Before putting your home on the market, it is necessary to plan ahead for costs that you as the seller will be responsible for. It is crucial to factor these expenses into your budget, as payment delays may hinder the property transfer process. This may also constitute a violation of the sale agreement.
In this article, we will focus on the various costs that sellers should budget for in order to complete the transfer of the property. The seller must cover the fees levied by various parties, which will typically include a conveyancing attorney, an estate agent, the bank, SARS, the municipality, body corporates or home owners associations as well as licensed electricians, plumbers and other relevant specialists where applicable.
- ESTATE AGENT COMMISSION
A property can be sold privately by the owner or by an estate agent. The estate agent’s commission is one of the most expensive seller costs. The amount payable is typically calculated as a percentage of the price for which the property is sold. The commission is payable following the registration of the home into the new owner’s name.
- BOND CANCELLATION
Should the Seller have a mortgage bond registered over his property, he is required to settle the outstanding amount before the property can be transferred to the new owner. The bank will provide their cancellation attorneys with an outstanding figure comprising the debt amount, an advance repayment amount and a penalty interest if the cancelling bank didn’t receive sufficient notice (usually 90 days) of the bond being cancelled. The figure will also cover several months of insurance premiums that would have been deducted from the bond account in order to maintain insurance cover for the duration of the selling and transfer process. Additionally, the bank may charge an early settlement penalty fee if the bond is cancelled within 2 – 3 years after it was registered.
On registration, this figure is settled (usually by way of a guarantee from the buyer’s bond to be registered or a guarantee from the transfer attorneys’ trust account if they are already holding the purchase price) and the bank then does a reconciliation on their side and a refund directly to the seller for any actual overpayment. The seller is also required to pay the attorneys’ bond cancellation fees.
- COMPLIANCE CERTIFICATES
A number of compliance certificates are needed as part of the transfer process and are required as per the Offer to Purchase signed by the parties. The seller is required to schedule several inspections and cover the cost thereof. Repairs may be necessary for the installations to be considered compliant. These expenses will also be for the seller’s account.
The following compliance certificates must be obtained:
- Electrical Compliance Certificate: Homeowners who are in the process of selling their property are legally required to have a valid electrical compliance certificate (ECC). Without an ECC the transfer of property ownership cannot be concluded. Certificates must be issued by a licensed electrician. Additionally, electrical repairs may be necessary to meet compliance requirements.
- Plumbing Compliance Certificate: Any property which falls in the City of Cape Town municipal area must have an up to date plumbing compliance certificate issued by a licensed plumber after due inspection and – if necessary – pluming repairs.
- Electric Fence, Gas & Beetle Certificates: Where applicable, you may also need electric fence system certificates, a gas certificate of conformity and an entomologist clearance certificate. Ideally, these certificates should be secured before listing your property for sale to prevent any delays in transfer.
MUNICIPAL RATES AND LEVIES
A rates clearance certificate is required to transfer ownership of a property from the seller to the buyer. Municipal rates and taxes must be paid before transfer documents can be submitted by the conveyancing attorney to the Deeds Office.
The seller will need to pay the total outstanding amount as well as an advance amount of between two and four months, calculated on the monthly average payable for the last few months. The municipality usually makes a refund payment to the seller of any overpayment within three months after registration.
For sectional title and homeowners association properties being sold, a levy clearance certificate is needed from the body corporate and/or home owners association. Levies payable will be calculated based on an estimation for a one to two month period. Usually, either the transfer attorney, the homeowners association or body corporate will do the necessary adjustments on the levy figures paid and refund the seller a proportionate amount back.
CAPITAL GAINS TAX
Capital gains tax (CGT) must be paid when a property is sold and the selling price exceeds the original purchase price. The seller is required to pay CGT as part of their income tax. This may not apply if the property being sold is considered to be a primary residence, in which case the seller may not need to pay CGT or a reduced amount of CGT will be applicable. Always contact your accountant before selling your home to consider the implications of CGT.
Our ESI Attorneys app has an excellent Capital Gains Tax calculator as well as a Seller’s Proceeds calculator where you can calculate an estimation of the sale proceeds due to the Seller on registration.