Selling your property: Make sure to account for these costs
Category Advice
There are few things in life as unpleasant as an "unforeseen cost". Sure, life happens and sometimes you just have to bite the bullet and pay to have the rug that that dog had an accident on professionally cleaned, but where possible to help to avoid unplanned expenses.
"When it comes to property, and especially selling property, forewarned is forearmed which is why it is important to pay attention to the costs you can expect to incur when selling a property," says Wilmot Magopeni, Franchisee: Leapfrog Sunshine Coast.
He shares the five main expenses sellers should expect.
Bond cancellation and transfer
When a bonded property is sold the bond needs to be cancelled, and a charge will be incurred for such. The bond cancellation cost varies from institution to institution but tends to be around 1% of the value of the property, and is payable upon transfer.
Magopeni says that sellers make 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. Failing to provide notice in good time will result in "bond notice period penalty interest", which is a significant but avoidable expense.
Compliance
The seller of a property is required by law to ensure various parts of the property are in satisfactory condition and good working order by obtaining compliance certificates from various professionals. Compliance certificates are typically issued for electrical and gas connections, plumbing, electric fencing and a beetle certificate to assert that permanent wood structures on the property are not infested with wood-destroying beetles.
"Budget for at least R1000 per compliance certificate, while also making provision for the cost of any faults or damages that may need to be fixed in order for the certificate to be issued," Magopeni advises.
Compliance certificates are the seller's responsibility but ultimately also exist to protect the buyer so make sure to address this in good time.
Agent commission
The estate agent's commission is essentially their fee for services rendered and is typically a percentage of the purchase.
"The seller pays the agent and is a 'cost' best viewed as the compensation for a professional service that includes access to the property professional's expert knowledge, expertise and effort in securing the deal at the best possible price for the seller," Magopeni explains.
Rates, levies and taxes
It is standard practice, as part of a property sale, that the conveyancing attorneys will require a clearance certificate from the local municipality to prove that all rates and taxes are paid up in full.
"It may happen that the seller has to make future-dated payments of two to six months in advance for an approximate amount based on past accounts. Since this can add up to a large amount of money it is useful to budget for this," Magopeni says. If the property is registered to the buyer in a shorter time frame (than the two to six months mentioned above), the seller may be refunded by the authorities.
Similarly, if the property being sold is an in estate or a sectional title property, the homeowners' association could 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.
Other costs
Capital Gains Tax (CGT) is an example of a cost that doesn't apply in all cases but one that definitely needs to be budgeted for if it doesn. CGT is the tax payable on the disposal of an asset (the property) where the proceeds exceed the base cost. CGT is always the seller's responsibility and is classified under the personal income tax umbrella.
"It is always a good idea to involve a financial advisor in the sale of a property for professional guidance as it typically involves large sums of money," Magopeni advises.
Lastly, but still important to note, is the cost of physically moving the possessions on the property to a new location. While a flexible cost to some degree, it is likely to incur at least some cost. Consider whether you'll use professional movers or/and transport, and you may even want to take additional insurance to protect your things in transit.
"Ensure you're well informed about the costs you're likely to incur with the sale of your property and plan accordingly," Magopeni ultimately advises.
Author: Leapfrog Property Group
