Costs involved in selling a property: 5 Things you need to know
Category Property market overview
Sellers are often caught off-guard by the expenses incurred in the selling of a property. Just like there is no such thing as a free lunch, there is also no such thing as selling your property without incurring at least some costs.
“It is important to understand that there are a number of costs involved in selling a property, which the seller needs to plan and, in some cases, budget for,” explains Bruce Swain, CEO of Leapfrog Property Group.
The selling costs can be divided into five main categories, each of which include a number of costs that may or may not apply.
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BOND COSTS
If you have a bond on the property there will be a charge to cancelling the bond when you sell. The bond cancellation cost varies from institution to institution but you can expect to pay upwards of R3000 per bond, which is payable upon transfer.
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. Failing to provide notice in good time will result in “bond notice period penalty interest”, which is a significant but avoidable expense.
Finally, the transfer process may also incur some costs for the seller. This usually only happens 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. “It’s useful to 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,” Swain recommends.
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COMPLIANCE COSTS
Compliance costs are a necessary evil as they can be rather complex, and costly, but certainly protect the seller in the long term. Compliance certificates, which includes electrical, gas, plumbing, beetle and electric fence, are the seller’s responsibility and must all be in order before a property can be transferred. Budget for at least R1000 per compliance certificate, excluding any potential damage or faults that the inspection could highlight and that would need to be fixed before the certificates are issued.
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AGENT COMMISSIONS
The selling cost that is paid most grudgingly is the estate agent’s commission. This is usually a percentage of the purchase price, and is the seller’s responsibility to pay. “It is important to remember that the agent offers a professional service, which helps to sell a property faster and at the right price. The agent’s commission is the compensation for their knowledge, expertise and effort in securing the best deal – and experience – for all parties involved,” notes Swain.
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RATES, TAXES AND LEVIES
As part of the process of selling a property the conveyancing attorneys will require a clearance certificate from the local authorities stating that all rates and taxes are fully paid. In some cases, the seller will 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 rather a large sum for the seller so it is useful to plan and budget accordingly when you decide to put your property on the market,” Swain explains. If, however, the property is registered to the buyer in a shorter time frame the council will refund the seller.
Similarly, if the home being sold is in an 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.
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OTHER COSTS
A cost that does not apply in all cases but that certainly needs to be planned for if it does is Capital Gains Tax (CGT), which 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. Sellers are advised to consult an attorney or financial advisor in this regard.
A more discretionary and flexible expense is the cost of physically moving your possessions from the sold property to a new one or into storage. This may include the fees of professional movers 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.
“While the costs associated with selling a property can’t be avoided they can be mitigated and planned for. A professional estate agent can certainly advise you on how to manage these costs in the most efficient way.” Swain concludes.
Author: Leapfrog Property Group
