Additional Costs When Buying A Property
Purchasing a new home is undoubtedly an exciting decision, but it is also an extremely emotional one. A home is where family traditions are brought to life and where lifelong memories are made. However, in addition to the immense pride that comes with having a place to call your own, comes additional costs that tend to come along with purchasing your new place, which you may not even be aware of.
When purchasing property, it is important to look beyond just the purchase price - there are a number of other costs that should be included into your budget when you plan on purchasing property. This article sets out to briefly make the reader aware of these costs.
The transfer and bond registration costs on a R1.4 million home, the country's average purchase price, are roughly as follows (follow the link above for you own specific property price range):
Transfer Costs:
Transfer Fees R 23,900.00
Deeds Office Levy R 1,283.00
Transfer Duty R 12,750.00
Postage and Petties R 1,100.00
Rates/Levy Clearance R 550.00
Pro-Rata Rates/Levies R 4,000.00
Deeds Office Search R 140.00
Electronic Document Preparation R 195.00
Vat @ 15% R 4,408.50
TOTAL: R 48,327.00
Bond Costs:
Bond Registration Fees R 23,900.00
Deeds Office Levy R 1,283.00
Postage and Petties R 1,100.00
Bank Electronic Connection Fee R 285.00
Electronic Document Preparation R 195.00
Vat 15% R 3,822.00
TOTAL R 30,585.00
Upon conclusion of the sale agreement, the seller must appoint a transferring attorney, the fee of which is covered by the purchaser. The transferring attorney ensures that property ownership is legally transferred from the seller to the buyer and lodges a sale record with the Deeds Office and charges a fee for their professional services calculated on a sliding scale in relation to the purchase price and in accordance with the prescribed tariff provided for by the Legal Practice Council.
The conveyancing fees are the only portion of the transfer costs that are actually negotiable. These fees are equal to a percentage of the property value and it is advisable for the buyer to always negotiate a discount with the attorney.
In addition to the general fee charged by the transferring attorney, they will also charge a fee for transfer duty and deeds office fees which is also covered by the purchaser.
Property Search Fee
The transferring attorney is also responsible for carrying out a deeds search. The purpose of the deeds search is to ensure that there are no existing conditions in the title deed that can preclude the transaction from proceeding. The costs of a deeds search range from R75.00 to R200.00 inclusive of VAT.
Postage & Petties / FICA documentation
Conveyancing attorneys also charge a levy to cover small costs such as postage, petties, and FICA (ID and proof of residence) documents. This is usually a fixed rate and varies per law firm
Rates Clearance Fees
The transferring attorney also obtains a Rates Clearance Certificate from the local Municipality. This certificate verifies that there are no outstanding rates and taxes due by the seller, and as such, the Municipality only issues a Rates Clearance Certificate once all outstanding rates are paid. The cost for a Rates and Clearance Certificate currently stand at R165.00, depending on the Municipality. This cost is payable by the purchaser, who is also responsible for paying all rates and taxes 4 months in advance before the registration of the property can take place.
Transfer duty is a tax levied by SARS and is payable by the purchaser on all property valued more than R1 million. The South African government establishes the scale at which transfer duty can be calculated. The scale can be accessed by clicking on the following link https://www.sars.gov.za/tax-rates/transfer-duty/ .
Deeds Office Fees
The Deeds Office charges a fee for the registration of every transaction. This fee is collected by the transferring attorney from the buyer and paid to the Deeds Office upon registration. The Deeds Office fee for transferring a property is charged on a sliding scale in accordance with the purchase price of the property. The sliding scale works as follows:
Purchase Price: Deeds Office Fee:
R150 000 or less R70.00
More than R150 000 up to and inclusive of R300 000 R350.00
More than R300 000 up to and inclusive of R500 000 R550.00
More than R500 000 up to and inclusive of R1 000 000 R650.00
More than R1 000 000 up to and inclusive of R2 000 000 R850.00
More than R3 000 000 up to and inclusive of R5 000 000 R1050.00
Over R5 000 000 R1250.00
Municipal Rates & Taxes / Property Insurance
It is important to note that a sale agreement will often contain a clause stipulating that "all risks and benefits in the property will pass to purchaser upon registration in the Deeds Office". The consequence of this clause is that the purchaser will become liable for all expenses in respect of the property. Such expenses include municipal rates and taxes levied on the property and also property insurance.
Bank - Home Loan Initiating Fees
The bank initiation fee is payable to the bank for processing the home loan. This amount varies by the bank but cannot exceed R6,037
Other Costs:
Other costs that first-time buyers need to be aware of is moving costs, occupational interest (rent payable to the seller if the buyer would occupy the property before registration) as well as possible repairs and maintenance needed to the property.
In light of the above, it is clear that there exists quite a number of hidden costs in purchasing a property. It is therefore imperative for any prospective purchaser to familiarise themselves with these costs to enable them to effectively budget for their dream home.