“Hidden” costs when buying/selling your house:

BUSINESS NEWS - There are very few things as exciting, yet so nerve wrecking, than buying, or selling your first property. Even though you will have an estate agent (in most cases) and a conveyancer guiding you through the process, you need to be aware of possible “hidden” costs when you budget for this huge step in your life.

For this article the costs will be based on an example of a freestanding house purchased or sold by an individual for residential purposes.

Costs for the purchaser’s account:
Once a purchaser makes an offer to purchase their dreamhouse, and the seller accepts this offer, a conveyancing attorney will be appointed by the seller to register the property in the name of the purchaser.

The purchaser is responsible to pay the conveyancing attorney’s transfer costs which is calculated in terms of the Conveyancing Guideline of Fees, published by the Legal Practice Council.

These fees are amended on a yearly basis and calculated on a sliding scale based on the purchase price.

In addition to transfer costs the purchaser is also responsible to pay transfer duty to SARS, which is a duty payable when acquiring immovable property.

Transfer duty is calculated on the value of immovable property and is payable by the buyer within six months of acceptance of the offer to purchase. If transfer duty is not paid within six months after the date of purchase, penalties will be payable by the purchaser to SARS.

It is fairly common to see a property being advertised: “no transfer duty payable” which is not to be confused with transfer costs. In this scenario the seller would be registered for VAT for purposes of this transaction and VAT will be payable by the seller instead of transfer duty by the purchaser (it will always either be VAT or transfer duty payable to SARS). If no transfer duty is payable the purchaser will still need to pay transfer costs to the conveyancing attorney.

In instances where the purchaser requires a mortgage to finance the property transaction, they will apply to a bank for a loan and if granted, the bank will register a mortgage bond over the property as security. The mortgage bond registration process is similar to the transfer process.

The bank will appoint a conveyancing attorney on their panel to attend to the registration of the mortgage bond and the purchaser will be responsible to pay the bond attorney’s registration cost (on the same scale as provided by the Legal Practice Council).

Further costs on the registration attorney and bond attorneys statement of account would be deeds office fees, electronic document generation fees and fees for submitting certificates etc., which fees are also for the account of the purchaser.

Costs for the seller’s account:
If an estate agent was the effective cause of the sale, the seller will be liable to pay the estate agent’s commission, as agreed upon between the parties or per the mandate. If there is a mortgage bond registered over the property passed by the seller, the outstanding amount will also need to be settled by the seller.

The mortgage bond will need to be cancelled, and the seller is responsible to pay the bank panel attorney’s cancellation fee and deeds office fee.

In terms of section 118 of the Municipal Systems Act (32/2000) the Registrar of Deeds may not register a transaction without a rates clearance certificate confirming that all municipal bills for the past two years have been settled.

In order to obtain the rates clearance certificate, rates and taxes need to be paid four months in advance in most instances.

The advance as well as any arrears on the account will be for the seller’s account. After registration, the said advance will be proportionately refunded to the seller, as the municipal rates and taxes becomes the purchaser’s responsibility from the date of registration of property in their name.

The Seller will also need, on his/her account, to provide the purchaser with valid certificates of compliance (Electrical, gas-, and beetle certificates – if applicable).

In most instances the seller’s costs will reflect on his/her final account statement and the costs will be deducted from the proceeds of the sale, if possible.

It is important to note that the costs mentioned herein are not necessarily all the costs applicable and payable when purchasing or selling a property as some properties are subject to other clearances like Homeowners Association consents, and/or body corporate clearances, among other costs. It is therefore vital that you consult with your conveyancer and estate agent regarding the process and costs involved when buying or selling immoveable property.

Article by: Lorandi van der Merwe (LLB) Conveyancer

For more information contact Lorandi at 044 6019900 or lorandi@rgprok.com | www.rauchgertenbach.com