget has been used at the various stages in the project, and whether there is sufficient
funds remaining for the outstanding activities.

1.1.3 Budget Elements

Any Budget should be made up out of the following costs:

1. Direct Costs
2. Indirect Costs
3. Contingency Costs

No Cost Type Description Examples

1 Direct Costs related to the use of resources Commissions of sales people
that are required for completing Materials, supplies &
activities. equipment, such as business
Direct cost of labour to manage cards, presentation folders,
office and estate agents. Banners, boards,

2 Indirect Overheads, expenditure to support Stationery, cleaning material,

operations expenditures that are security,
incurred to support activities. Admin, depreciation, rent, taxes
“Time x cost trade off” – elements PC’s, printers, faxes,
that increase over time – if house photocopiers,
sales and rentals are extended or Rent, water, electricity,
shortened, it directly impacts on Contract labour, temp staff
these costs Time related costs which
increase over a period of time.
3 Contingency Costs Costs used to ensure business Marketing, advertising &
operations quality, direction and communication
success Additional travel and
accommodation

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Portfolio Activity: Budget Elements

Refer to your Portfolio Guide for a theory and practical activity that must be
completed for summative assessment purposes.

Learners Note:
When creating or evaluating a budget, it is critical that provision is made for all
possible elements in accordance with the business activity or project plan and
deliverables.

Below is a possible budget checklist that can be adapted to be used in your Real Estate Business:

Budget Estimate and Evaluation Checklist Yes No Not

Relevant
Does the Business Operations estimate include:
Direct Costs such as:

• Labour Costs (Salaries, sub-contract and temporary,

Consultants)
• Materials, supplies & equipment
• Implementation costs (travel, accommodation,
workshops and road-shows).

Indirect Costs such as:

• Material Costs (Stationery, building and office alterations,

• Overhead Costs (Electricity, heating, telephones,
administration)
• Time related costs (insurance, depreciation, )
• Equipment Costs (PC’s, PCF networking, printers, faxes,
hire / lease).

Contingency Costs such as:

• Publication Costs (marketing material, advertisements,

printing, etc.)

Evaluation and findings

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1.2 Developing the Budget Income / Expenditure Sheet

Developing, analysing or evaluating a budget is all about ensuring that there is enough money to do
what needs to be done.

1.2.1 – Budget Pro formas

When developing, analysing or evaluating the budget, the work breakdown structure of the
operations and activities can assist in that the analysis of each activity, task, and subtask it can
provide information on:

• What needs to be done?

• How long is it going to take?
• Who is going to do it – is provision made for people with the necessary skills and knowledge, and
for outsourcing to experts, where required?
• When must it be done by – can one person do it, or will more than one person be required to
finish it on time?
• How is it to be done – what equipment is needed, is this equipment available, or must it be
bought, rented, or leased?
• Where must it be done – what facilities are required, are they available, or must they be rented?

Tip:

In developing, analysing or evaluating a budget, remember the following:

• The costs of the activities are related to the goals: What exactly is to be
produced?
• The costs of the activities are related to expected life-span - How quickly it needs
to be completed ( the shorter the schedule, the more resources needed
immediately, the longer the schedule, the more the overheads)
• The costs of the activities need input from experts – do they know exactly what
they have to provide?

1.2.2 Income and Expenditure

Tip:

There are different ways in displaying a Budget or Income and Expense Statement.
We will provide you the opportunity to select or develop the most appropriate way
of maintaining your Income / Expenditure Statement.

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31. Group Activity: Budget Planning

Your Facilitator will divide you into groups. With your partner select one of the
following activities:
• A wedding reception for your daughter and her new husband in 3 months
time – you have R20 000-00 only.
• Renovations to your house (kitchen and outside patio) over a period of
three months – you have R20 000-00 only
• An overseas holiday for your own family of three, in 3 months time – you
have R20 000-00 only.

1. Draft a budget for the activity you have selected, using the format given below.
(You may add to / change the format, should it be required).
2. Present your proposed budget to the facilitator and other groups, and
3. Evaluate one other group’s budget using your checklist developed by your
group.

Below is a sample of a draft income and expense statement template developed for your use. It will
have to be modified to accommodate your business requirements. Certain rows will have to be
added while some may be omitted if they are not relevant.

BUDGETING WORKSHEET
Opera- Date Completed
tional by
Area
Phase Estimated costs
Numbe

Equip- Materials Labour Communi Overheads Total

Start
Task

date

date
End

ment cation
r

1 1 1 Jan 1
June
2
3
2 4
5
6
3 7
8
9
10
4 11
12
13

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1.2.3 Budget calculations

Income statement calculations

Total operating expense = Total cost of goods (production) +Total cost of sales, general and
administration + Total cost of building and equipment + total cost of
other expenses
Operating profit = Total income – Total operating expenses
Profit before tax = Operating profit – Interest expense (interest on capital lent)
Net Profit = Profit before tax – corporate tax (29%)

Return on Investment (ROI)

ROI is a very useful quick calculation to determine if something is worthwhile and paying for itself.
The example below looks at the return of investment of your whole unit of control. ROI can also be
calculated per product, team or even sub-division under your control and provides a quick reference
and indicator where poor performance is occurring. Further investigation will be required to
determine and correct the actual problem but at least the general area will be known.

From your Income Statement you can determine the ROI (Return on Investment). ROI can be
represented in two ways either as a percentage or as a ratio.

Learners Note:
Calculate ROI Percentage

ROI% = [(output-input)/input]*100
= [(Total income – Total operating expense)/ Total operating expense]*100
= ___%

Example Box:

ROI% = [(output-input)/input]*100
= [(R100 500- R 65 000)/ R 65 000]*100
= 54.61 % (return on investment)

Calculating how much money is made per every rand spent is done in the following
manner:

ROI ratio = output/inputs

= R100 500/ R 65 000
= 1.55 in 1 (for every 1 rand spent 1.55 Rand was made).

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32.Activity: Calculate ROI Percentage

Your sister / niece’s T-shirt company has spent R30 000-00, and has brought in R38
000-00.
Help her top calculate her RoI percentage and ratio (“for one”) for the above
scenario.

ROI% = [(output-input)/input]*100
= [(Total income – Total operating expense)/ Total operating expense]*100
= ___%

ROI ratio = output/inputs

= Total income / Total operating expense
= ____ in 1

Self Reflection:

If you look back at the income statement and ROI for your niece’s company, are
there any obvious problems? What would you advise her as a mentor?

Resource: Financial Statements

Refer to your resource guide for additional information on Financial Statements.

2. Personal Financial Planning

Personal finance covers a wide variety of money topics including budgeting, expenses, debt, saving,
retirement and insurance among others. Understanding how each of these topics work together and
affect each other is important for laying the groundwork for a solid financial foundation for you and
your family.

2.1 Personal Budgeting

At the very basic level of personal finance you are dealing with a budget; you
make money and then you spend that money. Even if you haven’t created a
detailed and written budget you continue to budget on a daily basis. When you are faced with
spending money on something you think about it and realize that by spending that money you will
not be able to spend that same money on something else.

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The problem that stems from not having a detailed budget are that we are faced with so many
financial decisions it is nearly impossible to keep track of and remember everything. This lack of
understanding can lead to overspending, debt problems or even the inability to adequately plan for
your future.

When you create a budget you begin to see a clear picture of how much money you have, what you
spend it on and how much, if any is left over. Once you can see the inflows and outflows of your
money you can optimize your spending so that necessary items are sure to be covered while cutting
back on wasteful spending that will allow you to save money.

2.1.1 Cutting expenses

After you have successfully created a budget, you'll have a much better
understanding of where your money goes and where you can possibly trim
expenses. For many people, this is as simple as cutting back on some of the
little things that can add up.

Cutting expenses.

1. Trim your subscriptions. Do you subscribe to magazines that you rarely have time to read?
Maybe you subscribe to one of the DVD mail rental services but only watch one or two movies a
month. How about that gym membership you purchased as part of a New Year’s resolution that
you don’t use?
2. These subscriptions can slowly drain hundreds of rands every year. Individually they don’t seem
very costly, but over time many of these underused subscriptions are costing a lot of money.
Evaluate what you really use and don’t use and get rid of the wasteful subscriptions.
3. Avoid banking fees. Banks are regularly changing their products and you may be paying a
monthly fee without thinking twice about it. On top of monthly fees for accounts watch out for
fees associated with overdraft protection, paper statements or excessive transactions.
4. Pay your bills on time. This may seem like common sense, but it is easy to forget a bill and end
up with a late fee. These fees can be substantial ranging anywhere from a few rands to R40 or
more. If you have trouble keeping track of due dates check into automatic electronic payment
plans available.
5. Keep eating lunch out at a minimum. Eating out can be costly and for many busy professionals it
is almost a necessity. Did you know that spending only R10 a day on lunch while at work can cost
nearly R2600 per year? If your spouse spends the same amount on lunch you are spending
almost R5,200 per year just on lunch!
6. Try to cut back on buying lunch out by bringing a lunch just two days a week to start. Even this
can save a few hundred dollars a year. Not only does it save money but generally a sack lunch
from home will be better for you compared to what you normally eat when going out.

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Resource: Overspending

Refer to your user guide for an article that examines the roots of overspending.

Mentored Discussion: Cutting personal expenses

Read the article in your Resource Guide and have a class discussion on cutting
personal expenses. How can Estate Agents cut personal expenses more creatively?

2.1.2 Getting out of Debt

Even after creating a sound budget and cutting unnecessary expenses, you may still find yourself
with lingering debt to get rid of. Using credit and taking on some debt itself isn’t necessarily a bad
thing, but when you can't keep up with the payments or borrow more than you can afford to pay
back, you could be in trouble.

One of the most important steps in getting out of debt is to pay more than the minimum amount
due each month. Even a modest credit card balance can take over a decade to pay off if you simply
pay the minimum amount due. In addition, paying the minimum will end up costing you thousands
of dollars in interest over that period.

One of the most costly mistakes you can make with credit cards is getting into the habit of only
paying the minimum amount due each month. While the minimum amount may be affordable; it will
also cost you more money in the long run.

2.1.3 Insurance

You've created a budget, cut expenses, eliminated your credit card debt and, have started saving for
retirement, so you are all set, right? While you've definitely come a long way, there is one more
important aspect of your finances that you need to consider.

You've worked hard to build a solid financial footing for you and your family, so it needs to be
protected. Accidents and disasters can and do happen and if you aren’t adequately insured it could
leave you in financial ruin. You need insurance to protect your life, your ability to earn income, and
to keep a roof over your head.

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Health Insurance One of the most important types of insurance to have is health insurance.
Your good health is what allows you to sell houses and earn money. If
you were to come down with a sickness or have an accident without
health insurance you may find yourself unable to receive treatment or
even in debt to the hospital.

Unfortunately, the environment of the Real Estate does not always bring
health benefits. While it may not be cheap, the fact remains, what do you
have if you don’t have your health? Even a basic hospital bill without
insurance can run into the thousands of rands.
Life Insurance This type of policy is more important if you are married and/or have
children. Your life is valuable because it is what allows you to work and
earn an income to provide for your family. When you are gone you create
an income gap which could put your spouse or children in financial
trouble.

If you do not currently have life insurance your best bet is to check with
your employer first. Many employers offer a basic life insurance as a
benefit and some even allow you to purchase additional coverage at a
very affordable rate. Outside of employer plans there are hundreds of
insurance companies that can provide the right coverage for you

Motor Insurance As an Estate Agent, your vehicle is your business, without a car, you are
going to find it impossible to function in your full capacity.

Therefore, the most common reason to have motor insurance is to cover

the replacement of an expensive asset.

33.Activity: Personal Financial Planning

Analyse the above listed expenses and identify those that are :

Critical to have

Nice to have

Motivate

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3. Taxation

3.1 Personal Tax in the Real Estate Environment

It is important to note from the outset that this section deals solely with the registration as an
Employer for Tax purposes.

Tip:

No matter which form of business you have decided to adopt, whether it is a

Company, Close Corporation, Sole Proprietorships or Partnerships and if you intend
or have already engaged employees to work for you, you will need to register for
Employer Tax purposes.

The first step in registering a Company, Close Corporation, Sole Proprietorship or Partnership for
Employer Tax purposes is to obtain and complete form EMP101e. The form EMP101e can be
obtained electronically at www.sars.gov.za. On the left hand side of the SARS Home Page you will
see a block saying “FORMS”, click on the word “GO”., In the new page that appears, about nineteen
lines down, click on PAYE/ SDL/UIF and when the new page comes up click on EMP101e. (If you
would prefer a copy of the form in Afrikaans, click on EMP 101).

Learners Note:

Form EMP101e is multi-functional. By completing and submitting the form you will
not only be registering as an Employer for tax purposes but you will automatically be
registering in terms of the Skills Development Levy (SDL) and in terms of the
requirements of the Unemployment Insurance Fund (UIF).

3.2 The Principles of Value Added Tax

Value-Added Tax (or VAT, as it is more commonly known) is a government taxation levied on all
businesses in South Africa whose total value of taxable supplies or annual turnover exceeds a certain
level.

VAT and Transfer Duty are mutually exclusive. If the seller is a vendor, VAT will be charged on the
transaction and not transfer duty. If the Seller is not a vendor, transfer duty will be levied on the
transaction and not VAT. If the purchaser in a transaction is a vendor, VAT can be claimed on the
transaction (up to the amount of transfer duty paid) back from the Receiver of Revenue within a two
month period of such transaction.

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There are two forms of VAT registration.

Compulsory This applies to any person who runs a business whose total value of taxable
supplies or taxable turnover exceeds, or is likely to exceed,
R1 000 000 in any 12 month period.

Although you may not qualify for compulsory registration at present, as the
years go by and your business grows, you may exceed the R1 000 000
threshold and you will then be required to register
Voluntary Under certain circumstances the VAT Act allows a person to register their
business even although their taxable turnover does not exceed or is not
expected to exceed R1 000 000 in any 12 month period.

Tip:

The registration form VAT 101 can be obtained electronically at www.sars.gov.za or

from your local branch office of the Receiver of Revenue.

It may be an idea to collect the VAT 101 form from the nearest office as this will
allow you to speak to a client services consultant who will guide you through the
completion of what is a fairly complex form.

For those who are not able to visit a SARS office, the VAT 402 guide, (available at
www.sars.gov.za ) will assist you in completing the VAT 101 form.

Mentored Discussion: TAX and VAT

Your facilitator will lead a class-room discussion on the topic of Income Tax and VAT.
In your class answer the following questions:

• Why is it important to register with SARS as a taxpaying entity?

• When must you register for VAT, and why do you think it is important?
• What is the difference between PAYE and VAT?
• Which incomes are taxable under PAYE and VAT respectively?

3.2.1 Taxable supplies

A taxable supply is any supply of goods or services by a vendor in the course of an

enterprise or any activity within the Republic of South Africa carried on
continuously or regularly which supplies goods or services to other people at a
charge, whether or not for a profit. Tax is charged at one of the following rates:

• Standard Rate - currently 14%

• Zero rate - 0%

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Learners Note:

As a general rule, all goods and services are standard rated unless specifically zero-
rated or exempt. Zero rated supplies are taxable supplies taxed at a rate of 0%. The
sale of an enterprise may be zero rated where :

• Both the supplier and recipient are vendors, and have agreed that the
consideration for the supply is inclusive of VAT at a rate of 0%.
• They have agreed in writing that such enterprise be sold as a going concern.
• The enterprise is capable of separate operation and is ‘income earning'.

The relevant Act defines 'commercial rental establishment' as an “accommodation normally

provided to 5 or more persons at a daily, weekly or monthly charge or residential accommodation
which is rented out for continuous periods not exceeding 45 days and where the annual receipts
from the letting of same exceed R48 000.” 'Residential rental establishment' on the other hand is
defined as any commercial rental establishment in which no less than 70% of the persons to whom
domestic goods and services are supplied, reside for periods exceeding 45 days.

It seems clear from the Act and the definitions that the legislator did not intend that the letting of
residential property (even where rent exceeds R4 000 monthly), be included in the ambit of going
concerns (capable of zero rating) and that only guesthouses, hotels and bed and breakfasts should
be seen as 'going concerns' in the eyes of the Receiver of Revenue.

It follows then that a zero rated property transaction does not pertain to purely residential
properties. The purchase of a vacant plot of land by a Developer who wishes to develop same for
residential / commercial purposes will also not qualify as a going concern.

34.Activity: Going Concerns

Read the above statement and interpret the meaning for your clients who wish rent
/ lease a property – how would you advise them?

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3.3 Capital Gains Tax

Learners Note:

Definition - A transaction-based tax where realised or deemed capital gains / losses

are brought into account on an annual basis by way of inclusion in your income tax
return.

In situations where the proceeds from the disposal of an asset are of a capital nature no amount falls
to be included in gross income. However such proceeds are not necessarily free of tax. With effect
from 1 October 2001 a schedule (the Eighth Schedule) was added to the Income Tax Act to give
effect to the taxation of capital gains. In effect a portion of the capital profit is added to taxable
income and is subject to tax.

Learners Note:

Paragraph 12(2) (c) of the Eighth Schedule deems a person to have disposed of a
capital asset when such asset becomes trading stock. The capital asset is deemed to
be disposed of for proceeds equal to its market value when it ceases to hold as a
capital asset. This paragraph will apply when a taxpayer changes his intention from
capital to revenue.

For example if a taxpayer who acquired a capital asset for R1 million in 2002 changes
his intention in 2004 when the market value of the asset is R3 million a capital gain
of R2 million will arise. Note also that the asset, which has now become trading
stock due to the change in intention, is deemed to have a cost (as trading stock) of
the R3 million market value when it becomes trading stock.

Capital Gains Tax was introduced into the Income Tax Act by means of Act No. 5 of 2001 (the
Taxation Laws Amendment Act, 2001), contained in Government Gazette No. 22389 of 20 June 2001.
The capital gains tax provisions are contained in the Eighth Schedule to the Income Tax Act. In
terms of paragraph 2 of the 8th Schedule, the capital gains tax provisions apply to disposals of assets
on or after 1 October 2001. This means that capital gains tax applies with effect from 1 October
2001.

The term Capital Gains Tax (“CGT”) is something of a misnomer. The taxation of capital gains falls
within the ambit of the Income Tax Act and it would therefore be more correct to refer to the
“taxation of capital gains” rather than “capital gains tax” which infers a separate tax. A taxable
capital gain (which is determined in terms of the provisions of the Eighth Schedule) is added to a
person’s taxable income and subject to normal income tax.

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Learners Note:

Note however that capital losses are not deducted from taxable income but are
carried forward to succeeding years and are available for set-off against future years’
capital gains. Because the taxation of capital gains is dealt with in the normal
income tax computation it is in effect an annual tax. This means that all capital gains
and capital losses for a year of assessment are aggregated. If the net result (for the
year) is a net capital gain a portion of the gain is included in taxable income. The
portion to be included in taxable income is determined by having regard to the
nature of the taxpayer.

Briefly, individuals, ‘special’ trusts and deceased and insolvent estates will pay normal income tax on
25% of the capital gains (i.e. capital profits) they make, whereas companies, close corporations, and
ordinary trusts will pay normal income tax on 50% of the capital gains that they make. Special rules
apply to long-term insurance companies.

In terms of the Eighth Schedule a capital gain made by any person who disposes of an asset on or
after 1 October 2001 is subject to tax. A distinction is however made between persons who are
resident in South Africa and persons who are not.

Residents Non Residents

Paragraph 2 of the 8th Schedule states that the As far as non-residents are concerned, the
tax on capital gains will apply to any asset of a disposal of the following assets are subject to
South African resident. This means that a the CGT provisions ( para. 2 of the 8th
South African resident is taxed on ‘capital gains’ Schedule):
made on the disposal of assets which he owns
anywhere in the world. • fixed (immovable) property situated in
South Africa (including any interest in fixed
property)
• assets of a South African permanent
establishment of the non-resident

Fixed property includes shares in certain

property-owning companies.

3.3.1 Capital vs. Revenue

It should be noted that the introduction of capital gains tax has not removed the necessity for
determining the nature of the proceeds from the disposal of assets. If an asset is acquired with a
revenue intention the proceeds will be included in gross income (being of a revenue nature) and will
be fully taxable. If on the other hand the proceeds are of a capital nature the provisions of the
Eighth Schedule will apply.

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For the purposes of the Eighth Schedule it is not necessary to classify proceeds as being of a capital
nature because proceeds specifically exclude any amount that must be included in gross income.
For example if trading stock is sold there has been a disposal of an asset for the purposes of the
Eighth Schedule but there is no capital gain because the proceeds are nil, having already been
included in gross income.

35.Activity: Capital Gains Tax

Your facilitator will divide you into groups. With your partner, discuss the
implications of provisions on clients who are interested in buying a second property.

What advice would you give to them?

Learners Note:

What does CGT mean for your clients?

It means that taxpayers, including individuals, trusts, companies and close

corporations, will be taxed on the profit they make when they sell an asset or
property of a capital nature, usually where there is a change in ownership. It is then
basically a tax on the resale profits.

In most cases, it will not affect one's primary residence, provided the property is smaller than two
hectares and the profit to be made is less than R1 million. However, homeowners will be liable for
CGT on second properties or holiday homes that are not occupied as a primary residence. It also
affects all properties registered in the names of close corporations, trusts and companies.

How is a capital gain determined?

It is the difference between the base cost of the asset and the amount for which it is sold.

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3.3.2 Base Cost of an Asset

The base cost will be the expenditure made to own the asset, the cost of any improvements that are
made to it and any other costs directly brought about by the sale of the asset.

This base cost does not include any expenditure that may be claimed as an income tax deduction or
any borrowing costs (interest on loans) or repairs. The taxpayer must be able to prove the base cost
if no record exists. It is crucial for owners to keep records of any capital asset they have bought
including costs they spent on improving the asset. The base cost is the actual capital cost and
includes the cost of getting the asset. For example agent's commission, legal fees, conveyancing
fees, and the cost of improvements.

Mentored Discussion: Exclusions from Base Cost

Your Facilitator will lead a discussion on Base Cost. In your class answer the
following question and give examples.

1. What does base cost mean? Give example to illustrate

2. What is excluded from the Base Cost?

3.3.3 Exclusions from Capital Gains Tax

• The first one million of capital gain in respect of primary residences owned in the name of an
individual.
• An individual's private motor vehicle not used for business.
• Personal belongings including art and jewellery.
• Proceeds from pension, provident, retirement annuity funds and life insurance policies.
• Winnings from lotteries, casinos and prizes (if not a professional gambler).
• Compensation for injury, illness and defamation.
• Profit (not more than R500 000) from the sale of a small business, pending retirement if: the
taxpayer is older than 55 years; assets have been held longer than 15 years.
• Gains made when changing foreign currency back into Rands after a trip overseas.

3.3.4 Inclusions in Capital Gains Tax

• Primary residences owned in the name of a company, close corporation or

trust.
• Individual holiday homes or second homes and properties let to tenants.
• Boats, aircraft and caravans.
• Shares, unit trusts and private investments, and second-hand policies.
• Krugerrands or other silver or gold minted coins.
• Sale of a business.
• All other assets, except those specifically excluded.
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3.4 Transfer Duty Tax

This is a government tax, which applies in every case except where the seller is a registered VAT
vendor (an example being a property developer). It is calculated as a percentage of the purchase
price and varies depending on the purchaser's legal status. For a legal person it is 8% of the purchase
price. For a natural person the calculation is as follows:

• For a purchase price of R0 - R500 000.00, the duty is 0%

• For a purchase of R500 0001.00 - R1 000 000.00,the duty is 5% on the value above R1000
000.00
• For a purchase price of R1 000 0001.00 and above, the duty is R25 000.00 + 8% on the value
above R1 000 000.00.

The transfer duty is paid by the purchaser of the property prior to registration of transfer, or within 6
months after signing the agreement. There is a penalty fee for late payment of 10% per annum for
each completed month after due date is levied.

36.Activity: Transfer Duty Tax

Do the following Transfer Duty Tax calculation:

Purchase Price Transfer duty tax

R455,000
R795,000
R1,150,000

The new transfer duty forms and regulations, which require detailed and onerous information, will
make the administration of transfer duty and value added tax "easier", but also introduces some
other new responsibilities on all the parties to the sale of immovable property in South Africa. The
new forms were recently introduced by the South African Revenue Services.

This strategy is "promoted" as being a long-awaited streamlining of the transfer duty system, which
includes the introduction of electronic payment of transfer duty.

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3.4.1 Value of property subject to Transfer Duty

Section 5 of the Transfer Duty Act states that the duty is payable on the value of the property as
follows:

5. Value of property on which duty payable.—(1) the value on which duty shall be payable
shall, subject to the provisions of this section—
a. where consideration is payable by the person who has acquired the property, be the
amount of that consideration; and
b. where no consideration is payable, be the declared value of the property

Section 5(6) contains an anti-avoidance provision, i.e. (italics added):

6) If the Commissioner is of the opinion that the consideration payable or the declared value
is less than the fair value of the property in question he may determine the fair value of that
property, and thereupon the duty payable in respect of the acquisition of that property shall
be calculated in accordance with the fair value as so determined or the consideration
payable or the declared value, whichever is the greatest:

Provided that the provisions of this subsection shall not be construed as preventing the
Commissioner, after a determination of the fair value of the property in question has been
made, from revising such determination or from making a further determination of the fair
value of that property under this subsection, provided such revision or further
determination is made not later than two years from the date on which duty was originally
paid in respect of the said acquisition.

The term ‘fair value’ is defined in section 1 of the Transfer Duty Act and was amended in December
2002 to cater for the sale of residential property companies and the transfer of contingent interests
in trusts.

Fair value is defined as (italics added for emphasis):

“fair value”—
(a) in relation to property as defined in paragraphs (a), (b) and (c) of the definition of
“property”, means the fair market value of that property as at the date of
acquisition thereof;
(b) in relation to a share or member’s interest in a company 3 as contemplated in
paragraph (d) or (e) of the definition of “property”, means so much of4 the fair

3
A ‘residential property company’.
4
If, for example, a person holds 60% of the shares in the company, only 60% of the value of the property can be attributed
to the shares he holds.

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market value as at the date of acquisition of that share or member’s interest, of any
property held by that company which constitutes—
(i) residential property;
(ii) a share or member’s interest in any company as contemplated in
paragraph (d) or (e) of the definition of “property”; or
(iii) a contingent right in property of a trust as contemplated in paragraph ( f )
of the definition of “property”,
(without taking into account any lease agreement or any liability in respect of any
loan in relation to that residential property or any residential property of any
company or trust contemplated in subparagraph (ii) or (iii)), as is attributable to
that share or member’s interest; or
(c) in relation to any contingent right to any property, which constitutes—
(i) residential property;
(ii) a share or member’s interest contemplated in paragraph (d) or (e) of the
definition of “property”; or
(iii) a contingent right in property of a trust as contemplated in paragraph ( f )
of the definition of “property”,
held by a discretionary trust, means the fair market value of that property (without
taking into account any lease agreement or any liability in respect of any loan in
relation to that residential property or any residential property of any company or
trust contemplated in subparagraph (ii) or (iii)), as at the date of acquisition of that
contingent right:

Provided that—
(a) the fair market value of any property of a company or a trust which constitutes a
contingent right in property of a trust, as contemplated in paragraphs (b) (iii) and
(c) (iii), shall be equal to the fair value of that contingent right as determined in
terms of paragraph (c) of this definition; and
(b) where property, has been acquired by the exercise of an option to purchase or a
right of pre-emption, the fair value in relation to that property shall be the fair
market value thereof as at the date upon which the option or right of pre-emption
was acquired by the person who exercised the option or right of pre-emption;

Mentored Discussion: Fair Market Value

Your facilitator will lead a discussion on the above. What does the above mean?
How would you describe the above in simple language to your clients? Write down a
shorter summary below:

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3.4.2 Transfer Duty Streamlined

SARS has introduced seven new transfer duty forms to implement this "streamlining". The good
news is that the forms are user friendly and have a simple layout. But the bad news is that the
information required is very detailed not all of it is really relevant to the property transaction.

SARS claim that there are a number of practical reasons for changing the transfer duty declarations
and the VAT 249 form. The new forms are more streamlined to facilitate the long awaited electronic
lodgement and payment of transfer duty. SARS has also adapted the forms to accommodate recent
legislative changes. But the wording of the new forms speaks of more than simple practical
considerations in the process of paying transfer duty on immovable property transactions.

Tip:

The transfer duty forms are available for download from the South African Revenue
Services website in .PDF format.

Portfolio Activity: Taxation

Refer to your Portfolio Guide for a theory and practical activity that must be
completed for summative assessment purposes.

3.4.3 Practical Implications

Conveyancers (transferring attorneys) are now required to call for payment of the transfer duty
immediately after signing the deed of sale (if transfer goes through in the usual two to three
months). It will no longer be practical, or possible, for conveyancers to allow transfer duty to be paid
as little as one month prior to transfer, as was previously the case.

These forms require income tax numbers, all details of non-residents, all details of use of the
property, capital gains tax details, whether input tax was claimed or not, VAT details and much
more. If income tax numbers are not available, the annual income from all sources must be cited in
the transfer duty form.

Real estate agents have now also been roped in, as unpaid tax detectives, for the South African
Revenue Services. Real estate agents will have to sign declarations, under which they must report
any transactions, which involve the sale of shares, members' interests, or a change of trust
beneficiaries, to SARS.

Real estate agents will have to explain the rules to their clients and hope that they are willing to
cooperate. Parties to a property transaction will most likely resist providing the information and
answering the questions posed by the new SARS forms.

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So, delays in submitting the forms, as well as payment of transfer duty could be expected. The South
African Revenue Services will then in turn delay issuing a transfer duty receipt, which would delay
the transfer process.

Self Reflection:

1. The principle of Value Added Tax (VAT) in the Real Estate context is
understood.
2. The tax affairs of buyers, sellers and agents are discussed briefly in relation
to tax on property dealings.

Conclusion

1 Self Assessment

Self Assessment
You have come to the end of this module – please take the time to review what you
have learnt to date, and conduct a self assessment against the learning outcomes of
this module

2 Portfolio Activities

Portfolio Activity:

Refer to your Portfolio Guide for the assessment activities related to this section.

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Module 4: Financial Advice in Real

Estate
Learning Outcomes

The following learning outcomes are covered in this module.

S/O Specific Outcome Learning Outcomes

No
1 Advise sellers and lessors on Assess the financial position of sellers and lessors in order
financing real estate to advise on the impact of contemplated transactions on
transactions. their financial position.
Apply Questionnaires and other financial tools to provide
financial information to sellers and lessors.
Draw up and explain detailed statements of the costs that
are for the sellers or lessors account.
Explain the duties and obligation imposed by the National
Credit Act on credit providers in real estate credit
agreements to sellers and lessors.
Explain the rights and obligation of credit consumers
under the National Credit Act in relation to real estate
credit agreements.
2 Advise purchasers and lessees Identify the elements constituting the total cost of
on financing real estate ownership of immovable property with an example.
transactions. Explain the common law and contractual incidence of
maintenance and other costs items with examples.
Prepare and explain statements of costs that are for the
purchaser or lessee`s account.
3 Facilitate financing and Demonstrate an understanding of sources of finance and
conveyancing in real estate the qualifying criteria with examples.
transactions. Demonstrate understanding of the knowledge of sources
of financial procedures relating to real estate transactions
with examples.
Inform the prospective purchaser and refer to financial
products and providers.
Monitor and manage liaisons with conveyancers to ensure
that transaction is satisfactorily and expediently
concluded.

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1. Financial Viability

In all transactions, requirements of the Financial Intelligence Centre Act, Act 38 of 2001 must be
complied with. This Act compels the agent to properly identify the client and to report suspicious
transactions to the Financial Intelligence Centre. Identifying clients is quite onerous and it is
imperative that one should not simply accept photocopies of identity documents, as they could be
produced fraudulently. The original passport, identity, marriage certificate, ante-nuptial contracts
and other important documents must be obtained. The onus rests on the estate agent to ensure
compliance with the Act.

Tip:

The estate agent has a duty to assist the parties in understanding the importance of
complying with legal and financial obligations in terms of their transaction. An estate
agent needs to be sure that the agreement of sale has been accurately filled out and
that the necessary documentation needs to be prepared in order to ensure that the
following information is gathered timeously

1.2. National Credit Act

In order to conduct an efficient and professional service, an estate agent must be able to assist and
provide his/her clients with financial information that has a direct bearing on the purchase and sale
of the property. The contracting parties need to be made aware of their financial obligations
pertaining to the transaction.

The NCA applies to credit agreements with all consumers entered into after 0I June 2007, and to
entities such as close corporations, companies, partnerships and trusts, whose asset value or annual
turnover is below R1 million. This new legislation will affect all South Africans who are applying for
any of the following types of products:

• Overdrafts
• Credit cards
• Installment agreements
• Mortgages
• Financial leases

The Act aims to put a stop to misleading advertising around credit, credit products and facilities, and
the cost of credit.

• Negative option marketing (whereby an agreement will automatically come into existence
unless an offer is specifically declined) is not allowed

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• Phrases like "no credit checks", "free credit", and "guaranteed loans" cannot be used.
Marketing of credit at the consumer's home or workplace is prohibited without the
consumer's consent.
• Consumer choices must be obtained and kept as a record.

1.2.1 Pricing

All new credit agreements need to disclose interest rates, fees and additional charges and also
subject’s interest rates charged to a maximum rate of interest that may be charged. These cost
controls prohibit interest or other costs in excess of those prescribed rates.

Add-on costs for insurance are prohibited. All costs must be advised in advance and the consumer
has the right to arrange insurance directly, rather than pay the credit provider to do so, and to
choose to arrange his or her own insurance policies.

1.2.2 Assisting Buyers applying for credit under the NCA

Pre-agreement The credit provider must provide the consumer with a pre-
agreement, containing the main features of the proposed
agreement and a quotation of the costs. This pre-agreement is valid
for 5 days and gives consumers an opportunity to shop around for
the best deal.
Credit assessment The consumer will be required to provide certain information in
order for the lender to assess affordability. This may include a
detailed statement of income and costs, a household budget and
details of other credit commitments.
Credit bureaus The Act requires the credit provider upon entering or amending or
terminating a credit agreement to report the transaction to a credit
bureau.
Records of application Credit providers will be required to keep records of all applications
for credit, credit agreements and credit accounts for a prescribed
time.
Payment of accounts A consumer may pre-pay any amount owing at any time, and fully
pay out the account at any time without penalty, except in the case
of mortgage bonds or agreements in excess of R250 000, which are
subject to a termination charge of not more than three months
interest.
Spouse's written consent For marriages in community of property, the Matrimonial Property
Act, following from a consequential amendment made by the NCA,
requires the written consent of the spouse, when one spouse
applies for credit.

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37.Activity: National Credit Act

Advice the following persons who wish to purchase a property on the requirements
as set out in the National Credit Act.

1. A Married couple in an ante-nuptial contract where the wife is non-

residential.

2. A single residential person who is 22 years old.

1.2.3 Affect of NCA on home loan finance?

The new national credit act of South Africa will come into affect towards the middle of 2007,
compelling the banks to ensure that their mortgage clients do not over extend their credit limit.
Previously, the bond repayments were not to exceed 30% of their proven dependable income. The
new act will now make the banks legally responsible for checking the applicant's full credit situation.

On bond application, clients will be asked to declare their income as well as their expenses. With the
new act, the banks will have to be fastidious about ensuring that the client has declared all debt, for
example car repayments, credit cards, retail accounts and any other debt the client may have; if they
have another home loan; or a rental agreement (where applicable) it will also be regarded as a
mandatory requirement.

Investors who invest in off-plan purchases may find it more difficult to obtain finance if they have
mortgages with other financial institutions, thereby making multi-property ownership finance more
difficult to secure.

Learners Note:

The simple answer to obtaining mortgage finance is to make sure that your client’s
finances are in check as this will enable the bank to make a quick assessment of
affordability.

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The interesting part about the new act is that if a bank does allow a borrower to over extend on
their credit after disclosure of their financial situation, the bank could be sued by the borrower
should the debt result in the borrower not being able to repay that debt, as well as incurring a
possible fine for contravention of the act.

It also works in the bank's favour. Should the disclosure from the borrower not be accurate, the
property could be repossessed and the client blacklisted.

1.2.4 Over-indebtedness and reckless lending

The Act aims to promote responsible credit granting and use. To achieve this, when a customer
applies for credit, a credit provider would need to check whether the consumer can afford the credit
because if no check is done or if it can be shown that the consumer clearly could not afford to repay
the credit agreement, it could be alleged that the credit provider has granted the credit recklessly,
with severe consequences to that credit provider.

During this affordability assessment, the onus is on the consumer to fully and truthfully answer any
request by the credit provider for information.
In the case where a consumer gets into too much debt, a debt counselling service is offered.

1.2.5 Complaints

The National Credit Regulator will monitor credit providers and their compliance with the Act and
regulations. A National Consumer Tribunal is established to adjudicate in a wide variety of
applications, and to conduct hearings into complaints.

Learners Note:
You can go to the National Credit Act website and down load the Act and regulations
for yourself and future use. www.ncr.org.za.

1.3 Total Cost of Ownership

Various vehicles exist for purchasers of immovable property. Transfer can be affected to a purchaser
in his personal capacity (a natural person), a juristic person (a trust, a company or close corporation)
and the choice depends on the specific requirements of the purchaser.

The most important factors to be considered by the purchaser when selecting a suitable registration
entity are briefly discussed hereunder.

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1.3.1 Transfer Duty

Two recent amendments to the Transfer Duty Act will have a significant influence on the selection of
the mode of acquisition. Prior to 13 December 2002, transfer duty was payable where immovable
property, as opposed to the member's interest, shares of beneficial interest in a property owning
close corporation, company or trust, was acquired.

Since the amendment to the Transfer Duty Act on 13 December 2002, transfer duty is now payable
on the transfer of a member's interest, shares or beneficial interest in a Trust as well. Where the
purchaser of the interest or shares is a natural person, transfer duty is charged on a sliding scale
while an entity other than a natural person pays transfer duty at a flat rate of 10% of the purchase
price.

A change in the interpretation of the Act by the Receiver of Revenue has also curtailed the
purchaser's ability to sign an agreement of sale personally whilst reserving the right to nominate
another person or entity as purchaser usually within a stipulated period from date of last signature.

Learners Note:

This had afforded the purchaser time to consider various options, e.g. to purchase a
shelf close corporation/company or even to nominate a spouse whilst having the
Receiver of Revenue construe it as a single transaction only.
As a result of the Receiver of Revenue's stricter interpretation of nomination clauses,
the purchaser will have to have a clear idea of the most suitable entity for acquiring
ownership at the time of purchase as the nomination and acceptance thereof must
take place on the same day on which the agreement was signed.

If a purchaser elects either a close corporation or company as the preferred entity of acquisition, the
agreement of sale may be signed by the Purchaser "on behalf of a company/close corporation to be
formed." Once the company/close corporation is formed, it would have to ratify the decision to
purchase the immovable property concerned. In this manner the "nomination" will not attract
double transfer duty. Unfortunately the Trust Property Control Act specifically prohibits the
acquisition of immovable property by a Trustee for a Trust to be formed.

VAT Purchasers must keep in mind that no transfer duty is payable if

the seller is registered as a VAT vendor on date of registration, in
which event the seller is liable to pay the VAT, charged at 14% to
the Receiver of Revenue.
Protection from creditors This is an important consideration, especially where the
purchaser will be trading.
Administrative costs Certain registration entities are more costly to administer than
others.
Capital gains tax and other tax Whether capital gains tax, [CGT], estate duty or other taxes are
considerations payable and at what rate, depends on the entity selected.
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1.4 Contractual Incidence

Learners Note:
Refer to Learning Unit 2 that deals with Common Law and Contractual Incidence.

1.4.1 Contract of sale

A little sentence like, "Piet Poggempoel hereby sells erf 113, Honeydew, Johannesburg to Jimmy
Smith for R 100 000", written down and signed by both parties, would constitute a valid and legally
binding contract.

Learners Note:
A contract of sale is a written document that identifies immovable property, a buyer,
a seller and a purchase price, and clearly states the intention of the parties to
transfer ownership, is a valid contract of sale.

The fact that it is a very short contract of sale that doesn't mention things like
occupation dates, mortgage bonds, or fixtures and fittings, does not make it invalid.

The law that governs contracts for the sale and purchase of immovable property in South Africa is
the Alienation Of Land Act 68 of 1981. The Alienation Of Land Act requires that an agreement for the
sale of immovable property in South Africa must be in writing and be signed by the parties of the
agreement, or their authorised representatives.

Refer to Learning Unit 2 for detailed information on The Alienation Of Land Act principles.

The document must contain:

• a description of the parties,
• the property and, of course,
• the purchase price.
• Nothing else needs to be discussed in the agreement, or recorded in the contract of sale.
The relationship between the two parties, meaning everything that is not mentioned in the
written contract, is governed by the South African common law.

The interesting thing about contracts of sale and purchase of immovable property, in most areas of
the world, is that it can contain absolutely any conditions. If the parties agree that a condition that
will cause the buyer to pay R20 000 more for the property should the Free State win the Curry Cup in
two weeks' time, must be included in the contract, they can do so! Yes, anything goes, as long as it is
legal.

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1.4.2 Common Law

A contract of sale for immovable property in South Africa is usually not just a one-sentence affair,
though. The important terms of the agreement, such as the date of occupation and possession,
whether the sale is subject to a suspensive condition requiring the approval of a home loan, exactly
what is included in the sale and descriptions of other rights and responsibilities of the parties are
included in most contracts of sale.

Anything that is not addressed in the contract of sale is governed by common law. The principals of
South African common law are well established, but not always clear or even logical to everyone. For
this reason, it is always best to address all the aspects that may be involved in the sale of the
property in the written contract of sale.

These other clauses to the contract of sale are usually where the "mystery" starts for most South
Africans. Legal practitioners draw up most contracts of sale, even those used by real estate agents.
Unfortunately, "legal-speak" is not really a popular home language in South Africa, and the
unfamiliar words and weird sentence constructions attorneys use in some contracts of sale baffles
most "normal" South Africans.

1.4.3 Contract Clauses

Each clause in the contract of sale should state to whom it applies, what has to be done and by when
it should be done. These aspects can be spelled out in names, exact descriptions and specific dates,
but as long as they can be reasonably determined, they are valid. So, an occupation clause that
states that Jimmy Smith will have the right to occupy erf 113, Honeydew, Johannesburg on 1 May
2050, is correct, but an occupation clause stating that the buyer will have the right to occupy the
property on the first day of the month after the date of transfer of the property in his name, is also
valid.

Another aspect to keep in mind about clauses in a contract of sale is the intended function of every
provision. Some clauses simply state what the parties agree. A clause that states that, "the parties
agree that the rope swing under the big oak tree in the back yard is included in the sale", is such an
agreement clause. But other clauses intend to cancel the sale if a condition is fulfilled. Other clauses
may also intend to suspend the contract until specific conditions are fulfilled.

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1.4.4 Resolutive Conditions

Learners Note:

A resolutive condition is one that intends to cancel the contract if a condition is

fulfilled.

Example Box:

"This contract of sale is subject to the resolutive condition that the seller must
deliver vacant occupation of the property to the buyer, on or before 1 May 2050", is
an example of a resolutive condition.

Any condition that states words to the effect that the contract will be null and void if
something hasn't happened by a certain time, or something has happened by a
certain time, is a resolutive condition.

1.4.5 Suspensive Conditions

Learners Note:

A suspensive condition is one that intends to suspend the contract until a condition
is fulfilled.

1.4.6 Buying Off Plan

Developers make use of two ways to finance a new development:

• speculation and
• "plot-and-plan".

When developers speculate, they use their own money to fund a project and then sell each unit on
completion. This way the developer takes full risk. When a developer sells "plot-and-plan", the risk
lies with the buyer. The developer makes periodic withdrawals from the buyer's building loan with a
bank, which takes place in stages after the bank's valuator has confirmed completion of the stage.
The buyer then authorises the payment to the developer. In this way, the buyer at least has control
of what he is paying for.

Off-plan buyers need two contracts. Your clients should sign two sale agreements when buying a
freehold home "off-plan" or in a "plot-and-plan" development. The one contract is to purchase the
land and the other contract is to build the home itself.

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Learners Note:

The second agreement (with the builder) should cover everything that is discussed
and agreed upon with the person or company who is actually building the home -
from the building price, the floor plan, the electrical wiring, the plumbing, the paint
specifications, the fixtures and fittings, and so on.

Off-plan buyers are often not aware of the need for this second agreement, and the law only
stipulates that the transfer of land cannot take place without a written contract. Your clients may
find themselves in a situation where they have a piece of land, but with no agreement for anyone to
build a home on it.

Reputable estate agents working for developers or builders will thus always ensure that the sale
agreements between buyers and builders are concluded in writing and in detail.

Before buying a home "off-plan" or buying a "plot-and-plan" home, there are important
disadvantages to consider. There may be various risks involved and this is how you can safeguard
your clients against these:

Patent and Latent Defects

In certain instances, the buyer is protected against severe defects discovered after the transfer on a
property has gone through. The law will attempt to determine whether the defect is patent or
latent, and on these grounds, make a ruling as to who is responsible for the cost of repair.

A patent defect is clearly visible upon inspection, like a crack in a wall or window, and it should be
stated in the offer to purchase who will be responsible for fixing (or replacing) the defect. A latent
defect is not so easily picked up on superficial inspection, for example a faulty geyser, a damp area
concealed behind furniture or fresh paint or a leaking roof.

In terms of the law, the seller is responsible for all latent defects in the property for three years from
the date of discovery of the defect by the buyer. It is for this reason that a seller would stipulate that
the property is for sale 'as is' ('Voetstoots'), but he is still responsible for any deliberately concealed
latent flaw and can only rely on 'Voetstoots' if the defect was unknown to him. However, the burden
of proof is on the purchaser if he alleges that the seller knows or ought to have known about the
defect.

A buyer should ask the seller to supply all warranties and documentation relating to repairs and
maintenance on transfer of the property.

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Depending on the circumstances, the buyer can cancel the contract and/or claim repayment of a
portion of the purchase price when a latent defect is present.

38.Activity: Latent defects

1. What advice would you give to your client in the event where major latent
defects become apparent after the bond has been approved and the process
has gone through the Deeds Office?

2. What are the risks in terms of contractual issues?

1.5 72-hour Clause

The 72-hour clause, also called a release clause, kick-out clause, escape clause, or
first refusal clause, is commonly inserted into real estate offer-to-purchase
documents. The function of a 72-hour clause in a contract of sale is intended to
protect the seller from losing valuable marketing time for his/her property, due
to a suspensive condition, which drags out for too long.

The 72-hour clause enables the seller to continue offering his immovable property for sale, while
guaranteeing the buyer a right of preference (or right of first refusal). The 72-hour clause is meant to
allow the seller to avoid losing the first buyer, without knowing if a second buyer has the capacity to
buy. The 72-hour clause also allows the first buyer time to make sure of his/her capacity to buy, in
case he/she decides to make use of the right of first refusal.

1.5.1 Contingency Protection

If homebuyers want to buy a property, but have a home of their own to sell first, the seller may want
to keep the door open, to be able to accept another offer to purchase, which is not contingent upon
the sale of another property. The 72-hour clause is not limited to contingencies involving the sale of
another property. It can be used to protect the seller in any contract involving a suspensive
condition. The 72-hour clause functions as a resolutive condition in the contract of sale. In other
words, if something specific happens, the contract cancels.

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The seller can accept the buyer's offer to purchase, just as any other offer to purchase, but a 72-hour
clause is annexed (added) to the offer document, and signed by both parties. The 72-hour clause
allows the seller to reserve the right to accept a better offer, if one should happen to come along.

So, the seller continues to market the property, searching for a better offer. The seller can accept a
new offer to purchase, just as he/she accepted the first offer. To protect the seller against liability,
and to inform the new buyer about the situation, another clause should be annexed to the new offer
to purchase document. This clause should state that the new offer to purchase is subject to the
suspensive condition that the first contract of sale be cancelled.

1.5.2 72 Hours to Perform

The seller cannot simply cancel the contract, one-sidedly, upon receiving a better offer. If the seller
receives a new offer to purchase, which he/she wants to accept, the buyer must immediately be
notified in writing. The buyer then usually has 72 hours (from there the name "72-hour clause") to
fulfil the suspensive conditions of the contract of sale, or to declare them fulfilled (even if they are
not), and move ahead with the purchase of the property.

The seller may choose to send this written notice by fax, telegram, and phonogram or by any other
means, where receipt by the buyer can be confirmed. If the seller decides to use a fax, email,
telegram, phonogram for this notification, the 72-hour period begins at the time recorded on the
message. If the seller opts for another method, the 72-hour period begins from the time the notice is
received by the buyer, not when the notice is sent.

Learners Note:

It may be wise to require the buyer to acknowledge receipt of the 72-hour notice on
a copy of this notice. The buyer should also indicate the day and time of receipt. The
seller should then retain this copy as proof of notice.

It is important to note that the buyer must make himself reasonably available to receive the 72-hour
notice. So, if the buyer is leaving town for a while, he must leave an address or telephone number
where he can be reached in case the notice is sent. Otherwise, if the notice is sent by fax, telegram,
phonogram, the buyer risks receiving the notice when it is too late.

The time period does not necessarily have to be 72 hours, though. Any time frame can be negotiated
between the parties. If the buyer fails to make the contract unconditional, before the allocated time
has passed, the buyer's offer to purchase the property is wiped out.

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Learners Note:

If the first buyer cannot commit to the purchase for some reason, the second
contract becomes binding, and the seller proceeds to sell the property to the second
buyer with the unconditional offer to purchase.

The buyer will therefore have 72 hours, to give a written notice of his intention to waive all the
suspensive conditions in the agreement of sale, to the seller or his real estate agent. Or the buyer
can decide to cancel his promise to purchase the property. This should also be done in writing.

Example Box:

"This contract of sale is subject to the suspensive condition that the buyer obtains
written approval for a home loan of at least R50 000, before 1 January 2050", is an
example of a suspensive condition.

Any condition that states words to the effect that the contract of sale will not be a
binding until a certain something has happened is a suspensive condition. A binding
contract of sale then only comes into existence once that certain something has
occurred.

39.Activity: 72-hour clause

Scenario: Your client has signed an offer to purchase but has received another offer
from someone else. How would you advise your client?

1.6 Financial Products and Providers

Developers and property owners no matter where in the world they operate will have to finance
their projects using equity finance, debt finance or a mixture of both.

We therefore need to examine in detail the different types of finance available. The financing of a
property is, as we all know, ultimately a derivative of the net income flows it is expected to produce.
The perceived “quality” of that income will therefore influence property financiers. It will influence
the amounts of money they will make available, the price and the terms of the loan.

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What is meant by quality?

Well, to some degree that will depend upon the financier, but assuming that he is a rational being,
able to invest across all markets and acquainted with modern portfolio theory, then this means its
predictability, its lack of variability, its security, its cheapness of management as well as its ability to
grow in real or money terms, its ability to perform in such a way that it can repay debt and/or leave
an equity investor with a profit.

1.6.1 Banks

The four major banks in South Africa, namely Nedbank, Standard Bank, ABSA and First National Bank
offer a number of different home loan solutions to suit your client’s particular needs. The most
widely used are the following:
• Traditional Home Loans
• Flexi Bonds
• Future Use
• Repayment Choice.

40.Activity: Financial Sources

Your facilitator will divide you into groups. With your partner, you have to do some research into
the different product features and qualifying criteria of the 4 major banks in terms of home loan
solutions. You can choose any of the four major banks for this activity.

Institution:

Home loan product Features Qualifying Criteria

Traditional

Flexi Bonds

Future Use

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Repayment Choice

1.6.2 Bond Originators

Mortgage Originators are the reason why banks are making so much money out of mortgages.
They're the reason why South Africa's property market has boomed at the rate that it has. If it
wasn't for bond originators, bonds would not be granted within 2 weeks of submission and estate
agents would not be able to sell property at the rate that they do.

Why would your clients want to use a Bond Originator?

1. The bond originator will do the application process with every bank. The mortgage
originator will collect all the necessary documentation and setup your client’s application,
saving time and money!
2. It's one bond form. No more. This will be submitted to all the banks on their behalf by the
bond originators. Submission to multiple banks is not really seen as a good thing in the
mortgage industry, it's generally only submitted to a second or third bank should the first
decline. This is the difference between a GOOD and a BAD bond originator.
3. Originators almost guarantee better rates than the rates your clients get should they go
directly through a bank. Originators have relationships with the banks and home loans
departments which they often use to get clients better rates.
4. Bond originators are FREE. All payments made to originators are made by the banks.

Mentored Discussion: Bond Originators

Your Facilitator will have further discussions on Bond Originators. Answer the
following questions:

1. Name 4 major Bond Originators in South Africa.

2. Under which circumstances would you advise clients making use of Bond
Originators?
3. Have Bond Originators make the lives easier for Estate Agents? Provide an
explanation for your answer.

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1.6.3 Financing Commercial Real Estate

Financing sources for commercial real estate include:

• Mortgage banking firms.

• Savings and loan institutions.
• Regional banks.
• Insurance companies and private investors.

Commercial real estate financing can take on very different terms, and the way deals are structured
is based on a number of factors:

• Anticipated use of the property.

• Anticipated returns from the property.
• Geography.
• Type of real estate.
• Size of real estate.
• Perceived risk to lender.
• Market conditions.

Learners Note:

Each of these areas must be examined by the business owner prior to seeking
commercial real estate financing. Business owners then need to examine the type of
loans offered by lenders in accordance with their needs and anticipated growth.
Unlike obtaining financing for residential real estate, where the transaction is based
on the value of the home at the time of the sale, commercial real estate financing
will be based — in part — on the value of the business in the future.

While some lenders specialize in specific types of commercial ventures, such as warehouses, retail
operations, or apartment complexes, others provide across-the-board financing to a wide variety of
commercial ventures. For the business owner, the key to starting the process is to have the
necessary paperwork in order. Despite the many types of financing and types of commercial real
estate, lenders remain primarily concerned with the level of risk they'll be taking. Therefore, they
must see the following documentation:

• Income and expense statement for the property demonstrating a solid income stream;
• Financial statements on all principals involved as owners of the property;
• Profiles of the management team;
• Property appraisal;
• Financial statements on the borrowing entity;
• Plans, including construction blueprints (if available) for the use of the property.

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Unlike most residential real estate transactions, the potential borrower is asked to pay 1 to 2
percent of the terms of the loan (referred to as “standby points”) to show a commitment to the deal.
This amount is refunded once the loan is closed. If the lender decides to offer a loan, a commitment
letter is presented with their terms included.

The loan agreement will usually include the length of the loan, interest rates (fixed or variable), and
what the loan is for (new construction, the purchase of an existing property, refinancing). As the
borrower, the business owner needs to see that the terms will allow the business to grow, and not
derail such progress. Such a commitment letter or loan agreement will likely also include:

• Closing conditions;
• Owner occupancy requirements;
• Affirmative and negative covenants regarding what the borrower does and does not agree
to do;
• Representation and warranties.

Once the lender and borrower have negotiated and come to mutually agreeable terms, the closing
process follows, and it is usually more complex than that of a residential mortgage. Issues such as
tenants, leases, environmental reports, and even zoning ordinances may all need to be factored into
the closing process, which can take up to two or three months, in some cases.
The key to commercial real estate financing is to find a lender that will meet the needs of the
business, and then allow the business to grow. The right business can increase the value of the real
estate it occupies, but only under an agreement that allows it to move forward.

41. Activity:

List the documentation that your commercial client has to prepare in order to seek
financial assistance from a bank or investor.

42.Activity: Calculations (1)

The seller, Mr X, sells his property for R1 200 000. The agent’s commission is 7.98%
and is included in this amount. The seller still has an outstanding amount of R350
000 on his mortgage.

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1. How much commission does he have to pay to the agent?

2. Once he has paid his mortgage debt, how much cash will he have available to
invest in his next property?

43.Activity: Calculations (2)

Read the buyer’s case study below.

Mr and Mrs Z, a newlywed couple want to buy a small cottage. They are married in terms of an
ante-nuptial contract. You qualify them jointly and ascertain the following information:
• He earns R20 000 per month and receives an annual bonus of R20 000.
• His wife earns R15 000 per month and receives a thirteenth cheque annually.
• They have sold their apartment for R560 000 but still need to pay the selling agent
commission of 5%, which is included in the selling price.
• The outstanding mortgage on the apartment is R250 000.
• They have some money in a savings account that should cover the buying costs.
• The bond cancellation fee is R200.

You will have to go and do some research to the exact amounts payable for the following costs:
• Bond registration fee plus VAT to the conveyancer responsible for bond registration.
• Bank charges plus VAT, i.e. valuation fee and the opening of a new account.
• Deeds office fee for registration of ownership and a bond.
• Postage and petties payable to the conveyance

Calculate the following:

1. What is the couple’s joint annual income?

2. If 33.3% may be utilised to repay a loan, what

size loan do they qualify for?

3. If an 80% bond is available, what is the

purchase price that they can afford?

4. How much transfer duty are they liable for?

5. How much of their savings do they need to

plan to pay the other costs on the purchase
of a cottage?

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Conclusion

1 Self Assessment

Self Assessment
You have come to the end of this module – please take the time to review what you
have learnt to date, and conduct a self assessment against the learning outcomes of
this module

2 Portfolio Activities

Portfolio Activity:

Refer to your Portfolio Guide for the assessment activities related to this section.

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Module 5: Office Administration

Learning Outcomes

The following learning outcomes are covered in this module.

S/O Specific Outcome Learning Outcomes

No
1 Control and deal with Define and describe confidential information for a specific
confidential information and organization.
documents. Explain the systems and procedures used for dealing with
confidential information with examples.
Demonstrate understanding of securing documents in an
appropriate manner and within an agreed time frame.
2 Control and evaluate ordering Present a plan to effectively control office stationery
and distribution of office policies, procedures and strategies.
stationary. Develop and implement effective shrinkage controls for an
organisation.
Produce Evidence of accurate reports reflecting stationery
movements for a given period.
Explain and apply the control of the administration system
and procedures to ensure effective administering of
stationery.
Explain documentation used for the control of stationery
in an accurate, complete way, which complies with
requirements to employees.
Evaluate effective stationery control procedures, systems
and follow up actions.
3 Implement and control Implement contracted control measures and identify non-
measures with individuals. conformances for reporting to person with authority to
deal with them.
Record non conformances and negotiate corrective
actions according to organisational requirements.
Handle and record reported non-conformance in
accordance with organisational policies and procedures.

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1. Introduction to General Administration

As soon as a business comes into operation, paperwork is created. The paperwork is the
administrative records of the company – and the administration is an integral part of the
organization’s quality management system.

Without proper administrative controls and record keeping, any business or operational area within
a business will soon suffer.

1.1 Administrative Quality Management

To put the need for administrative records into context, it is best to look at the QMS (Quality
Management System) of any business.

Learners Note:
All Quality Management Systems have three broadly defined areas:

•Policy statements which clearly state the organizational position towards an ETD
practice, and where required, state a clear inclusion and exclusion of expected
Strategic practice

•Processes that show how the policy statements will be implemented, and
normally includes a “by who”
Operational

•Supporting documents to be used in the process of implementation – whether it is

, marketing media, buyers profiling, offer to purchase, code of conducts,
information brochures … the administration forms the heart of the quality
Admin management system that drives and protects the business

1.2 Electronic Administration Management

Most companies have a server that manages information on a share-drive –

that means all people in the department/organisation have access to the same
documents at once. However convenient this may be, it also has the potential
to become a deep dark hole where valuable information disappear into if not managed properly.

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1.2.1 The share-drive

• Is structured in such a way as to reflect the overall purpose, roles and functions of the real estate
business.
• Structure and management must contribute to effective, efficient access to documents and
resources relating to the operational department.
• Is access controlled, but accessible to all members who contribute to the department’s
operations, but not to the whole of the company, for security and confidentiality reasons?

1.2.2 Setting up the structure of the Share-Drive

All documents and folders to be within acceptable share-drive “grid” of maximum 10 levels down
and 4 levels across

Example Box:

Level 1 Level 2 Level 3 Level 4 Document Register

Master file 1
Master file 2
Master file 3
Master file 4
Master file 5
Master file 6
Master file 7
Master file 8
Master file 9
Master file 10

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Example Box:

An example of how this would be implemented is as follows:

Level 1 Level 2 Level 3 Level 4 Document Register

Real Estate Business HR Management Estate Agents • John Doe • Signed Contract
Management • Jane Doe • Letter – appointment
• Application & CV
Client Management Mandates Residential • Mrs Doe • Contract
(Seller) Property • Property Inspection and
Evaluation
• Open House checklist
and leads
• Personal Confidential
Information
Buyer Clients Sectional Title • Mr Black • Buyer Profile
(Listed) Properties • Properties sourced
• National Credit
Compliance
• Personal confidential
Information
• Conveyer information

1.2.3 Share-drive Maintenance

• The correct maintenance of the share-drive is the responsibility of all staff.

• Conformance to share drive requirements ensured by the Principal Agent / Owner or Office
Manager.
• Non-conformances are addressed monthly as a quality item at staff meetings.
• Change requests to master structure of the Share drive to be approved by the Manager.

Learners Note:
Review of the share-drive structure should be every 6 months and it is usually driven
by a person appointed by the Manager; the Office Administrator.

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1.2.4 Server levels:

Based on the above, the administration server of the business should be broken up into three levels:

Strategic Level
(includes policies)

Operational level
directly related to
policy

Administrative Level
related to policy and
operations

Learners Note:
Each level has a series of procedures related to the level, which is broken into two
major levels:

Masters
All master forms / reports / tools

Operations Implementation of the particular area

In order to create a meaningful administrative system that is effective in hard and electronic copy, it
is critical to develop a QMS Model first – or at the very least, an Administration Plan.

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1.2.5 A typical Real Estate QMS Model

A typical QMS Model for Real Estate offices may be structured to look as follows:

Business
Management

Client
Office QMS
Management

Agent
Management

Real Estate has a variety of documents around the following areas:

Mandates, Contracts, Agreements, Code of Conducts, Conveyer communication and documentation,

human resource management, client support and information, facilities management, listings,
profiling, marketing and advertising information, after sale service information, Legislation,
Mortgage broker’s information and communication, Deeds Office documentation and
communication, etc

44.Activity: Administration QMS Model

Based on the proposed Admin QMS Model above:

• Identify possible sub-divisions that you would have under each area.
• Identify any other high level area that may be required to complete the
Admin QMS Model.

Mentored Discussion: Admin Systems

Your facilitator will lead a group discussion, in your class, answer the following
questions:

1. Who in at your workplace is responsible for the maintenance of the

administration systems?
2. What can you do to ensure efficient implementation and maintenance of the
Admin system, and what would the benefits be of a well maintained electronic
system?

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Tip:

The Golden Rule with an electronic system is to keep it simple. The following serves
as some tips in the establishing of such a system.

• Try not to have more that 3 levels of folders before documents are reached –
more than that creates a fragmented, cumbersome search for documents, and
the possibility of misfiling increases dramatically.
• Create a standard, informative naming convention for folders and documents
that does not leave one guessing about the content of the folder or document.
• Chunk the information logically: use several chunking methods to create a on
line “file divider”:
o Use years as a high level filing system, You may, for example, have folders
named “Close Mandates 2006, Close Mandates 2007, Close Mandates 2008”
o Use dates as a method of version control and multiple folder identification.
As an example: “Mand001 25 June 2006” may contain all relevant client
information, open house leads and other documents related to Mandates
001 that was concluded on 25 June 2006.
• As an example, under client management you can create a folder per client, with
all his relevant personal information, contracts, etc.

1.3 Hard Copy Office Administration

A logical, stream-lined and structured filing system in support of the

electronic filing system is as critical to well managed Quality
Administration System.

Below is a sample of a Filing Plan that is aligned to the Electronic Administration Plan. The system
implies that every piece of paper / document in the Real Estate office system has a home, and can
be found by anyone who has been trained in the use of the system.

File File Label Information in Electronic Folder Where stored

Number File electronically
1 Company Company CK Business Management Company Information
Information Document
Company VAT Business Management Company Information
Registration
SARS tax Business Management Company Information
clearance
Company Business Management Company Information
Profile
Company Business Management Company Information
Organogram

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File File Label Information in Electronic Folder Where stored

Number File electronically
FICA Business Management Compliance
requirements
2 EAAB EAAB Business Management Compliance
Correspondence registration
3 Quality Individual Business Management Quality Management
Management Policies Systems
System

From the above it becomes clear that the electronic and hard copy administration system may not
necessarily be an exact duplicate of one another, but will show up to 80% similarities.

45.Activity: Administrative Filing Plan

Based on the sample Filing Plan above:

• Identify possible files that you would need for Client management in your
organisation.
• Identify some of the documents that may form part of the hard copy files
you have identified.

File File Label Information in Electronic Folder Where stored

Number File electronically

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1.3.1 Types of Administration Documents

Let us re-look at the basic QMS Admin Model used above, which you have already built out in the
previous exercise.

Business
Management

Client
Office QMS
Management

Agent
Management

Each of the divisions will have a number of standard documents that supports the category, and
those standard documents will be used to create operational records for the company.

It is therefore critical that the required standard documents be identified first. Below is a list of
possible documents that could be relevant to each division:

Business Management

These documents manage the Business – and focuses on the internal operations of the
organization that is necessary for legislative compliance and sound business practice. It would
therefore contain documents such as:

• Company legal documents: CK registration, VAT registration, tax clearance.

• Company profile documents: company profile, organogram, vision and mission, business
plan.
• Marketing and Advertising information: standard price lists, proposals, menu of services
• Selling information: Advertisements, sales teams, promotions, stationary (business cards;
sales media).
• Financial Information: Cash flow, Profit & Loss statements, bank statements, invoices.
• Business Schedule: Client schedules, Agent Area Allocations.

Client Management

These documents manage the Clients – and focuses on the product and services that is offered.
It would therefore contain documents such as:

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Client Information Financial Information Legal Information

• Buyer profile templates • Mortgage application • Attorney information and
• Seller profile templates Template templates
• National Credit Act • Deeds Office information
• Mandate Template
Obligation Checklists and documentation
• Open House template • Special clause templates
• Bond Calculation
• Property Evaluation • Municipal information and
Templates
Template application templates
• Loan Application
• Geographic canvassing
Templates
Template
• Repayment Calculation
Template
• Financial Institutions
qualifying criteria

Agent Management

These documents manage the estate agent – and focuses on the effective human resource
management of individuals and teams. It would therefore contain documents such as:

• Human Resource information: staff recruitment documents and contracts, code of conduct.
• Professional development plans
• Allocation of sales teams
• Personal information
• Presentation folder templates

1.4 Access vs. Security

Learners Note:

No estate agent shall, without just cause, divulge to any third party any confidential
information obtained by him concerning the business affairs, trade secrets or
technical methods or processes of a client or any party to a transaction in respect of
which he acted as an estate agent. “Code of Ethics, Clause 10”.

Every estate agent who is the sole proprietor of an estate agency business or a partner in a
partnership or a director of a company of a member of a close corporation contemplated in
paragraph (b) of the definition of estate agent” in section 1 of the Act carrying on the business of an
estate agent, shall be held responsible for any contravention of or failure to comply with this code of
conduct by any other partner, director, or member of by any estate agent in the service of such sole
proprietorship, partnership, company or close corporation, unless he has prior to such contravention

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or failure to comply taken all reasonable steps to prevent the same and could not in the
circumstances have prevented such contravention or failure to comply.
In terms of this clause the principals of an estate agency business assume responsibility for any
contravention of or a failure to comply with the code of conduct by their fellow principals and
employee estate agents and impose an obligation upon such principals to take all reasonable steps
to ensure compliance with the Code by such persons. The effect of this provision is that principals
are compelled to play an active role in ensuring compliance with the provisions of the Code. In-
house training will obviously play a major role in ensuring such compliance.

Learners Note:

It is therefore important to have access control to documents, to protect the

integrity of your organization, not all people in the Office can have equal access to all
records, and it is important to structure access in accordance with a Popular
Management of Information Principle:

Access

Information
Management

Confidentiality Security

Information is accessed or released on a basis of “Need to Know” – and it is important to determine

in the organization what a person’s right and duty to information is. It is helpful to colour code the
access status and determine a person’s colour coded security status to records.

Status Colour Code Reason

Must Know Green Essential information to perform his duties, full access allowed.
Nice to Know Yellow Not directly related to his job function, but access to do not
compromise confidentiality or security.
Need to Know Blue Needs access to portions of the information – not all of it. Some
protection of security and confidentiality required.

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Need not Know Red Job function requires no access to this information, and adds no
value to the person’s job functions.

46.Activity: Access Diagram

Look at the Access Diagram below, and provide an Access to Information security
clearance to each of the persons with regards to specific records.

Discuss the implications of the ratings that emerge – do persons all have equal
administrative security access ratings? What is the implication thereof for physical
office lay out?

Non Receptionist Finance Principal Agent Office

Principal Manager Manager
Agents

Staff Contracts

Invoices

QMS System

Client
Portfolios

Company
Balance Sheet

Sales Data and

Fore-cast

Marketing
Media

Data theft by employees is a growing concern. Employees usually have unrestricted access to
sensitive data including confidential documents, customer databases, business contacts and sales
leads. Below are important tips on the prevention of confidential data being compromised.

Tip: Prevention

• Shred ALL proprietary information with a cross-cut shredder. Desk side

shredders are ideal for business professionals that regularly handle sensitive
information including legal, accounting, and human resource or finance
personnel.
• Develop office guidelines for all employees that outlines the proper procedures
for protecting sensitive information.
• Keep all sensitive information and files locked away. Restrict access to those
who need it and closely watch your files.
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• Work with your company’s IT department to limit the access employees have to
electronic files. All files should be password protected and encrypted.
• Ensure all company computers have the most up-to-date anti-virus, anti-spyware
and firewall software. Also, check to make sure wireless networks are protected
with the proper security settings.
• Conduct thorough background checks on potential employees. It is not
uncommon for confidential information to be stolen from within.
• Don’t put outgoing mail in an unsecured mailbox at work. Use Post Office
mailboxes for mailing these sensitive items.
• Avoid leaving documents in communal copiers, shared printing spaces,
conference rooms or other open areas for extended periods of time.
• At the end of each work day, all employees should log off their computers and
lock their workstations or office doors. All confidential documents should be
filed away rather than left at one’s desk.

These days it is common for Real Estate businesses to have a website. If you are selling goods and
services or collecting personal and financial data over the internet it is advisable to secure your
website against hackers. The simplest method and cost effective method for doing this is by using
secure socket layer (SSL). This means that the data traffic between client machines and web server is
encrypted during communication over the internet.

2. Office Stationary

Stock is an expensive liability, and only becomes an asset once sold – and safely
in the hands of the customer. On the other hand, any business also has
equipment and resources that will never be “sold”, but forms an essential part
of the required tools for estate agents to do their jobs effectively. These items
have a depreciative value (i.e. it depreciates or loses “sales” value all the time,
but the replacement value keeps raising.

In the Real Estate environment, stock could refer to any of the following:

• Stationery stock
• Printed marketing and advertising materials
• Presentation folders and information brochures

2.1 Stationary Stock Control

Even though stationery items do not cost a lot per item, for example a ream of A4 paper costs
approximately R40, but if you add up all the stationery in the office, it can add up to hundreds or
thousands of Rands depending on the size of the office.

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Learners Note:

If you buy too much (overstocking), this can mean that you have spent too much
money and if the stationery is not used it is like money just sitting there. If you buy
too little (under-stocking), you may not have enough to do urgent and important
work that could cause delays.

How do we control the stock in a Real Estate Business?

• A TRUSTWORTHY storekeeper - Someone must take charge of the stationery and that
person should hold the key to the cabinet or room where the stationery is kept. This person
should be a trustworthy person.
• Only ONE person to buy stationery - In a large business, different departments should not
be allowed to buy stationery. They should tell the person in charge who will then buy
enough for everyone. Firstly, this is good control, secondly, it saves time because one person
does the job for the entire company and there is less paperwork involved.
• FIXED TIME to draw stores - It is not efficient or effective for people to get stationery
whenever they want. Imagine how busy the storekeeper will be if he/she has to open the
storeroom or cabinet every other hour because everyone wanted something at a different
time. It is not only time-consuming, but also the paperwork that has to be done is more. It
makes more business sense for everyone to draw stationery at a fixed time of the week;
most companies do it once a week. If any department has a special project on and need
more stationery, they should inform the storekeeper so that he can prepare it in advance for
them.
• REQUISITION FORMS - For any stationery taken from the store, the requisition form should
be properly written out and signed by the relevant authority.
• UPDATE stock cards - Stock cards for each stationery item must be updated at all times. This
means that after stocks are delivered or after stocks are issued to the company, the records
must be accurate and up-to-date.

Mentored Discussion: Stationery Control

Your Facilitator will lead a class-room discussion on stationary control. In your class
answer the following questions:

1. What are the common reasons in a real estate business for stationary
control?
2. Is it viable to have fixed times of stationary distribution? Give reasons for
your answer.
3. What workplace systems are currently in place to control stationary?
Discuss your workplace situation.

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47.Activity: Office Stationary

You are required to do some basic research at your workplace. Do the following:

1. List the stationary items that Estate Agents use for their daily activities.

2. What would happen if the office under stock some of these items?

3. What security measures are in place at your workplace to control the

stationary?

2.1.1 Under-stocking of Stationary

The Real Estate office cannot function if there is not enough stationery. For example, you may have
an urgent offer to deliver to a seller but there is no A4 paper in the office. This is a situation you do
not want. To make sure that this does not happen, there must be minimum number of stationery
items in the office.

When stocks fall below this level, it is called under-stocking. For example, your minimum number of
envelopes in the office is 10 envelopes. If you only have 7 envelopes in the office, you are under-
stocked. You must buy more envelopes as soon as possible or letters cannot be sent.

2.1.2 Overstocking of Stationary

The maximum stock level is the number which the stock should not exceed.

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Tip:

For example, if the office needs only a maximum of 100 envelopes, then you should
not have more than 100 envelopes. Overstocking is when you have more than the
maximum. If your maximum stock level for envelopes is 100 and you have 150, you
are overstocked. This is not good because you are wasting money buying the extra
envelopes and wasting space keeping the extra envelopes.

2.1.3 Re-order Stock Level

It takes time for the stationery supplies to get to your office after you order them from a stationery
supplier. Of course, some common items can be bought off the shelf but you cannot bring 100 reams
of paper from the shop to the office. Normally, you get bulky purchases delivered to your office. And
this takes time.

The re-order stock level is set so that there is enough stock for the office to you by the time the
stationery items is delivered. The re-order stock level must be more than the minimum stock level.

Example Box:

The minimum stock level for envelopes is 10 pieces; the re-order level can be set at
20 pieces. So when your stock reaches 20 envelopes you place an order and before it
comes, you should have enough envelopes to last you for a day or so.

For some companies, they use a coloured marker to show where the re-order level is
so that you do not have to count how many you have every time you want to order
stationery. For example, take a piece of red A4 paper and put it between two reams
of A4 paper where you have to re-order. When you use paper and reach the red
piece of paper, you know you have to re-order.

2.1.4 Documentation

The Stationery Requisition Form must be filled up properly before stationery is given to the
department.

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48.Activity: Stationary Requisition Form

Your Facilitator will divide you into groups. With your partner design an office
stationary requisition form. The form must make provision for the following:
• Order serial number
• The person who is drawing and collecting the stationery
• Department which needs the stationery.
• Quantity and Description
• Date of request and date of issue.
• Signature

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Stationary Stock Cards5

A stationery stock card is used to record the movement of each particular item of stationery. The
stationery stock card is important because:

• It can help make sure that the company does not over or under stock stationery just by looking
at the balance in the stock card.
• It can help check if person has used too much stationery.
• The receipts columns will confirm that the delivery of stationery items was carried out. For
example, if the stationery supplier says that he has delivered 20 reams of paper last Thursday,
you can confirm it by looking at the stock card.
• After a physical stock check, you can tell if anyone has stolen anything if you have less than what
is written in the balance column of the stock

Example Box:

Stationary Stock Card

Item: Bond Paper A4(1) Max Stock: 100 boxes(2)
Ref: BP1 Min Stock: 50 boxes(2)
Date(3) Receipts(4) Issues(5) Balance in
Stock(6)
Quantity Invoice Quantity Requisition
Supplier Agent
Received Number Issued Number
Manuel
Aug 1 60 254B 100
Ltd
" 3 2 2456 Peter 98
" 3 10 2457 Elize 88
Dealer
" 4 12 2458 76
Principal

1) The item must be indicated. In this case, it's Bond Paper A4. A reference number is used for
bond papers of different colours/weight.
2) The maximum and minimum stock level must be indicated. Here it's 100 and 50 respectively.
3) The date column shows when the movement took place. This is important if you want to
check if your supplies came in on time or when the invoice is sent to your office for payment.
4) The receipts column is divided into "Quantity Received", "Invoice number" and "Supplier".
You may have more than one supplier because sometimes the supplier may run out of stock
and cannot sell to you.
5) The issues column is divided into "Quantity Issued", "Requisition number" (which refers to
the requisition form number) and "Department".
6) The most important column is the "Balance in Stock" which shows how much you should
have in your storeroom on that day.

5
www.geocities.com

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2.2 Control Measures for Individuals

In order to successfully manage an office, regardless of your company's product or even your
customer base, you should adhere to some basic guidelines. Here are important areas that you
should keep in mind:

2.2.1 Employment and human resources

It's critical to have an employment policy in place. A policy manual gives you a
blueprint for the way the company approaches employment. It spells out rules in a
way that can prevent later problems. (Imagine working for an organization that came to a standstill
each time an employment issue arose.) In addition, you'll want to include a training and
development program under this area. Even if your training and development program is modest,
you still need to consider building this into your policy .

2.2.2 Performance Management

Keeping track of agents’ projects and activities is critical to the successful completion of important
tasks and represents an essential piece of documentation. Knowing when things have to be
completed and by whom gives everyone a clear idea of what's ahead. Deadlines are less likely to be
missed and people are more likely to know their roles. Plus, each project, through careful
documentation, can become a useful case study for future assignments .

2.2.3 Office Communication

For many small businesses, the responsibility for communication falls upon the office manager /
Principal Agent. Knowing how and when to communicate key information is vital to successful office
management. E-mail blasts, posted instructions at the copier, and weekly staff meetings are just a
few of the types of communication that occur within a busy office. Having a communication plan
that everyone can adhere to will increase an office's productivity and ensure that information is
disseminated clearly and quickly.

2.2.4 Conflict resolution

Conflicts are inevitable. Knowing how to handle them properly, however, will make life easier.

Learners Note:

Whether you have a formal policy or rely on your own wits, you need to prepare
yourself for a wide variety of disagreements. Even with an employment manual, such
issues as equitable distribution of work, commission rates, and job descriptions often
arise in a company. Ignoring a conflict or waiting for it to dissipate is never the right

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solution. Having a plan or a policy for conflict resolution will help everyone navigate
through a disagreement in a professional manner.

2.2.5 The Agency and its people

Knowing how to run an office must include understanding the company and its people. Knowing the
product line and how it fulfils a need is just as important as ordering more toner for the printer. If
you don't understand your company's mission, you won't know how best to support its various
functions.

The same goes for people — knowing employees' roles, where they fit into the big picture, and how
they operate will help you manage the office so that every function supports the people tasked with
getting things done. The more you know about how the company works and what people are doing
to build business, fulfill customer requests, meet deadlines, and otherwise perform their duties, the
more successful you'll be in creating and sustaining an environment that fosters success.

Portfolio Activity: Office administration

Refer to your Portfolio Guide for a theory and practical activity that must be
completed for summative assessment purposes.

Conclusion

1 Self Assessment

Self Assessment
You have come to the end of this module – please take the time to review what you
have learnt to date, and conduct a self assessment against the learning outcomes of
this module

2 Portfolio Activities

Portfolio Activity:

Refer to your Portfolio Guide for the assessment activities related to this section.

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Module 6: Self Development in Real

Estate
Learning Outcomes

The following learning outcomes are covered in this module.

S/O Specific Outcome Learning Outcomes

No
1 Describe and apply self Discuss the purpose and principles of self-management in
management skills in a Real relation to the Real Estate function.
Estate environment. Explain the purpose and process for scheduling activities in
a Real Estate context with examples in relation to setting
targets and goals.
Identify own time management tools/methods and align
to work schedule to ensure productive use of time.
Discuss typical constraints to self-management within Real
Estate context with examples.
Outline methods for overcoming own constraints with
examples.
Draw up an activities schedule and self-management
action plan according to work demands, identified
constraints and overall results and targets that need to be
achieved.
2 Identify and describe typical Explain typical career paths and opportunities within Real
career development Estate with examples.
opportunities within Real Estate Provide a map of your own career path according to
and define own career personal action plan and the career opportunities
development plan in relation to identified within own work context.
this. Describe and apply the principles of goal setting to own
career planning process.
Outline targets and goals to map out own career plan with
timeframes and compile a comprehensive career plan in
relation to the principal`s targets.
3 Describe career development Explain typical career paths and opportunities within Real
opportunities within Real Estate Estate with examples.
and define own career Map your own career path according to personal action
development plan. plan and the career opportunities identified within own
work context.
Describe the principles of goal setting and apply to own
career planning process.
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S/O Specific Outcome Learning Outcomes

No
Outline targets and goals to map out own career plan with
timeframes and compile a comprehensive career plan in
relation to this.
4. Identify the various trends in Identify and discuss the various bodies, institutions and
Real Estate career development structures that affect career development and self-
and how these impact on own development planning within Real Estate in relation to
personal development. their overall roles and functions.
Ways in which the various bodies, institutions and
structures can be tapped to maximise own career
development plan are identified and actioned in order to
achieve targets and goals.
Outline the qualifications and unit standards that need to
be completed in order to obtain the necessary certificates
for actioning career goals

1. Introduction to Self Development

Many people often fail to achieve their full potential in life such as. For example:

• As estate agents they don’t sell as many houses as they should.

• They do not pass, or even complete, the courses that they attend.
• They do not stick to self-improvement plans.

The key difference between those who do achieve and those who do not achieve is simply that the
achievers plan to be a success - and they stick to their plans.

In addition to planning, achievers believe, and accomplish things, that non-achievers neither believe
nor do. The ‘things’ that distinguish achievers from non-achievers relate, in essence, to self-
management and to self-esteem.

If you are able to understand, and apply, the self-management skills practiced by achievers you too
will be able to realise your potential both as an estate agent and as a member of society. This
chapter will introduce you to some of the skills of the achievers.

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1.1 The Purpose of Self Management

The purpose of learning about self-management is to develop the skills that are necessary to enable
you to plan your day-to-day life so that you can:

Set your goals

compile action plans to assist you in achieving your goals

enjoy the success that will come with goal achievement

enjoy career and personal success, including enhanced

productivity and profitability

1.1.1 The Principles of Self Management

Now that you know the purpose of self-management it is necessary to consider some of the more
important principles underlying self-management.

According to Wikipedia a principle is: “[A] truth, a rule or a standard.” A principle is, in other words,
a “fixed or predetermined mode of action”. Through an analysis of the literature in such diverse
disciplines as psychology, education, business and sport the following eight principles of self-
management have been identified. These principles, essentially, comprise a list of the eight
identified behaviours that can be attributed to successful and self-managed people as contrasted
against those people who are not self-managing.

The eight self-management behaviours are listed in Table 1 below:

Learners Note:

The good news is that anyone can develop these behaviours – all it takes is effort
and practice to change from someone who cannot manage themselves, their career
or their day-to-day activities into someone who is fully in charge of themselves and
their destiny. You will be shown how to accomplish this transformation later but, for
now, here are the important self-management behaviours for your consideration:

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SELF-MANAGED PEOPLE… STRUGGLING PEOPLE…

Accept self responsibility – you are the primary See themselves as victims – believing that
cause of your outcomes and experiences things happen because of fate or luck

Discover self motivation – finding purpose by Have difficulty sustaining motivation, are
discovering meaningful goals and dreams depressed and resentful because life is “unfair”

Master self-management – consistently planning Seldom identify specific actions needed to

and pursuing their dreams and goals accomplish an outcome and procrastinate
when they do
Employ interdependence – building mutually Are solitary - often rejecting help from others
supportive relationships to achieve their goals or they seek the company of people who are
equally negative
Gain self awareness – consciously employing Make important choices unconsciously and
behaviours, beliefs and attitudes to keep get involved in self-sabotaging habits
themselves on track
Adopt lifelong learning - finding valuable lessons Resist new learning and imaginative ideas
and wisdom in nearly every experience which are seen either as boring or fearful

Develop emotional intelligence – effectively Live at the mercy of strong emotions such as
managing their emotions in support of their goals anger, anxiety or a need for instant
and dreams gratification
Believe in themselves – seeing themselves as Doubt their confidence and personal value and
capable, lovable and unconditionally worthy as feel inadequate to reach their goals
human beings

1.1.2 Scheduling of Activities

One of the key behaviours highlighted above is the necessity for planning
your life and not leaving anything to chance.

The need for planning is important both for your career and your personal
life. But what should you be planning? Use the activity block below to
identify the areas of your life that you should be planning for.

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49.Activity: Personal Goals

Complete the table below in terms of personal and work-life goals – make sure you
include personal, social, development and business goals.

Working Goals Personal Goals

1. 1.

2. 2.

3. 3.

4. 4.

Learners Note:

Someone once wrote: “If you fail to plan, you plan to fail!” Planning is like the
rudder of a ship. Without a rudder the ship is at the mercy of the sea, the wind and
the currents.

There are six generic steps to planning according to conventional wisdom:

1. Establish a realistic target – this is your goal.

2. Ask yourself the 5 Ws and 1 H (What? Who? Where? When? Why? and How?) to determine
what needs to be done, how it is to be done and by whom.
3. Schedule the activities in the order that they should take place – prioritise.
4. Tell everyone who is involved in your plan.
5. Implement the plan.
6. Check your regular progress against the plan, taking corrective action where necessary.

1.2 Setting Goals

Goal setting is, unfortunately, not as straightforward as it sounds. It takes a great

deal of thought and energy to decide what you should be aiming for.

Goals also need to be challenging yet achievable. Conventional wisdom states that
goals should be SMART.

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These letters make up an acronym as follows:

Specific You must specify exactly what you want or where you are going.

Measurable Your goals must be quantifiable so that you can track your progress. It is
not enough simply to state that you want to sell more houses – you need to
say how many more houses you want to sell and in what time period.

Achievable Your goals need to be a stretch but, to be motivating, they must also be
achievable. Since goals that are not achievable are de-motivating to the
individual one tends quickly to give up

Realistic You may decide to set yourself the target of selling at least ten houses a day
– but is this target really realistic given the state of the economy, the cost,
the activities of competitors and the various other relevant constraints.

Timeous You need to state that you are planning to achieve your goals within three
months or within two years or within ten years. This will help you
periodically to track your progress so that you can take corrective action as
and when this is necessary.

Tip:

It is a good idea to visualise yourself actually achieving your goals. Some people cut
out pictures and stick them on their walls - or place them on their computer - where
they can serve as a constant reminder of their desired goals and objectives.
Visualisation helps you to stay on track.

Visualisation of your goals is important – but, at the very least, you should write
down your goals and also read your list often to remind yourself of what it is that
you are striving for.

1.2.1 Scheduling Goals

Once your goals have been clearly defined it will help if the incremental steps leading to the
achievement of the goals are listed. When you have compiled a full list of the necessary activities
you can start to prioritise and schedule the necessary activities to ensure that you achieve your
goals.

The process of establishing priorities will help you to maintain your focus and reduce your levels of
stress. There are numerous ways to set priorities but the simplest way is for you to create a priority
category list for yourself such as the one shown on the following page:

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Priority code Action

A Must do – urgent
B Should do – a second order item
C Could do – when and if time allows

Start with the A tasks and ensure that you finish these before moving on to the Bs. Any tasks that
have not been completed on one day need to be moved over to the following day, and so on, until
you have finished the tasks that you have set for yourself.

You may even find it necessary to redefine and re-prioritise the tasks as you move through your daily
planner and as things become clearer to you. B tasks, for instance, may assume a new urgency as the
days progress so that you re-schedule them as As while As may seem to be less important and are
then downgraded to Bs and so forth.

Should you be working as part of a team, you may add the name of the person responsible for each
activity as well as an expected completion date to the activity schedule.

Example Box: Activity Schedule

Priority Action Who By When Who Completion Review

allocated Date
task
A1 Prepare budget Bill 30 June Thabo 29 June 
A2 Arrange budget Mary 1 July Bill 1 July 
review meeting
B1 Do project plan Bill 4 July Thabo
B2 Schedule staff Mary 6 July Bill
C1 Revise admin Mary 6 July Gill
job specification

50.Activity: Schedule Activities

1. Select any one of the goals that you chose in the previous activity and draw up
an activity list for the accomplishment of that goal.
2. Create a priority category list that is suitable for you and use that list to prioritise
the activities for the achievement of your goal, in order of importance.
3. Showing which activities you will do first and which you will hold over until later.

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Goal selected:

Priority Category Activity to achieve goal

1.3 Time Management Tools and Methods

Effectively managing your time can be a crucial factor in determining how close
you get to achieving your goals. Successful time management will depend on
your ability to organise and plan your time effectively. It is necessary, therefore,
to identify the most common ‘time wasters’.

Typical ‘time wasters’ would include the following:

a) Procrastination – putting work off for later instead of doing it immediately can lead to stress,
over-burdening and, ultimately, missed deadlines.
b) Disorganisation – if your desk is so cluttered that you cannot find the articles that you are
seeking you will inevitably be wasting significant time and effort in looking for things.
c) Telephone calls and e-mails – dealing with each and every telephone call and e-mail that comes
in will definitely distract you from the immediate tasks at hand. It takes a while to refocus each
time and this also wastes valuable time.
d) Meetings – many meetings are unstructured and, as a result, time wasting. Always prepare an
agenda for a meeting and stick to it.

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Self Reflection:

Make a list of any other time wasters that you encounter in your job environment
and indicate how you think you can control these factors so that you are able to
make the most effective use of your available time.

1.3.1 Time saving tools and methods

Good time saving methods and tools that you must practice to manage your time effectively
include:

Get started Gather the information that you need and plan to start. A good tool to employ
here would be for you to keep, and regularly update, a project plan or a diary.

Make a ‘to-do-list’ If you know exactly what you need to do each day it is much easier to make a
start.
Plan what needs to be done and leave time open for emergencies.

Prioritise Divide your daily tasks up by creating, and using, a priority category list.

Use your diary Schedule all your appointments and tasks in a diary so that you do not lose
track of time.

Do only one task at It is much more effective to do one thing at a time and to give that particular
a time task your undivided attention.

Establish deadlines If a task is taking too long to complete evaluate why this is so and establish
for every task essential remedial measures including, for instance, additional training.

Make time for Ensure that you make time for yourself.
yourself

Mentored Discussion: Time Management

Your facilitator will lead a class-room discussion on time management. In your class,
discuss the following:

1) Time management constraints that Estate Agents might have.

2) Describe some of the time management tools available and how these could be
effectively used in the Real Estate Environment.

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2.1 Career Development

The Oxford English Dictionary defines career as an individual's "course or progress through life (or a
distinct portion of life)".

Career usually refers to work that a person gets paid to do. A career is traditionally seen as a course
of successive situations making up a person's working life. One can, for example, have a sporting
career or a musical career without necessarily being a professional athlete or musician. "Career" in
the 21st century, however, would refer to a series of jobs or positions through which one earned
one's income. Career, in its broadest sense, then, refers to an individual’s work and life roles over
that individual’s lifespan.

Learners Note:

Just as it has been emphasised that it is essential that one should not leave the
achievement of one’s goals to chance, so is it equally important not to leave one’s
career to chance. It is important that you carefully plan your career from the first
day that you start working so that you know what position you will be in, by when
and what you hope to be earning as far as your career is concerned.

Ball (1997) defines career management as:

1. Making career choices and decisions.

2. Managing the organisational career. This deals with the career management tasks of individuals
within the workplace, such as decision-making, life-stage transitions, dealing with stress, etc.
3. Managing 'boundary-less' careers. This refers to skills needed by workers whose employment is
beyond the boundaries of a single organisation, a work style common among, for example,
artists and designers.
4. Taking control of one's personal development – as employers take less responsibility,
employees need to take control of their own development in order to maintain and enhance
their employability.

2.1.1 Career Paths and Opportunities in Real Estate

There are a number of different careers options that are open to people within the real estate
sector. These include:

Principal estate agent Non-principal estate Administrator Canvasser

agent

Secretary Conveyancing attorney Paralegal secretary Bond originator

Office manager Financial controller or Receptionist

accountant

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An estate agent may, furthermore, elect to practice in any one of the differentiated areas of estate
agency including:

• Residential
• Commercial / industrial
• Community schemes
• Agricultural
• Business broking
• Social housing
• Facilities Management
• Auctioneering

Where you start, and where you will end up, is typically referred to as your “career path”. You
would usually envision yourself moving up the career path (as, for instance, from being a canvasser
to becoming a non-principal estate agent to running your own enterprise as a principal estate agent
and employing non-principal estate agents).

A career path could, however, be horizontal (moving from one job to another at the same
hierarchical level) or, even, downwards in that you may be a principal estate agent but elect to
return to being a non-principal estate agent simply because you prefer to work as a salesperson
rather than as an administrator.

The ideal career choice for you will depend on a number of personal characteristics that will be
discussed in the next section

Mentored Discussion: Real Estate Careers

Your facilitator will lead a class room discussion on the wide career choices in the
Real Estate Environment. In your class discuss the following:

1. List at least 3 other careers besides those already listed above.

2. What do they do?

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3. If you were given a change to develop yourself towards any of these, what
would your priorities be?

2.1.2 Choosing a Career

Each person has a different personality and one which is as unique as their fingerprints. Our
personality determines:

• how we react to different situations;

• which situations we like and which we avoid; and,
• Which people we like and which people we avoid.

Our personality determines how we react to situations, what situations we like and which ones we
avoid and what people we like and avoid. Our personality is something that has been built up over
our entire lives and it has been crafted through our experiences, successes and hardships. We need
to select careers that match our personalities. If there is a good fit between our personality and our
career environment then we are more likely to be happy and successful.

Being satisfied in your career choice is one of the most important aspects of your personal
happiness, so do not leave it to chance. Take time to know yourself and to match your personality
characteristics with the career requirements that best suit you. Remember to plan your career
development so that you are able to move as far up the career path as you wish to.

In addition to personality type there are other personal characteristics that are important when it
comes to choosing and excelling in a career. These include, amongst others:

• Personal intellect – or your level of ‘intelligence’ as measured by an intelligence test (most

commonly referred to as an Intelligence Quotient or IQ). Some careers require a particular
level of intellect to enter the career and a tertiary education such as, for example, an
attorney or chartered accountant.

• Emotional intellect – this is your level of emotional intelligence (Emotional Quotient or EQ)
which describes an ability, capacity or skill to perceive, access and manage the emotions of
oneself, of others and of groups. It is a relatively new area of psychological research.
Theoretically managers need a higher level of EQ than non-managers so that they can
inspire and motivate those under them to achieve.

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• Personal values – this is an ambiguous concept governing human behaviour. Values are
considered to be subjective and vary across different peoples and cultures. Types of values
would include ethical/moral values, doctrinal/ideological (political, religious) values, social
values and aesthetic values.

It is important to consider your values when choosing a career because it will be difficult to
work for a company which has values that may be in conflict with your own such as, for
example, a company that does not practice good ethics, cheats on its tax return or even
worse.

• Skills – certain careers, such as, for example, medicine, accounting or computer
programming, require definite and unique skills from practitioners. One would be
automatically precluded from such careers if one did not possess the required skills.

• People vs task orientation – some careers, such as estate agency, sales, marketing and
nursing, have a strong people-focus while others, including finance, engineering and
banking, have a strong task orientation.

Certain people, similarly, prefer to work with other people while different people, again, are
happiest working with things or tasks. It is best if you can match your preference for
working with people or with things with the inherent focus of the job that you have selected.
If a person with a preference for working with tasks and things, for instance, is thrust into a
career where that person is required to work with people the person will experience stress
and performance will never be optimal.

Learners Note:

Bear in mind that your principal(s) also has/have a valuable contribution to make to
the advancement of your career plan and path. You should, therefore, always
consider the needs of the enterprise that you are in when planning your future
career path.

Self Reflection:

1. Describe what personality, and personal characteristics, has to do with

career choices and think of some examples from your own personal context.

Self Assessment:

1. Why is goal setting important when you plan your career?

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2.2 Trends in Real Estate Career Development

The educational structure for estate agents, prior to the introduction of the Outcomes Based
educational initiative, did not comply with the requirements of:

• the South African Qualifications Act (1995); or

• the National Qualifications Framework (NQF).
• Organising Framework for Occupations

Mentored Discussion:

Your facilitator will lead a class-room discussion on the South African Qualifications
Authority. In your class discuss the following:

1. The purpose of the National Qualifications Framework (NQF)

2. The role of the South African Qualifications Authority (SAQA)
3. The role of the Organizing Framework for Occupations

Government, through the Department of Trade and Industry (“the DTI”), regulates the real estate
sector in a manner very similar to that in which the financial services sector is regulated. In the
latter instance the Financial Advisory and Intermediary Services Act, 37 of 2002 (“FAIS”), was
promulgated to regulate the business of financial service providers who, until 2002, were completely
unregulated.

Learners Note:

Financial service providers are now required to register with the Financial Services
Board in terms of FAIS requirements, which cover the broad range of financial
advisory and intermediary services that financial service providers render to their
clients. There are many similarities between the Estate Agency Affairs Act and FAIS
as both acts have been designed with consumer protection in mind. Consumer
protection legislation, generally speaking, will follow a similar pattern.

At the time of publication of this material, the DTI had already finalised the drafting of the proposed
new regulations for the introduction of the National Qualifications Framework for estate agents. It
was anticipated that the new education regulations would be promulgated, through publication in
the Government Gazette, by June 2008 and would have an effective date of 15 July 2008, when they
would come into operation.

The position regarding estate agents already registered with the Estate Agency Affairs Board as at
the effective date, as well as new entrants into the estate agency profession after the effective date,
is as per the following page.

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Non-principal estate agents who were already Will be granted until the end of December 2011
registered with EAAB as at the effective date to complete the Recognition of Prior Learning
(“RPL”) process and to be certificated against
the competencies of the Further Education and
Training Certificate: Real Estate, which
Qualification has been registered by SAQA at
NQF Level 4

Principal estate agents who were already Will, similarly, be granted until the end of
registered with the EAAB as at the effective December 2011 to complete the RPL process
date and to be certificated against the competencies
of the National Certificate: Real Estate, which
Qualification has been registered by SAQA at
NQF Level 5.

Learners Note:

RPL – an assessment process that is not necessarily preceded by formal classroom

training.

RPL means the comparison of the previous learning and experience of a learner
howsoever obtained, whether formal, informal or non-formal, against the learning
outcomes required for the Further Education and Training Certificate: Real Estate, or
the National Certificate: Real Estate, as the case may be, and the acceptance, for the
purpose of achievement, of that which meets the requirements of the Qualifications
in question. RPL, therefore, reflects the belief that people learn in a variety of
contexts outside educational institutions and that this learning may well be
equivalent to the type of learning that is formally gained.

2.2.1 Requirements for New Entrants

Non Principal Estate Agents

All new estate agents entering the estate agency profession for the first time as from the effective
date will be required to serve a compulsory one-year internship period. The intern estate agent will,
during this time, work under the active supervision and control of a principal estate agent, or of a full
status estate agent who has held a valid fidelity fund certificate for at least three years. A mentor-
protégé relationship will, thus, be created.

The intern estate agent will also be obliged to maintain and keep a logbook (also referred to as an
intern ‘Portfolio of Evidence’) reflecting the various estate agency functions and activities that have
been undertaken and performed during the course of the internship period.

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Learners Note:

As with non-principal estate agents the intern estate agent will be required to
complete the Further Education and Training Certificate: Real Estate. This
qualification is intended to enhance the provision of entry-level service within the
property and real estate professions and to provide the broad knowledge, skills and
values needed in the property and real estate environment. The intern estate agent
may be certificated against the Qualification after undergoing training through an
accredited education provider or by way of the RPL route.

Resource: Internship Agreement

Refer to resource guide for a copy of the Internship Agreement.

Principal Estate Agents New entrants who wish to act as principal estate agents will have to be
certificated against the new National Certificate: Real Estate level 5.
This qualification not only adds value to the understanding of the
property and real estate sector by principal estate agency practitioners
but also enhances their appreciation of the practical functionalities
occurring within the workplace. The qualification is also intended to
build on the skills that have been gained in the Level 4 qualification and
will, essentially, consolidate the broad knowledge, skills and values
required in the property and real estate profession. The new entrant
may, similarly, be certificated against the qualification after undergoing
training through an accredited education provider or by way of the RPL
route
Professional The completion of the Further Education and Training Certificate: Real
Designation Estate or the National Certificate: Real Estate, as the case may be,
Examination (PDE) constitutes a prerequisite for admission by the professional estate
agent to the Professional Designation Examination (“PDE”).

The PDE is a practical and integrated test of knowledge for estate

agents to be conducted by the Estate Agency Affairs Board. The PDE is
also referred to, in the terminology of the National Qualifications
Framework, as a ‘final summative assessment’ or the final test of the
estate agent’s ability practically to implement and apply the learning
that has been achieved.

Continuing Professional A continuing professional development requirement will be

Development (“CPD”) implemented in accordance with current best practice requirements in
most world-wide real estate regulatory jurisdictions. One of the major
intentions of the Estate Agency Affairs Board in introducing the NQF for
estate agents was to raise societal perceptions of estate agents to
professional status. It is increasingly accepted that members of a
profession should maintain their professional standing through
continuing professional education and development.

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With the introduction of CPD in the estate agency profession, probably from 2009 onwards, the
Board will apply a system of rewards and sanctions. All registered estate agents will be required
to earn a prescribed minimum number of CPD points over a three year rolling cycle. As at the
date of publication of this material the proposed CPD policy had still not been announced by the
Estate Agency Affairs Board.

Learners Note:

No person can be registered as a full status estate agent until that person has
successfully completed the PDE.

Estate agents, however, who had continuously held a full status fidelity fund certificate, whether as
principal or non-principal estate agent, for a period of not less than five years as at the effective
date, are exempted from having to undertake the PDE for principal or non-principal estate agents, as
the case may be.

2.2.2 Career Path Strategy

It is of interest to note that the Estate Agency Affairs Board, in fact, envisages the implementation of
a total career path strategy for estate agents by introducing additional specialisation skills
programmes at a higher NQF level (possibly at NQF level 6 and above) for both principal and non-
principal estate agents in the differentiated fields of estate agency that have been identified,
including:

• residential;
• commercial/industrial;
• community schemes and leisure;
• farms/agricultural;
• business broking;
• social housing;
• facilities management; and
• auctioneering

A SAQA registered NQF Level 6 qualification in real estate already exists and will be implemented
when demand warrants this. It is hoped that the vast majority of estate agency professionals will
voluntarily commit themselves to the NQF enshrined principle of lifelong learning and will ensure
that they incrementally increase their knowledge base and qualifications throughout their active
careers as estate agents.

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2.3 Roles of Various Institutions

From the above it will be seen that a number of bodies and institutions will play a crucial role in the
career development and self development of real estate professionals. These may be summarised
as shown below:

BODY OR INSTITUTION ROLE PLAYED

SA Qualifications Authority Oversees the registration of qualifications and unit standards on

(SAQA) the National Qualifications Framework (NQF) and manages the
quality of Education and Training Quality Assurance (ETQA)
bodies and SETAs as a higher authority. See the SAQA website at
www.saqa.org.za.

National Qualifications A list (framework) of all registered unit standards and

Framework (NQF) qualifications presently from NQF 1 (lowest level) to NQF 8
(highest level). All information regarding the NQF is in the public
domain and can be found on the following website, namely:
www.saqa.org.za.

National unit standards of A statement of agreed competence. They are stakeholder

competence designed and agreed standards that define what individuals
should be know and be able to do in order to be deemed fully
competent.

Estate Agency Affairs Board The statutory regulatory body of the estate agency profession
established by the Estate Agency Affairs Act, 112 of 1976. More
information on the Estate Agency Affairs Board can be obtained
from their website which can be accessed at: www.eaab.org.za.

Services Sector Education & The regulatory body set up by government to regulate training in
Training Authority (Services SETA) the services sector – and real estate falls into this sector. See:
www.serviceseta.org.za

Services SETA’s Education & The division of the Services SETA that manages the accreditation
Training Quality Assurance of RPL centres, education providers, assessors and moderators to
division (SETQAA) ensure that quality standards in education and training are
maintained.

Other SETAs and ETQAs There are presently 23 SETAs in South Africa and 35 ETQAs, each
representing a particular economic/business sector.

Accredited Recognition of Prior To assess against the estate agency Qualifications the relevant
Learning (RPL) Centres RPL centres must be accredited by the SETQAA and must be able
to show proof of such registration.

Accredited training providers To provide training for the estate agency Qualifications the
training providers concerned must have been duly accredited by
the SETQAA and must be able to show proof of such registration.

Assessors and moderators Must be registered as generic assessors and/or moderators with
the Education, Training and Development Practices (ETDP) SETA
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BODY OR INSTITUTION ROLE PLAYED

and as constituent assessors and/or moderators with the Services
SETA.

Principals Will be working towards certification against the National

Certificate: Real Estate (NQF Level 5)

New entrants to estate agency Will be required to undergo a twelve month internship and will
practice be working, incrementally, towards the Further Education and
Training Certificate: Real Estate (NQF Level 4) and the National
Certificate: Real Estate (NQF Level 5) if the new entrant wishes to
practice as a principal estate agent. Will be required to do the
Professional Designation Examination unless exempted.

Existing agents Will be working towards either the Further Education and
Training Certificate: Real Estate (NQF Level 4) or the National
Certificate: Real Estate (NQF Level 5) depending on whether the
existing estate agent is a principal or a non-principal estate agent.
Will be required to do the Professional Designation Examination
unless exempted.

Self Reflection:

1. Do you now know precisely where you fit in and with which role-players you, as
an estate agent, must engage?
2. Have you checked to ensure that the RPL or training provider whom you are
using to qualify yourself as an estate agent has been accredited by the Services
SETA and is properly qualified to offer you the Qualification that you have
enrolled for?

2.3.1 Working with Different Structures

All of the identified role-players will invariably impact upon you, and your career development, in
the estate agency sector. The Services SETA can, in particular, be used to acquire additional
resources and benefits. The Services SETA, for example, does have some funding mechanisms that
are available for both RPL and the training of new entrants into the estate agency profession.

2.3.2 Prescribed Qualifications

As you are aware, you are presently studying towards the Further Education and Training Certificate:
Real Estate (NQF Level 4). If you have not done so already it is useful for you to see the full
curriculum for the course of study that you are undertaking. You may also wish to proceed to the
National Certificate: Real Estate (NQF Level 5) as part of your career path once you have achieved
the NQF Level 4 Qualification.

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Learners Note:

To view the two Qualifications in question, as well as the individual unit standards
making up the qualifications, access the website of the South African Qualifications
Authority at www.saqa.org.za.

Once at the SAQA website:

• click on “Qualifications and Unit Standards” menu; and then

• click on “Registered Qualifications and Unit Standards”.
• For the Further Education and Training Certificate: Real Estate type in the
SAQA QUAL ID (59097) and the NQF Level (4).
• For the National Certificate: Real Estate type in the SAQA QUAL ID (20188)
and the NQF Level (5).
• Alternatively, refer to your Orientation Guide you received at he beginning
of the programme – the level 4 qualification is in there.

Tip:

It is important that you check your registration status with the Estate Agency Affairs
Board. Do not simply assume that you are exempted from having to undertake the
Professional Designation Examination once you have completed your NQF Level 4 or
5 studies. If you do need to undertake the PDE use this training material to assist
you in revising, and preparing, for that examination.

Conclusion

1 Self Assessment

Self Assessment
You have come to the end of this module – please take the time to review what you
have learnt to date, and conduct a self assessment against the learning outcomes of
this module

2 Portfolio Activities

Portfolio Activity:

Refer to your Portfolio Guide for the assessment activities related to this section.

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