Hidden costs to look for when buying a home
Looking for a new home is an exciting venture. It often coincides with an important milestone, like starting a family and needing more space, changing jobs and looking for something more luxurious, or a fresh start in a new city.
When people start thinking about buying a house, they tend to begin with a rough number of what they think they can afford, based on the rent or bond and other costs they’re currently paying. While your monthly repayment is arguably the most important part of your budget, there are many other costs involved in buying property. Sometimes, these costs are ‘hidden’ and sneak up on you, resulting in a nasty shock or increased financial pressure.
Similarly, if you are selling your property, you will have a rough idea of what you are going to be left with after settling your bond. There are also costs that will eat into this.
To help you avoid any unpleasant surprises, we’ve put together a list of costs to expect before (and even after) you get the key to your new front door.
Bond cancellation fees and penalty:
If you’re selling a home with an existing bond that isn’t paid off, you must give your bank 3 months’ notice of your intention to settle the bond, or the bank will charge you an early settlement fee. Also, your bank will instruct attorneys to cancel the bond in the deeds office. You are responsible for the costs (usually around R5 000).
Commission for estate agents:
If you’re selling a property, make sure you provide for the commission due to the estate agent who secures that sale. Commission is usually a percentage of the selling price, and will vary from agent to agent. If you award an estate agent a sole mandate (which means that they don’t have to compete with other agents to sell your property), they would generally give you a lower percentage than if you awarded multiple agents mandates.
Clearance certificates costs:
When you sell a property, the conveyancer must obtain clearance certificates from the municipality, and from the body corporate if you live in a complex. The amount to be paid is any outstanding balance plus up to four months’ provision for advance billing. If there is a special levy that is being paid monthly, the outstanding special levy has to be paid up. After transfer, you will be refunded the unused amount of what was provisioned for future billing.
But be prepared to be patient — while this happens quite quickly in the case of a body corporate, it could take months for municipalities to issue the refund.
Compliance certificates costs:
As a seller, you need to obtain an electrical compliance certificate, an electric fence compliance certificate (if applicable) and a gas installation compliance certificate (if applicable) from qualified technicians.
Make sure that all these things are up to date and compliant before you get ready to sell. If anything is found to be not compliant, you as the seller would need to pay for any upgrades or repairs necessary to get to compliant status, and this can get pricey.
When we transfer properties, we pay these amounts on behalf of the seller and deduct from the proceeds of the sale – no need for you to find the money up front.
New rates costs:
As a buyer, you’ll be responsible for rates costs effective from the date of transfer. However, it can take the municipality a while to update its records and start billing you. This means that you’ll go for months without receiving an invoice and then get a hefty one to cover all the months that have been missed. Make sure you ask the seller or estate agent what the average municipal bill is, and set aside that money every month to pay the lump sum when it comes.
New levies costs:
As a buyer, you will need to pay any levies after transfer, as well as any special levies that are imposed after transfer. Again, ask the seller, agent or body corporate what these might be to budget accordingly.
Transfer costs:
Buyers are responsible for the transfer costs. These include attorney’s fees, postage and petties, Deeds Office fees, Deeds Office search fees, an electronic generation fee, FICA costs, rates clearance fees, and transfer duty.
We have a handy tool on our website to help you work these out ahead of time: https://costcalculator.korbitec.com/A55F1984-44C9-4416-94A1-1727D859C56E.
Bond registration fees:
If you’re a buyer, you’ll need to pay the registration fees associated with your new bond, if applicable. This is paid to the attorney registering the bond, and is dependent on the size of the loan — the higher the bond, the higher the fee to register it.
Now that you have an idea of what you’ll pay in addition to the asking price of the property you’re interested in, we wish you happy house hunting!
To make the process easier, contact us for our conveyancing services, which include:
- Drafting and vetting offers to purchase,
- Transferring ownership of property,
- Registering and cancelling bonds,
- Opening sectional title registers,
- Opening township registers and township establishment,
- Registering servitudes, and
- Registering subdivisions and consolidations.
You can contact us on 011 347 0300 or info@lawmen.co.za.