Beware! The "hidden" costs of selling property
Category Advice
Nobody likes to get caught off-guard when it comes to incurring expenses, which sometimes happens to property sellers. Forewarned is forearmed and thus knowing that there are likely to be at least some costs involved in selling can soften the blow.
Chris Trytsman, Principal at Leapfrog Rustenberg, shares that selling costs falls into five categories, with costs in each that may or may not apply.
1. Bond cancellation
If there is a bond on the property that is being sold, the seller can expect to pay a bond cancellation fee. "The cost varies from one bank to the next but plan to pay upwards of R3000," Trytsman recommends.
According to a spokesperson from FNB Home Finance and Private Bank Lending, quoted in this article, the cancellation is not due to the bank but rather to the conveyancing attorney appointed to handle the cancellation of the bond at the Deeds Office. As such, the cost is made up of the attorney's remuneration fee and the fee payable to the Deeds Office for cancelling the bond.
Be sure to give the bank written notice, 90 days in advance, before consolidating your bond in full as a result of sale, or risk incurring a notice period penalty.
The seller is also likely to incur costs related to the transfer of the property, though this tends to only happen if you wait until the sale of your property has been finalised before notifying the bank, as you may then be liable for the penalty interest. "Note that if you need to settle other fees with the money available in your bond to do so before issuing the bank with notice of bond cancellation," Trytsman says.
2. Compliance certificates
Compliance certificates, including electrical, plumbing, gas, beetle and electric fencing, are the seller's responsibility to obtain and pay for. All compliance must be in order before the property transfer can take place.
"Budget for at least R1000 per certificate though it can come to more or less for each, excluding any potential damage or faults that the inspection could highlight and that would need to be fixed before the certificates are issued," Trytsman says.
Compliance certificates can be complex and costly but certainly serve to protect the seller in the long term.
3. Rates, taxes and levies
The conveyancing attorneys handling the transfer of the property will require a clearance certificate from the local authorities stating that all rates and taxes are fully paid. The seller may be required to make future-dated payments for between two and six months in advance. The amount will be an approximation based on past accounts, and can be a large sum. As such, it is advisable for the seller to make provision for this cost as soon as the property goes on the market.
"In the case of sectional title properties, the homeowners' association may require the seller to pay the levies a few months in advance to ensure all costs are covered while the property transfer is in process," Trytsman notes.
4. Agent commission
The commission an agent earns on the sale of a property is for the seller's account and is calculated as a percentage of the purchase price.
Commission is the remuneration for a professional service rendered, which includes access to expert property knowledge, dynamic market insights and helping to secure the most favourable deal for both buyer and seller.
5. Miscellaneous costs
While not applicable to all property sales, Capital Gains Tax (CGT) is certainly one that needs to be planned for where it does apply. CGT is the tax payable on the disposal of an asset (your property) where the proceeds exceed the base cost. CGT is the responsibility of the seller and forms part of income tax payable to SARS.
Moving costs should also be taken into consideration as it can be a significant one. This would include the fees of a professional movers company or the transport cost of doing it yourself. Depending on the nature and distance of the move it may also be useful to get insurance for the items being moved.
Costs associated with selling a property are unavoidable but can be planned and budgeted for. Seek the advice of a trusted property advisor to help you manage these expenses more efficiently.
Author: Leapfrog Property Group
