Tuesday, September 25

Hidden costs of buying and selling

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You’ll expect some costs when buying or selling property, but may find hidden costs, or previously unknown costs that are also payable during the process, so it is best to be prepared.

Buyers

Lolly Unterslak, property consultant at Jawitz Properties Atlantic Seaboard and Nelio Mendes, SAProperty.com’s marketing manager, give us the lowdown of buyer costs:
1 Bond registration costs: If you’re buying the property with a home loan, bond registration costs are probably the first hidden items for your account that you’ll run into.
These include:
  • Initiation fees: are charged by banks to initiate a bond in favour of the buyer, and do not form part of the bond, but are in addition to it. This can be up to around R5 900 depending on the home loan.
  • *Bond attorney fees. “When registering your bond, you’ll be dealing with different sets of attorneys,” Unterslak says. “The buyer is liable for the legal fees of the bond attorney, who is appointed by the bank to register the bond.”
2 Transfer costs: Once the transfer agreement is signed between you and the seller, in addition to transfer duty itself, there will also be:
  • Legal fees.
  • Deeds office fee.
  • Posts and petties.
Mendes says some buyers confuse transfer duty with 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.

3  If the buyer is purchasing a sectional title unit: Ask what the levy clearance certificate 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. This is obtained, with charges, from the insurance broker.

4  If you are buying the property with money from an overseas account: Taxes and bank charges could apply when transferring your capital across borders.

5 Fixtures: “Blinds are usually included as a fixture and are priced into the total purchase price,” Unterslak says. “Curtains are not considered fixtures, and must be specified and ‘
priced if included in the sale.” The same applies for appliances, unless they’re built-in and considered a fixture.
Moving day costs and later costs include:
6 Moving costs: Hiring a company to move your belongings  can be a big cost.

7 Sectional title scheme: Monthly levy payable to the body corporate. Any possible special levies must be disclosed to you by the seller during the transfer negotiations.

8 Occupational rent: Will be payable by you should you need to occupy the new property before the transfer is registered.

9 Decorating: Everything from curtains to rugs and  upholstery might need to be changed. Be prepared.

Sellers

Sellers also face a number of apparently hidden costs when moving on. Nelio Mendes, SAProperty.com’s marketing manager, detail the sellers’ costs.

There are a few costs for a seller to factor in, and it’s best to establish the true cost of selling before putting one’s home on the market, just in case it turns out there is a lot more to be paid than expected, and there is a chance of losing too much in comparison to what is gained in profit, says Mendes. 

He lists the hidden costs:

1 Commission payable to the estate agent who has sold the property: This percentage is not set and is negotiated between the seller and the agent when the mandate is given. This figure is often questioned, but this is to cover the agent’s marketing of the property and the fee for facilitating the deal.

2 Capital Gains Tax: The seller might have to pay this case if the property is not his primary residence or if it was registered in a company’s name rather than that of a natural person.

3 Clearance certificates: A full inspection of the property is always advised to get the necessary clearance certificates. The seller can pay companies who specialise in this as it saves time. 

Clearance certificates that will be called for to transfer the property are
  • Electrical compliance.
  • Water compliance.
  • Gas installations.
  • Electric fencing (installed, altered, or where ownership of the property has changed after  October 1 2012).
  • Beetle clearance certificates are not mandatory by law, but most banks will not grant a bond on the property if this certificate is not obtained.
Repair budget: In addition to the inspection of the property, the seller should have a repair budget set aside in case it is found certain repairs need to be done before the 
compliance certificates can be issued.

5 Rates clearance certificate: 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. If the transfer goes through before this, the municipality gives a pro rata refund. 

“This can be a hefty amount,” says Mendes, “and sellers must make sure they have enough funds set aside to pay this bill.”

6 A lost title deed or one that 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.

7 If you cancel the bond: 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 both buyer or seller. If everyone has prepared themselves fully beforehand, any extra costs will not end up a disaster in terms of the budget, says Mendes.
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