The oft-forgotten costs when buying or selling homes
There are the typical costs when buying a home; the buyer would expect to pay transfer duty if the home is above R900,000 and put down a deposit to secure the deal. There are, however, other costs that are sometimes forgotten or not factored in when budgeting to buy a home, reminds Nelio Mendes, SAProperty.com’s marketing manager.
Sometimes buyers confuse transfer duty with the transfer fees payable to the conveyancer. Also known as transfer costs – this is the fee charged by the conveyancing attorney to oversee the transfer and registration of the property in the new owner’s name.
The buyer could sometimes be charged VAT, although this amount is meant to be included in the contract amount when signing the offer to purchase.
There is a fee charged by the banks to initiate a bond in favour of the buyer (this can be up to around R5,900 depending on the home loan), and a bond registration fee payable to the bond attorney who is tasked with registering the bond. This fee might, however, be added to the loan and is paid off over the bond period instead of paid up front.
If the buyer is purchasing a sectional title unit, he should ask what the levy clearance certificate application fee will cost and what levies or costs might be payable to the body corporate upfront. In addition, if a bond is being registered over a sectional title unit, an insurance certificate is needed by the bank – which is obtained from the insurance broker at a charge.
Sellers; establish the true cost of selling before listing
It is best to establish the true cost of selling before putting one’s home on the market, just in case it turns out that there is a lot more to be paid out than expected, and a chance of losing too much in comparison to what is gained in profit, says Mendes.
The first, obvious, one is the commission payable to the estate agent who has sold the property. While this percentage is not set, it is negotiated between the seller and the agent when the mandate is given. This figure is often debated but this is to cover the agent’s marketing of the property and his fee for facilitating the deal.
The seller might have to pay Capital Gains Tax, which would be the case if the property is not his primary residence or if it was registered in a company’s name rather than a natural person.
A full inspection of the property is always advised in order to get the necessary clearance certificates – one can use companies who specialise in this as this saves time. Clearance certificates that will be called for in order to transfer the property are: electric compliance, water compliance, gas installations and electric fencing (installed, altered, or where ownership of the property has changed after 1st October 2012). Beetle clearance certificates are not mandatory by law, but most banks will not grand a bond on the property if this certificate is not obtained.
In addition to the inspection of the property, the seller should have a repair budget set aside in case it is found that certain repairs need to be done before the compliance certificates can be issued.
The seller will have to get a rates clearance certificate on the property being sold. In order to do this, he will be asked to pay up to six months rates upfront, and if the transfer goes through before this then the municipality gives a pro rata refund.
“This can be a hefty amount though,” says Mendes, “and sellers must make sure they have enough funds set aside to pay this bill.”
If it is discovered that the title deed is lost or has errors on it, the seller will be liable for the costs of rectifying the problem, and this would be done via the conveyancing attorney.
Sellers must also remember to notify their banks of their intention to cancel the bond, giving three months’ notice, or the bank will charge a cancellation penalty fee.
All of the above can be pre-empted by either buyer or seller and if everyone has prepared themselves fully beforehand, any extra costs will not end up a ‘disaster’ in terms of the budget.