Hidden Costs of Buying and Selling Property in South Africa

The journey of buying or selling a property is a significant milestone, filled with both excitement and a touch of anxiety. While the prospect of owning your dream home or moving on to a new chapter is exhilarating, it's essential to approach the process with a clear understanding of the financial implications. Beyond the purchase price or selling price, there's a world of "hidden" costs that can significantly impact your budget.

Even with the support of experienced estate agents and conveyancers, being well-informed about these potential expenses is crucial for a smooth and stress-free transaction. This comprehensive guide aims to demystify the often-overlooked costs associated with buying and selling property in South Africa, empowering you to make informed decisions and avoid any financial surprises.

Costs Encountered by Buyers

Transfer Costs: Facilitating the Change of Ownership

Once your offer to purchase a property is accepted, the seller typically appoints a conveyancing attorney to handle the legal transfer of ownership. As the buyer, you are responsible for covering the conveyancer's transfer costs. These costs are calculated based on the property's purchase price, following a sliding scale outlined in the Conveyancing Guideline of Fees published by the Legal Practice Council. It's worth noting that these fees are subject to annual adjustments, so it's always wise to confirm the latest figures with your conveyancer.

Transfer Duty: A Tax on Property Acquisition

In addition to transfer costs, buyers are also liable for paying transfer duty to the South African Revenue Service (SARS). This tax is levied on the value of the property and is payable within six months of accepting the offer to purchase. Failing to meet this deadline can result in penalties, so it's crucial to prioritize this payment.

You might come across properties advertised as "no transfer duty payable." This doesn't imply the absence of transfer costs altogether. Instead, it signifies that the seller is registered for VAT purposes, and they, not the buyer, are responsible for paying VAT on the transaction. However, even in such cases, buyers still need to cover the conveyancing attorney's transfer costs.

Bond Registration Costs: Securing Your Finance

If you require a mortgage bond to finance your property purchase, the bank will appoint a conveyancing attorney to register a bond over the property, acting as security for the loan. As the buyer, you are responsible for the bond attorney's registration costs, which are calculated similarly to the transfer costs, based on the loan amount.

Additional Fees: The Fine Print

Be prepared for additional fees that may appear on both the transfer and bond attorney's statements of account. These can include deeds office fees, electronic document generation fees, and fees for submitting various certificates. While these individual fees may seem relatively small, they can add up, so it's important to factor them into your overall budget.

Costs Incurred by Sellers

Estate Agent's Commission: A Fee for Service

If an estate agent played a role in facilitating the sale of your property, you will typically owe them a commission. This commission is usually a percentage of the selling price, as agreed upon in your mandate or contract with the estate agent.

Bond Cancellation Costs: Clearing Existing Debt

If you have an existing mortgage bond registered on the property, you'll need to settle the outstanding balance before the sale can be finalized. This involves cancelling the bond, which incurs cancellation fees payable to the bank's attorney, along with associated deeds office fees.

Rates and Taxes Clearance: Ensuring Municipal Compliance

To transfer ownership of the property, you'll need to obtain a rates clearance certificate from your local municipality. This certificate confirms that all rates and taxes are up to date. In many cases, this requires paying a few months in advance. While you'll typically receive a refund for any overpayment after the transfer is complete, it's essential to account for this upfront cost in your budget.

Certificates of Compliance: Meeting Safety Standards

As the seller, you are obligated to provide the buyer with valid certificates of compliance for electrical, gas, and beetle (if applicable) installations. These certificates ensure that the property meets the required safety standards. The costs for obtaining these certificates are your responsibility.

Other Potential Costs: Property-Specific Expenses

Depending on the nature of the property and its location, there might be additional clearance requirements or costs involved. For instance, properties within estates or sectional title schemes may require clearances from Homeowners Associations or body corporates. It's essential to be aware of any such property-specific expenses that may arise.

Seek Expert Advice for a Smooth Transaction

It's important to emphasize that the costs outlined in this guide are not exhaustive. Every property transaction is unique, and unforeseen expenses can arise. Therefore, it's crucial to consult with your conveyancer and estate agent to gain a comprehensive understanding of the specific costs involved in your particular situation. They can provide valuable guidance and help you navigate the process smoothly.

Simplify Your Sale with Hoom

Selling a property can be complex and time-consuming. At Hoom, we're dedicated to simplifying the process for sellers, making it more transparent and efficient. Our platform empowers you to compare estate agents in your area, ensuring you find the best match for your needs and preferences. Plus, you'll earn cash-back when you successfully sell your property through Hoom, putting more money back in your pocket. Let Hoom help you navigate the property market with confidence and achieve your selling goals.

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