Prepare for unexpected expenses when selling a home
The process of selling your home may not be as straightforward as you think.
While there are healthy returns on investment to be made, there are some costs that will be incurred prior to the sale being concluded, says Mike Greeff, chief executive of Greeff Christie’s International Real Estate.
“Sellers often find themselves confused and intimidated by the numerous prerequisites and steps involved in the sales process. The best course of action for any property owner thinking of selling is to enlist the help of an agent from a reputable agency.”
Keeping these costs in mind will help sellers avoid being taken by surprise:
Compliance costs include certificates for the home’s electrical wiring, gas piping and fittings, plumbing, beetle and electric fencing, if applicable. Greeff says these are all the responsibility of the seller.
“While these may seem like a nuisance, they are an inescapable part of the transaction and required by law in order for the transfer of ownership to be completed. Sellers sometimes choose to begin the certification process very soon after enlisting their agent. This eliminates potential delays as the certificates are issued immediately and readily available to the buyer, attorneys or lending institutions.”
Rates, taxes and levies are additional costs incurred by sellers prior to transfer. The seller needs to provide proof that the rates and taxes on the property are have been paid in full. In some cases, Greeff says sellers may need to pay up to six months of rates, taxes and levies in advance.
“The good news is that the council may refund a portion of the payment should the transfer happen faster than expected.”
The payment in advance of levies and taxes may also be required by the homeowner’s associations of estates or sectional title properties.
“Sellers who have a bond on a property may run into additional expenses in the form of a bond cancellation fee which is payable on transfer as well as a ‘notice period penalty’ if you consolidate your bond in full as a result of the sale without giving the lending institution 90 days written notice in advance.”
Capital gains tax (CGT) may also be payable when you sell. This tax is payable when one disposes of an asset for more than its base cost.
CGT forms part of an individual’s annual income tax, says Greeff.
“The good news is that primary residences qualify for an exclusion from the tax up to R2million. The not-so-good news is that secondary homes or investment properties do not qualify for any exclusions.”
While most of these costs cannot be avoided, Greeff says they can be planned for if sellers are aware of them early on.