Exactly how much will that new property end up costing?

Enter into this exciting experience with a certain degree of knowledge of the process and the costs involved.

Research

Although, a residential home should not typically be considered an investment, you should ensure, prior to signing the agreement, that you are not paying too much for the property. If you really have set your heart on a particular property, you might end up paying a premium but, generally, you should do your homework, regarding what the property is really worth.

How much is the property worth?

In this regard, obtaining a property valuation report is worthwhile. An estate agent could probably obtain one for you. Alternatively, they are easily purchased online from a reliable site. The report would normally include:

• • Official property description and details

• • Municipal valuation

• • Details of the owner

• • Transfer history

• • Sale prices of other properties in the area with dates of transfer

• • Price the present owner paid

• • Trends of the suburb.

Compare the prices of other homes for sale and visit other properties on offer in the desired area. Find out how long properties have been sitting on the market, including the property you are interested in. The more knowledge you have, the better you will be prepared for negotiating an offer lower than the asking price.

Other parties involved in property transactions

Estate agents

Should the sale be due to the efforts of an estate agent, a commission is payable. The commission is a percentage of the sale price, usually between 5 and 7½%. This is paid by the seller and is usually paid out of the purchase price by the transferring conveyancer directly to the agent. The percentage is as agreed between the seller and the agent, as the estate agent acts on behalf of the seller. Estate agents may agree to a decreased percentage with the seller but sellers should negotiate this discount upfront.

Transferring conveyancers

Transferring conveyancers are specialised attorneys who are tasked with transferring the property and co-ordinating and overseeing all the requirements for the transfer to go through. In most cases, they are chosen by the sellers, but this can be changed by agreement. However, sellers should proceed with caution if they agree to this as, should the buyer default with his/her obligations, it will be buyer’s attorney who is attending to the process. The conveyancers charge a formulated fee on a sliding scale based on the purchase price, which increases with the value of the purchase price. They will also charge for postage and petties, for conducting a deeds search, for FICA compliance and other tasks that are pertinent to the transaction. Reliable Internet sites will give you a good idea of these costs. These fees and costs are for the purchaser’s account.

Bond conveyancers

Should a purchaser require a mortgage bond to purchase the property, a bond conveyancer will be required to register the bond. The bond conveyancer represents the financial institution that has financed the mortgage bond but the fees and costs are the responsibility of the purchaser. The bond conveyancer will also charge similar fees to the transferring attorneys but based on the value of the bond. These costs are also set out on reliable Internet sites. Bear in mind that the financial institution granting the bond charges an initiation fee which differs from institution to institution but is capped by legislation. The initiation fee can be added to the bond amount.

If the seller has an existing bond on the property, this has to be cancelled as well by conveyancers acting for the existing bondholder. The seller is responsible for the costs of cancelling his/her existing bond.

Deeds office

The deeds office charges a fee for transferring a property which is calculated on a sliding scale based on the purchase price.

SARS
The sale of immoveable property is subject either to a VAT payment or transfer duty (never both) which is paid over to SARS. If applicable, VAT is payable at the standard rate. Alternatively, SARS levies a duty (tax) on the transfer of immoveable property if the purchase price is above R600 000 as at the present date. VAT or transfer duty is paid by the buyer. The transferring conveyancers attend to collecting this money. The duty is calculated on a sliding scale based on the purchase price. The more expensive the property, the higher the transfer duty. The seller may also, in certain instances, be liable for capital gains tax, which is dealt with in the seller’s tax return and not as part of the property transaction. The amount of duty is also accessible on up to date Internet sites.

Local council

A rates clearance certificate must be obtained from the local council stating that the property’s rates are up to date for the transfer to take place. You may be required to pay up to five months worth of rates payments to allow the transfer to take place.

Sectional title

There may be additional costs for purchasing into a sectional title scheme, such as registering an exclusive use area.

Moving and ancillary costs

Remember to factor in the costs of moving to your new house as this can be substantial, particularly if you are moving to another province. Also bear in mind that you might want to add or update security features to the new home as a priority. Your insurance costs may also rise depending on the value of the home or other criteria that your insurance company may deem important.

If the property has been purchased without curtaining or blinds, you may want to fit these as a priority as well, whether for comfort or security. It is often a good idea to make an offer to include the window dressings and if they are not to your taste, you can replace them at your leisure or as the budget allows.