Time and Cost Factors when Selling your Property
If you're planning to sell your property with the hope of making a profit, we have good and bad news for you. The good - if done right it can yield incredible profit, the bad - if you go in blindly you can incur major financial losses. Read on as we will reveal how to sell your property in good time and at a high-profit margin while unpacking the costs involved during this process.
The Transfer Time
In terms of legal processes, your property can only be sold once it has been transferred onto the buyer's name, as registered in the Deeds Office. This can take on average 3 months, but there have been instances where it can be as quick as 6 weeks or as long as 6 months - this all depends on various factors. For example, if it is a cash sale and there are no existing bonds over the property, it will most probably be a quick transfer.
Other Factors that Affect the Sale
Of course, if you're already at the property transfer stage, this means you have already found a willing buyer. But before this stage, there are various other factors that will affect the time you sell your property such as the location, market factors and the type of property you are selling. These also have a big impact on your profit margins.
Although all factors are important to consider, many experts agree that the most important when determining time and profit is, location location location!
This is the real estate mantra for just about anyone. So if you're selling your property, and hoping for a quick sale and high profit, this will be easier to achieve if you buy in a sought-after location where homes are not on the market for too long. But what exactly is a sought-after location? Well, in terms of the residential sector, this will include a location that is:
- Relatively safe and secure
- Close to key amenities such as good schools, hospitals and shopping mall
- Central to places of work
- Modern with homes that promote a lock-up-and-go lifestyle
Many seasoned property investors buy in locations where demand is relatively low but is starting to increase gradually. This involves understanding the market more in-depth and takes a level of speculation, but if your property is in an up-and-coming location and you are willing to wait until demand rises, you can reap the rewards of a profitable return.
Market Conditions and Type of Property
There are of course other factors to consider, such as:
Market conditions (buyer vs. seller market): If you're lucky enough to be selling your home in a seller's market, there is a bigger possibility of your property selling fast and at a good price due to demand being high and supply, low.
Type of property: In SA, the most popular property type among homebuyers are sectional-titles, these are in higher demand and sell faster than traditional freestanding homes.
With the goal of making the biggest profit possible, selling your property does have its fair share of costs that you need to be mindful of as this will reduce your profit margin.
Estate Agents Commission: This is 5 - 8% of the property selling price, plus VAT. This won't be applicable if you're selling privately.
Certificates of Compliance: These include electrical, beetle (coastal properties), electric fencing (if applicable), and gas (if applicable). The costs of these certificates are R500 each and up. However, if problems are discovered, you will first need to sort these out before a certificate is issued.
Rates Clearance Certificate: A clearance certificate is issued to the transferring attorney only once rates and taxes are paid up-to-date, this amount includes the rates and taxes for the next four to five months as well. Council will only give the transferring attorney the clearance certificate once the amount is paid in full. This amount can be very large, however, if your property transfers earlier than anticipated you might get a refund.
Capital Gains Tax: This tax will come into effect once you make a profit through the sale of your property. It is calculated as the selling price less the base cost.
Bond Cancellation Fees (If applicable): If you cancel your bond after selling your property, you will be charged a fee by your lender of R3000 or more. You can also be charged an early settlement fee if you cancel within 2 years of taking out the bond.
Other Costs to Consider
In addition, you would've incurred bond registration (if applicable) and transfer costs when you purchased your property, as such, you will need to work these out when determining the exact amount of your profit.
Yes, there are many costs involved when selling your property, but the right location, coupled with an "in-demand" property type and favourable market conditions will make the process quicker and your profits higher.
Author: De Lucia Group