Before putting their home on the market, owners need to spend time considering the pros and cons involved.
“Property for sale” adverts appear daily on the pages of publications and online portals and are so common that only those looking to buy take notice of them.
However, for many of the people behind those ads, they are more than columns of text and photos – these listing are often the end result of months of anguish.
Sometimes the listing is the start of a new life journey. It all depends on the reasons behind the need to sell. Traditionally, South Africans moved home about every seven years, says Chris Cilliers, chief executive and co-principal of Lew Geffen Sotheby’s International Realty in the Winelands.
Today this has changed, with homeowners selling for a variety of reasons. The obvious drivers for sales include scaling up, scaling down, financial pressure, death, divorce and emigration and semigration. While the last four might, generally, force homeowners to sell, the decision is often tough.
Scaling up, for example, can lead many sellers to question whether the change is justified. “If the house is in a good area and the property is within the parameters of prices in the area, many homeowners decide to do alterations rather than pay transfer duty and transfer fees on a new house, moving costs, capital gains tax (if applicable) and agent’s commission,” Cilliers says.
This is particularly the case when properties are in the higher price range where transfer duty has risen over the past decade. “Unless there is a substantial benefit to upscaling, these funds can be used to add onto a property or renovate.”
Scaling down is also a move of choice in most cases, she says. Some people, particularly empty nesters, desire new freedom and the ability to travel and relax. As larger homes often come with larger gardens and big pools, they might no longer want to be tied down by them, Cilliers says.
The stage of life is a “great influencer” when deciding to sell, not only for retirees, says Mike Greeff, chief executive of Greeff Christie’s International Real Estate. “If you’re starting a family, you might want to sell your apartment and opt for a family home.”
As someone’s personal needs change, they will feel more inclined to sell and purchase a new home that will fit in with their new lifestyle. For many owners who downscale, finances are a primary consideration as they might be unable to afford their current homes and need to alleviate financial pressure, Greeff says.
The “time” to sell is circumstance driven, as people buy and sell to accommodate their family size and be closer to schools/work, says Lisa Connellan, sales manager at Knight Frank.
“If your location is perfect, but the house doesn’t meet your needs, renovating (if space allows) is always more cost-effective than selling.”
Each customer’s situation and market conditions at the time, will be unique but Buyisile Maseko of FNB home finance says homeowners should ideally have paid off their homes before deciding to sell.
If they are in financial distress, that is a different story. Few are fortunate enough to be able to pay off the entire loan before selling, she says. It is, therefore, recommended they look at the equity that exists in a property before selling.
“This way you make sure your selling price is sufficient to settle your loan and perhaps additional costs, such as outstanding rates and taxes.”
“Ideally, you’d want to have enough equity to pay off your loan balance, cover closing costs and turn a profit when you sell,” Maseko says.
Geoff Lee, managing executive at Absa home loans, says owners must consider whether their property’s value has increased substantially and how much profit they want to make. “With a bond, the interest repayment portion of the total monthly repayment is always much higher in the first years,” he says.
If a owner sells before their property value has increased to the extent that they have recovered the costs from the sale, they would have made a loss.