Selling your home will cost you more than just the agent’s commission, but sellers frequently expect to get more out of the sale of their property than they actually do. As the seller of a property in SA, you have to pay these costs if they apply to you:
1. BOND COSTS
Cancellation Costs If you have an existing bond with a bank, you will be charged to cancel it when selling your house. The bond cancellation costs total about R4 000 per bond and are payable on transfer so no advance cash payment is necessary.
Early Settlement Penalty If you are repaying a bond within 2 or 3 years (depending on the bank) of having purchased the property, your bank may be entitled to charge you an “early settlement” fee. You would need to ask your bank whether this penalty could apply to you and, if so, how it would be calculated.
Notice Period Penalty This is also known as bond notice period penalty interest. Most banks require 90 days’ written notice that you will be repaying the bond in full because of the expected sale of your property. Penalty interest is extra interest payable on the outstanding balance of your bond. Once you have notified your bank of your intended property sale, you must continuously notify them every 3 months until the sale is complete. Otherwise the bank may decide to charge you a fee for cancelling your bond early. This fee is calculated as 3 months’ interest, which can be a substantial sum to pay unnecessarily.
Please note that if you give notice about cancelling your bond, the bank will freeze your facility and you won’t be able to access it.
The Transfer Process
It takes about 2.5 to 3 months from the date that the offer to purchase is accepted by you, to the registration of the property into the buyer’s name. So, it is common that sellers only inform their bank once the agreement of sale has been finalised (there is then the chance that they could be liable for a small amount of penalty interest). BUT remember that, after you have given notice, the bank will freeze your facility, so you won’t be able to draw on it. If you need money from your bond to pay your rates and taxes or levies in advance or any other costs, then you should draw out this money before giving notice of cancellation.
Some banks won’t charge penalty interest if you will be taking out a new bond with them on another property.
2. AGENT'S COMMISSION and VAT
An estate agent charges commission on the sale of any property, and it is usually expressed as a percentage of the purchase price. Note, however, that this percentage excludes VAT. This total is the seller’s responsibility to pay.
The estate agent commission is paid only when the property is transferred into the new buyer’s name i.e. while the conveyancers pay the net proceeds of the sale (after deducting the commission and bond amounts) to you.
The agency commission is likely to be the biggest cost by far, so it pays to consider your selling alternatives carefully. Your options would be:
using a traditional estate agent
selling privately (by owner)
3. COMPLIANCE CERTIFICATES
Before a property is transferred into the new buyer’s name, various compliance certificates are required. These are, if applicable: costs for electrical, beetle, electric fencing, gas, and plumbing compliance certificates. These certificates are at least R500, but if problems are discovered then you also have to pay for the necessary work to be done before the certificate can be issued.
Another cost that most sellers should be aware of is the Electrical Certificate of Compliance or ECOC, which according to the current legislation is only valid for a period of two years. If the seller has an ECOC that is older than this, or any electrical alterations have occurred during the two-year period, the seller will be required to obtain a new ECOC by enlisting the services of a certified electrician. Provided there are no faults found, this can cost anywhere from R500 to R1 000 depending on the size of the property and the call-out fee.
If the electrician does find faults, the cost will escalate depending on the work that needs to be done to get the home compliant.
Electrical Fence System Compliance Certificate
If a homeowner has opted to install electrical fencing as a security measure, an Electrical Fence System Compliance Certificate is now also required where applicable.
It is vital to note that an ECOC and Electrical Fence System Compliance Certificate are two separate and different documents.
This certificate is to confirm that the wood in the property hasn’t been infested by beetles and is usually only needed if your house is at the coast. While not compulsory, homeowners who are selling their property in the Western Cape and KwaZulu-Natal regions will generally need to provide the purchaser with a beetle-free certificate.
To confirm that the gas lines are safe, and only needed if there are gas appliances in the house, homeowners will be required to obtain a certificate of conformity, which indicates that the installation has been done by a qualified technician. With the energy crisis experienced throughout the country, many households have installed gas lines to supplement their electricity usage.
This confirms that the plumbing is sound and is only required in Cape Town. These inspections each cost R500 and up, plus VAT, and normally take place only after any other conditions in the sale agreement (such as the buyer obtaining a bond) have been fulfilled. If there is work needed to be done to achieve compliance, then the contractor will give a quote for it. It is the seller’s responsibility to arrange and pay for the inspections and any remedial work that may arise, but often the contractor will be happy to delay receipt of payment until transfer takes place.
This certificate does not confirm that the property is free from rising damp or that there are no blocked drains.
4. RATES, TAXES and LEVY CLEARANCE CERTIFICATES
Rates and taxes
The attorneys will require a rates and taxes clearance certificate from the local council, and the seller will need to put money upfront to get this certificate. In order to provide the clearance certificate, the council can ask between 2 and 6 months of future-dated payments, which can add up to a fair amount of money. If the home happens to be registered within a shorter time frame, the council will pay back the additional money which the seller has paid. However, this does take some time. In some cases, sellers have only received the money owed to them by the council a year after the date of sale – so they will need to be prepared to wait.
In the instance where the seller is in an estate or sectional title property, similarly to the rates and taxes clearance certificate, the homeowners’ association or body corporate may request that the seller pays for their levies a few months in advance to ensure these costs are covered until transfer takes place.
5. PROPERTY CAPITAL GAINS TAX (CGT)
Capital Gains Tax (CGT) refers to the tax applied by SARS to a capital gain (profit). This tax would be payable by the seller. However, in many cases, the sold property will qualify as a so-called “primary residence”, which means that there will be either no CGT or only a reduced amount of CGT payable.
6. MOVING COSTS
Costs of moving your furniture and possessions to a new property or to storage include the petrol costs and the possible cost of professional movers. These may vary depending on how many trips need to be made from A to B.
Getting insurance for items being moved should be factored in.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)