During a property transaction both sellers and buyers have certain responsibilities and obligations that they need to address before the home can change ownership, says Adrian Goslett, CEO of RE/MAX of Southern Africa. For this reason, it is vital that each party financially prepares for engaging in either selling or purchasing a home.
Goslett looks at the costs and elements that buyers and sellers will need to consider during the property sale process:
The buyer
Goslett says that aside from the deposit requirements that most purchasers will have to adhere to in order to obtain finance, there are several other costs that they will need to prepare for. These costs would include transfer fees and bond costs, if registering a bond with a financial provider.
The South African Government levies a tax on property transactions that is paid when a property is bought and transferred into a buyer’s name. If purchasing vacant land, the transfer duty is based on the value of the land. However, transfer duty on an existing home will be based on the value of the land and building. Transfer duty will not be charged on homes under R600 000.
Goslett notes that the transfer duty is payable to the conveyancers approximately one month before transfer, so buyers will need to have the money saved up before they start looking at homes. “If the property is purchased in the name of a CC, company or a trust, a standard transfer duty of 10% of the purchase price will be charged. Should a property be bought from a developer, a VAT portion will be paid rather than the transfer duty on the purchase price,” says Goslett. “In the instance where the seller is VAT registered and the sale forms part of the seller’s enterprise, then no transfer duty is payable. The purchase price of the property could either be recorded as VAT inclusive in the contract or VAT exclusive, depending on the contract terms,” says Goslett.
In the case where a buyer is planning to renovate or subdivide the property, they might be required to pay for a conveyancer’s certificate regarding certain title restrictions that may be relevant to that particular property. This certificate will generally cost in the region of R2 500 plus VAT. The buyer may also be required to pay for the approved plans of the property. While the seller may have drawn up plans for the renovation and the offer to purchase may stipulate their inclusion, the seller is not legally bound to provide the buyers with the approved plans.
“Although dependant on the agreement between the buyer and seller, if the buyer decides to move into the property before transfer occurs, they are also likely to be liable for paying occupational rent to the seller. The occupational rent amount must be predetermined based on fair-market value and stipulated in the offer to purchase,” advises Goslett.
The seller
Apart from the agent’s commission, the seller will be responsible for obtaining all clearance certificates for the property. These would include an Electrical Certificate of Compliance (ECOC) -which must not be older than two years and must cover all electrical installations during this time – water and plumbing certificates, gas certificate, electrical fence and beetle certificates if applicable. If no repairs are required, the cost of obtaining all the certificates will be in the region of approximately R2 500 depending on the service providers used.
“Although it will largely depend on the agreement of sale between the buyer and seller, all other repairs around the house that need to be completed will be for the seller’s account,” says Goslett. “The costs of such repairs will be solely reliant on what needs to be done as well as the contractors that the seller chooses to use.”
According to Goslett, the seller will be required to pay a bond cancellation fee also in the region of R2 500, which is payable to the attorney and is applicable even if the bond is at a nil balance. It is important to note that the seller will need to provide their bondholder with three months written notice to cancel their bond. Failure to do so will result in the seller having to pay a bond penalty interest, which will equate to approximately a bond instalment for every month of notice not given.
He notes that as a general rule, sellers will have to pay a three months advance on their rates and services, as well as any arrears owing on any levies or their homeowner’s association fees.
“If either party is unsure of what they are required to pay, they should consult with a real estate professional or property attorney who can provide them with further guidance. Being financially ready for a property transaction will ensure that the process runs smoothly and that there are no monetary surprises on their side of the sale,” Goslett concludes.
Issued by RE/MAX of Southern Africa.
