Sale & Transfer Process – Who Pays For What?
Category Market Advice
Prior to the ownership of a property being transferred, both the buyer and seller have certain financial obligations that need to be addressed during a property transaction. It’s important to be financially ready and have a sound knowledge of what expenses either party is responsible for.
When listing a property with an agency, the seller is required to pay the agent’s commission. They also need to obtain all clearance certificates for the property. These include: the Electrical Certificate of Compliance, which needs to state all current electrical installations and not be older than two years; a Water & Plumbing Certificate; Gas Certificate; and if required, a Beetle Certificate. Depending on the service providers that the seller contracts, all these certificates could cost them approximate R2500 if no repairs are required. The seller could also be liable to pay for repairs depending on the contract they have with the buyer.
If the property is bonded, the seller needs to pay a bond cancellation fee directly to the bond cancellation attorney; this fee costs between R2300-R3000 and is unavoidable, even if the bond is sitting at a nil balance. The seller is required to provide three months’ notice to cancel their bond with their holder in writing; failure to comply will result in a bond penalty interest equating to approximately one month’s bond repayment for every month of notice not given.
As a general regulation, sellers will also need to pay a three months’ advance on their rates and services in addition to any arrears owing on any levies on their homeowner’s association fees.
Other costs can include: Financial undertakings for seller; bridging finance for seller; obtaining directive from SARS; repatriation of funds; foreign investment abroad.
Buyers are often required to pay transfer duty, however, since 1 March 2015, buyers purchasing properties valued below R750,000 have been exempt from paying this expense. Transfer Duty is a tax that the South African government levies on property transactions. Transfer duty is payable to the conveyancers approximately one month prior to the transfer, therefore, prospective buyers should have that money saved before they begin looking for a new home. If purchasing from a developer, instead of paying a transfer duty, a VAT portion will be paid. In some instances, transfer duty is not payable if the seller is VAT registered and the sale forms part of their enterprise; the property’s purchase price could either be recorded as VAT inclusive/exclusive in the contract depending on its terms.
If the buyer is registering for a bond, they will need to pay bond costs to their respective finance provider. If the buyer moves into the property prior to the transfer from the seller, they are liable for paying occupational rent to them; this is however entirely dependent on the agreement between both parties. Properties may have certain title restrictions, and if the buyer is planning on renovating or subdividing the property, they may be required to pay for a conveyancer’s certificate. The buyer may also incur costs of obtaining approved plans for the property. If the seller has approved plans for the renovation and its inclusion is stipulated in the offer to purchase, it's important to remember that unless expressly stated in the agreement, the seller is not legally bound to provide the buyers with the plans.
Our skilled and experienced agents at De Lucia Group will be more than happy to assist you determine which costs you are likely to incur and guide you through the process if you are still unsure. Get in touch with an expert in the field today.
Author: De Lucia Group