Costs of buying and selling property

TYPICAL COSTS OF BUYING

PURCHASE PRICE

§ A deposit of the gross purchase price to the estate agent of conveyancer payable usually on signature of the deed of sale by both parties within 7 to 14 days from signature (usually 10%) (if applicable)
§ The balance of the purchase price is lodged prior to transfer, or is secured by way of a bank guarantee
§ Over and above the purchase price, the purchaser should have the cash available to cover the transfer costs (if this is not included in the bond) and the bond registration costs as follows:-

TRANSFER COSTS

§ Transfer duty – calculated on a sliding scale for the joint and individual buyer – between 0% to 8% of the gross purchase price payable. (R0 to R500 000 is exempt). If the property purchased is registered in the name of a CC, company or inter vivos trust, transfer duty at rate of 8% of the gross purchase price, is payable to SARS, as government tax
§ If the seller is a VAT vendor, then VAT is payable at 14% of the purchase price. As the seller is liable for payment, it is important to add the VAT to the purchase price. The transaction may be zero-rated only when an income generating entity, which is also a going concern, is sold from a VAT vendor to a VAT vendor. If VAT is payable, the purchaser will not pay transfer duty. Check whether the price is stated as including or excluding VAT. If nothing is stated, it is including VAT. Whether the transfer duty or VAT is payable, if the purchaser is registered for VAT (s)he can potentially reclaim this within the normal VAT cycles as an input credit.
§ Transfer duty on property in the event of divorce has been scrapped since the 2006/7 tax year.
§ Conveyancing fees – of the transferring attorney, may vary slightly according to rates set by the conveyancer who attends to the transfer, but are based on tariffs from the law society (plus VAT).
§ The legal and registration costs are payable at least 4 weeks prior to the date of transfer, so that lodgement can be effected in the deeds registry of the relevant transfer documents for examination. The time of payment is usually set out in the agreement.
§ Bond registration costs – the purchaser normally pays the transfer and bond registration cost (plus VAT).
§ Deed office/registration fees – a fee which varies between R55 and R 1000 (plus VAT), dependent on value of property.
§ FICA costs – usually R 300 per FICA investigation
§ Sundry charges – posts and petties and telephone calls (plus VAT) payable to the transferring attorney (usually about R500), and valuation certificates – a disbursement to the local authority to obtain a valuation certificate – which varies and is based on the valuation of the property, usually between R 100 and R 150 (including VAT)
§ Occupational rental/pro rata rates & taxes – payable prior to and adjusted on registration of transfer, the occupational rental (if applicable), and share of current years’ rates & taxes (levied by the local authority). The buyer will pay a pro-rata share of rates in advance from date of occupation until the end of the current rateable year (which is from 1 July to 30 June). The buyer may be paying anything from 1/12th to 11/12ths of the annual rates, depending on date of transfer.


TYPICAL COSTS OF SELLING

§ Estate agent’s commission – commission rates are calculated as a % of the gross purchase price & should be negotiated upfront with the agent. Sellers need to establish very clearly what commission an agent proposes to charge before awarding a mandate & to ensure that the % agreed upon after any negotiation is written into the mandate document (where applicable).
§ Beetle inspection, electrical inspection certificate – usually between R 250 and R 500 (plus VAT). The seller will be responsible for any repairs required before such a clearance certificate can be issued. The beetle inspection certificate may be required by inclusion in the contract of sale. The electrical inspection certificate is required to be obtained by the seller in terms of legislation (Occupational Health & Safety Act no 85 of 1993).
§ Bond cancellation fees – to settle an existing bond
§ Rates & taxes – the seller is normally liable to pay rates up to the date of transfer. This may involve paying a few months’ rates in advance, payable before registration of transfer.