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Published on 24 Feb 2023
Over and above the price of the property, there are numerous additional costs to budget for and, whilst some of these are upfront, out-of-pocket and non-refundable even if the deal doesn’t go through, others will only hit your pocket once the sale is concluded.
It’s therefor a good idea to allow for around 10% of the purchase price of the property (over and above the deposit) to cover the additional costs and it’s also essential that buyers do their homework to ensure they are aware of all the relevant fees and at which point of the process they are due before even beginning the home search.
Preparing to buy
The first step to easing your financial burden is to be patient and save as much of a deposit as you can as this will not only help you in the short term by making it easier to secure a loan, it will also be a blessing down the line as smaller monthly repayments mean more money in your budget for other important things.
This will also give you time to get your credit rating in order and even to improve your credit score.
Remember that the better your risk profile, the higher your chances of getting a competitive interest rate so make sure that all your accounts are up to date and serviced regularly and address any issues there may be before applying for a home loan.
When you’re ready to take the leap and make what is probably the biggest investment of your life, here’s what you need to know keep your budget being stretched to breaking point.
1. Bond registration – conveyancer’s fee: Paid to the conveyancing attorney for the service they provide to get your bond registered on behalf of the bank. This fee governed by the Law Society tariff guidelines and is calculated according to the sale price, with the percentage charged declining as the property price increases.
2. Bond registration – Deeds Office registry fee: The fee charged by the Deeds Office for the legal registration of your mortgage bond.
3. Property transfer registration – conveyancer’s fee: For the service provided by the attorneys to get your new home transferred from the old owner’s name and registered into yours. This fee is also governed by the Law Society tariff guidelines and is also calculated according to the sale price, with the percentage charged declining as the property price increases.
4. Property transfer registration – Deeds Office registry fee: The fee charged by the Deeds Office for the legal registration of the transfer of the property into the name of the purchaser.
5. Transfer Duty: A government tax levied for the transfer the property from the seller's name into the buyer's name and it generally constitutes the major portion of the additional costs involved. However, properties under R1 000 000 are exempt from transfer duty.
If the seller is a registered VAT vendor, no Transfer Duty is payable, however the seller should have included VAT in the purchase price as is usually the case when buying property in a new development.
6. Home loan initiation fee: A once-off administrative fee charged by the bank for the processing of the home loan application.
7. Body corporate or home owner’s association fee: Not always applicable, but buyers might be required to pay a portion of the home owners’ association or – body corporate levy upfront when purchasing a sectional title unit or a property in an estate that is managed by a home owners’ association or body corporate.
8. Building insurance: If you require a bond to buy your home, the financial institution will insist on you having building insurance, even though it’s not a legal requirement. This will have to be in place when the property is transferred into your name.
The cost of selling
Sellers have fewer costs to bear but, if they are unaware of what these are and what is required of them in the sale process, they can also be in for a rude awakening. Especially if they leave everything until the last minute and are then faced with hefty bills which could not only cause them untold stress, but even end up souring the deal.
1. Bond cancellation – conveyancer’s fee: Paid to the conveyancing attorney for the cancellation of an existing bond over the property. And if the seller doesn’t provide the bank with 90 days written notice prior to cancellation date, they will incur penalties. Prompt notification also avoids possible delays in transfer.
2. Compliance certificates: In order to prove that the property is legally fit for sale, occupancy, electrical, beetle, gas, plumbing and electric fencing compliance certificates are required before the transfer can take place. These each cost around R500 and take only a few days to acquire if all is in order. However, if problems are discovered then you’ll not only incur the costs of the necessary work to be done before the certificate can be issued, transfer could be delayed if you’ve left to the last minute.
3. Body corporate and home owner’s levy (if applicable): The body corporate or home owner’s association might require the seller to pay a portion of the body corporate levy figures until date of transfer.
4. Municipal provision for rates and taxes: Rates and taxes that are payable in advance by the seller. It varies from one local authority to another, and is calculated in accordance with the valuation of the property. Your conveyancing attorney will assist in obtaining the amount due.
5. Estate Agent's Commission: This is usually due upon registration of transfer and is payable from the proceeds of sale.
Ultimately, it’s essential that both buyers and sellers do their homework to ensure that they have a clear understanding of the costs and procedures involved in the transaction as this is the critical key between saving money from the get-go or ending up with a mountain of debt.
And, equally important to the seamless navigation of this convoluted process is the services of a knowledgeable and experienced property professional with a solid track record who will be able to guide you every step of the way and ensure that your purchase or sale happens quickly and in the most profitable way.
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