Assessing your affordability is not just about being able to make the monthly bond repayments or pay for ongoing maintenance.
Nor is it just about calculating the transfer duty payable on the purchase of the property.
There are a number of hidden, or perhaps unknown, costs associated with the transaction, says Dave Nezar, partner at Kaplan Blumberg Attorneys. “The costs of transferring ownership of property into your name comprise costs due to the government in the form of transfer duty, legal costs as well as a number of payments the attorneys have to make to obtain clearances.”
Transfer attorney fees: fees prescribed by the Law Society of South Africa, calculated on the purchase price of the property.
Postages and petties: costs incurred such as telephone costs, postage and courier fees, administration fees and bank charges.
Deeds Office fees: fees published in the Government Gazette, based on the purchase price of the property.
Electronic generation fees: fees incurred for the generation of electronic documents.
FICA: costs incurred when verifying the identity of a client prior to establishing a business relationship with them.
Deeds Office searches: search fees to ensure there are no conditions that may prevent the property transaction.
Rates clearance fees: a rates clearance certificate must be obtained to verify there are no outstanding rates and taxes payable by the seller of the property.
Transfer duty: tax levied by the government on property transactions. If you are using a bond to buy the house, Nezar says there will be bond costs payable too.
He says: “The bank will appoint an attorney firm on their panel to attend to the registration of the bond. We often find clients don’t know this and don’t budget for the second conveyancing account”.
What is transfer duty?
Transfer duty is a tax that must be paid to the South African Revenue Service by the person buying a property, says Mike Greeff, chief executive of Greeff Christie’s International Real Estate.
You pay this as a “fee’’ for purchasing the property from the seller. “Transfer duty is usually calculated based on the purchase price of the property, in most transactions.
“The transfer of the property into the name of the buyer cannot go ahead unless the transfer duty is paid as the Deeds Office requires a Transfer Duty receipt that must be added to the transfer documents at the deeds office.”
For developments VAT is payable and, therefore, transfer duty is avoided.