PROPERTY NEWS - Buyers are often shocked to find just how much they have to pay in transaction costs and just how involved the process of buying a property can be, says Dinis Martins, licensee for Seeff Somerset West.
"It is a fantastic time to buy and with the interest rate drop, property is more affordable than it has been in years. People will always buy houses regardless of the economy. The banks are keen to lend but you have to know what you are in for cost-wise. Don't waste a good crisis, get into the market now!"
Selling - who pays for what
Seller pays for
The seller pays the agent's commission, usually around 5% to 6% of the selling price. If you have a bond, be aware that you typically need to give three months' notice before cancelling to avoid being charged penalty interest, which is effectively a month's bond interest on top of the instalment. Your rates and levies will also need to be up to date.
Various compliance certificates are required, which will involve inspections to the cost of about R2 500 if no repairs are needed. Use a reputable company and get a second quote if repairs are necessary.
Sellers need to ensure the property is in a good state as new legislation means they can no longer hide behind the "voetstoots" clause and full disclosure of defects is required.
Buyer pays for
The full purchase price - either in cash, or part cash deposit and the balance funded with a mortgage loan. Transfer duty is payable on all transactions above R900 000. In the case of a development, there is usually no transfer duty as the developer will pay VAT.
On top of that are the various attorneys and deeds office fees and costs, pro-rata services and levies and so on. On a R1,1-million sale, the transfer costs are around R39 700. If you are taking a home loan, there will be additional costs to register the mortgage bond, estimated at around R24 500 (approx. R64 200 in total).
On top of that, transfer costs on a R5-million sale will be around R450 000, including transfer duty and about R60 000 for the bond costs.
Renting - who pays for what
If you are renting, you also need to budget for costs. You can get better value by renting a house in Somerset West that would cost you about R20 000 per month to buy, for around R15 000. But, while it leaves more money in your pocket in the short term, you don't own the asset, which can accumulate substantial value in the long term.
Landlord pays for
If you are merely sourcing a tenant, you will pay an agency fee of around 8% to 10% of the value of the lease, but if you include a management portion, there will be an additional cost. In the case of sectional title, landlords also need to factor in the cost of maintenance, levies and rates on the value of the property.
Tenant pays for
Deposits of one to two times the monthly rental is common. On a R15 000/month rental that means that you need up to R30 000 to put down as a deposit and will also have to pay the credit verification and lease fees, which could amount to around R1 150 once off.
The landlord (or agent) must invest the full deposit in an interest-bearing account for the benefit of the tenant. It may not be used for anything whatsoever.
At the end of the lease, the capital sum plus interest must be refunded to the tenant subject to the landlord being able to deduct reasonable cost of repairs or unpaid rent from it.
The landlord must provide a property in a fit and habitable state and the tenant must keep it in a good condition, including maintaining the garden and pool as provided for in the lease. A watertight lease and an incoming inspection are essential to agree on the state of the property upfront.
At the end of the lease, an outgoing inspection must be undertaken to determine whether any funds can be deducted from the deposit. The tenant may also not make any alterations without the express written permission of the landlord.
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