All the costs you need to know about when buying property
Don't be surprised by these added on fees cautions Lesiba Mooka
To most new property buyers, buying a property simply means getting a bond from a financial institution and paying monthly installments for the next 20 to 30 years.
Buyers rarely take their time to research other costs involved with a property sale, information that is hardly communicated to by the seller. Home buyers are always caught off guard when they start receiving calls and statements from different attorneys who are involved in the transfer and registration process of the property.
The Minister of Finance recently said in his budget speech that no transfer duties would be paid on properties that sell for less than R750 000 and that rates will increase on properties selling for more than R2.5 million. What does this mean to a first time property buyer who intends on buying a house lower than R750 000 or the seasoned investor buying for R2.5 million and more?
Knowing and understanding the different costs involved with the sale of a property will create a better picture for a buyer before they can make a long term commitment of buying a property.
With most banks being strict on their lending lately, a lot of bond applications are only approved 95% or less of the selling price. What this means is that the buyer will now be liable to come up with the difference to make up the asking price.
"A mistake most buyers make is taking a further loan with the bank so that they can cover the deposit amount"
This shortfall amount, most commonly referred to as a deposit is usually requested a few days after the bank has approved the bond application. The deposit amount is paid in full by the purchaser upon being instructed to do so by the transferring attorneys.
A mistake most buyers make is taking a further loan with the bank so that they can cover the deposit amount. This only puts the buyer under financial distress and leaves them with a mountain of additional debt every month.
The role of a transferring attorney is to arrange for a smooth transfer of ownership between the seller and the buyer. A lot of confusion always arises between the buyer and the seller as to who should bear the costs for those services.
Although the attorney is acting on instructions from the seller, the buyer is however liable to pay for their services. Only buyers who are purchasing a property worth more than R750 000 will pay the transferring duties, below that no fees are charged.
Bond Registration Fees
At this stage of the process the bond attorneys representing the bank would have completed bond documents that the buyer must sign. Similar with the transferring attorneys, it is the buyer’s responsibility to pay for the services of a registration attorney. Payment is mostly required days after all necessary documentation has been completed and signed by the buyer.
"Although most of these fees or duties are government regulated and can be obtained when requested, they more often than not come as a surprise for most property buyers"
In addition to the fees paid to the registration attorneys, there is an initiation fee that is also paid by the buyer to the bank. This fee can range from R1000 to R5700, depending on the institution that is offering the bond. In cases were the buyer cannot pay the initiation fee in full immediately, the fee is added to the bond amount and paid together with the mortgage loan.
Municipal Rates and Taxes
Payments of outstanding municipal rates and levies are the responsibility of the seller until transfer of ownership has taken place. The seller will be liable to pay these rates during the transfer and registration process until the property is lodged and registered at the deeds office. Thereafter, those fees will fall to the new property owner.
In the case where the purchaser is buying a property at a public auction, the purchaser will be accountable for all outstanding municipal fees owed by the property. Many first time buyers fail to make provision for these fees when buying at an auction and end up spending more money than they initially planned.
Although most of these fees or duties are government regulated and can be obtained when requested, they more often than not come as a surprise for most property buyers who only budget for the monthly repayments and the deposit.