Moving home? You cannot afford to make a mistake
The ancillary costs of disposing of an existing home and acquiring a new one are so high that those taking this step must make absolutely sure that they “get it right”. Mistakes here, invariably turn out to be very costly indeed.
Those embarking on this exercise, should ensure that the home they are about to buy is really what they want and need. If halfway through the process they find they are not happy with their choice, the cost of putting matters right is prohibitively high, quite often more than one year’s salary.
When disposing of a home, the seller will have to make provision for:
· The estate agent’s commission, which in a good agency will be a non-negotiable 7,5% + VAT of the sale price. On a R2,5 million sale, for example, this would amount to R213,750.
· Obtaining plumbers, electricians, beetle and, where applicable, gas and electrified fencing compliance certificates from those qualified to carry out the necessary tests. Although the certificates themselves are usually relatively inexpensive, making a property fully compliant can be very costly indeed, quite frequently as much as R10,000 for the electrical repair work and R10,000 for the plumbing repairs. It is surprising, how often homes have over the years become non-compliant and need extensive repairs.
· Payment of the bond cancellation fees and associated fees. The typical cancellation fee will be minimal but if the seller has not given the bank three months’ notification of his intention to cancel the bond he will also have to pay a penalty fee, which could amount to three months interest on the outstanding bond amount.
· In some cases if he is not to be given immediate access to the home he has bought, it will be necessary for the mover to make provision for temporary renting or a stay in a bed and breakfast or hotel until the new home becomes available.
· The cost of the cartage contractor, which in the Northern Suburbs (the area served by Alexander Swart Property) can be anything from R 1000 to R 5000.
· If the capital gain made on the sale exceeds R2,5 million, or if the property being sold is not the seller's primary residence, the seller may also have to pay a Capital Gains Tax.
So much for the costs of disposing the home. The costs of acquiring the new home are, however, could easily be equivalent or even higher.
Supposing the seller is selling a R2 million home and upgrading to a R2,8 million home and supposing he is paying R1 million in cash and takes out a bond of R1,8 million, in these circumstances he will find himself having to pay:
· Transfer costs of R182,000.
· A bond registration fee of R27,000
· R5,985 for a bond initiation fee.
Although the seller can probably expect to cover part of these costs from the profit made on the sale of his existing home, most instances require purchasers to supplement such profits to cover the costs of acquisition.
In view of these high costs, it is essential that those planning to sell their existing homes and buy elsewhere make sure that they are fully informed about the new home and their new area.
When buying a home, a good estate agent will help the purchaser to define and clarify his needs and wants – and will help him to achieve them. If the mover does not find a good estate agent and does not investigate these matters for himself thoroughly, he may find himself having to go through the whole expensive process again and in today’s economic climate - with salary earners under stress - many will find that they are unable to do this.
13 Jul 2017
Author Independent author