What costs can you expect when buying a property?

Buying a property can be a daunting task for anybody, but knowing all of the costs involved can make the process more manageable.

Knowledge of the process will also enable a potential buyer to have a better understanding of what their affordability may be.

The Courier spoke to Annabelle Da Costa, a Property Law expert at Da Costa Inc about which costs one can expect.

There are 8 general costs that a buyer can expect when purchasing a property.

Transferring Attorney’s Fees:

This can be charged according to the purchase price, and in line with a guideline tariff issued by the Law Society of South Africa.

Attorneys are not obliged to follow this tariff, but it is deemed a fair and reasonable charge for the work that goes into a transaction.

Transfer Duty:

This is a tax levied by and payable to SARS on all immovable property transactions that exceed R1 million.

The percentage is calculated on a sliding scale, and can be anywhere between 3% and 13% of the purchase price depending on its value.

If the seller is a VAT vendor then the rule of thumb is that VAT at 15% will be charged.

Residential properties are ordinarily exempt from VAT charges but there are circumstances whereby it may be charged in place of the transfer duty.

Deeds Office Fee:

This is an administrative fee charged by the Deeds Office and is calculated according to the purchase price of the property but currently does not exceed R6 794.

Municipal Clearance Certificates:

Conveyancers are required to obtain a rates clearance certificate which is lodged in the Deeds Office.

The cost is municipality specific, but it usually requires payment of current, arrear and advance rates, all electricity owing, refuse and sewerage costs in order for a clearance to be issued.

A buyer is only liable from registration of transfer to a particular date, specified by the municipality as well as the certificate fee.

The dates can be found on your final statement of account.

Levy Clearance Certificates and Consents:

In the case of a Sectional Title property a levy clearance certificate is also required.

The body corporate or managing agents call for payment of current, arrear and advance levies, as well as a fee for the issuing of the certificate.

A buyer would only be liable for levies from date of transfer onwards and the certificate fee.

If the property is within an estate then advance Home Owners Association levies, levy stabilisation funds, club joining fees and even debentures may be payable.

Sundry Charges:

The conveyancers may charge for postages and petties, online electronic instruction costs and a fee for complying with the Financial Intelligence Centre Act, but these costs will vary from firm to firm.

Bond Registration Costs:

If the buyer is obtaining a bond to pay for some or all of the purchase price, then separate provisions have to be made for the bond registration attorney’s fee (as well as disbursements) over and above the transfer costs.

The bond attorney’s costs and the deeds office fee for the registration thereof is calculated on the bond amount to be registered, and is usually calculated according to the Law Society guideline tariff.

Bank’s Initiation Fee:

This is charged by the bank to raise the bond.

Depending on the bank, it is usually charged upfront, and is included in the bond registration attorney’s account.

However, it may subject the bank’s agreement, to be included in the bond – But, we do not recommend this, as the fee will, in effect attract interest for the term of the loan.