Costs Involved When Selling Your Property
Key Takeaways:
Selling your property incurs various fees beyond the selling price.
Expenses include agent commissions, legal fees, and compliance costs.
Understanding these fees is vital for accurate budgeting in property sales.
As can be reasonably expected, there are some costs involved when selling your property. You definitely want to plan ahead and have a clear idea of what these costs are so you can properly budget for them ahead of time.
General Selling Costs
General costs could include the following:
Bond Costs - the amount differs from bank to bank, but if you have an existing bond on the property you’ll have to pay a bond cancellation fee, usually in the region of R3 000. If your bond is less than two years old, you may also be liable to pay an early settlement fee or additional penalty interest of approximately 1% of the outstanding home loan amount.
There are exceptions, for example penalties are not charged for deceased estates or sequestration, but it’s best to clarify specific legalities with the banks conveyancing attorney.
Early termination fees may apply to you as the seller if you have not given the bank the required notice (the notice period also depends on the bank or financial institution as the duration differs) of bond cancellation, in which case you could be liable for interest penalties. Most banks require 90 days’ written notice that you will be settling the bond amount in full because of the intended sale of your property.
Estate agent commission is due when the property is transferred into the new buyer’s name, which is also when the conveyancers pay the net proceeds of the sale to you. As this can be a considerable amount of money, it’s a good idea to weigh up your options which may include negotiable commission, flat fee commission, or of course selling privately.
Compliance Certificates
The seller is responsible for inspections and compliance certificates. These can become quite expensive, and may differ slightly in each province, but you’re likely to need compliance certificates for electrical, gas, plumbing, beetle, water and electric fence. Aside from the cost of having the certificate issues, which average around R1 000 each, it’s likely, especially in older homes, that there may be some remedial work required in order to comply and have the certificate issued, so these costs need to be included in your budget.
Body Corporate or Homeowners' Association Levies
If the property you’re selling in a residential estate or a sectional title, you’ll need to get a Levy Clearance Certificate from the Body Corporate or Homeowners’ Association. This amount would likely include an average estimation of your utility bills (if this is usually paid to the Body Corporate) and levies for a period of three months.
The conveyancers will obtain the amount payable from the Body Corporate or Homeowners Association and will advise you accordingly.
Municipal Accounts
The conveyancing attorneys will require a clearance certificate from your local municipal authority confirming that all rates, taxes and utility bills are fully paid. As the seller you may have to pay an amount of two to six months in advance. The Conveyancer’s will obtain the required amount payable from the municipality and will advise you accordingly.
Capital Gains Tax
You may be liable for Capital Gains Tax on the sale of your property. As prescribed in the Income Tax Act, a “capital gain”, or profit, is the difference between the price you bought the property for, and the price you're selling at, less costs of capital improvements and of buying and selling your property. This is of course assuming your property is selling for more than the original purchase price. Your accountant can best advise you on whether you are liable for this tax and what the amount is likely to be.
While the costs associated with both buying and selling your property are unavoidable, being aware of what these are and planning accordingly can make for a much smoother process than discovering unexpected fees along the way.