Knowing the hidden costs of buying a property
11 Apr 2018
Experts estimate that the hidden costs of buying a property can add as much as 10% onto the purchase price. Knowing the “ins and outs” of the property before making an offer can prevent an emotionally inflated purchase price and save valuable finances towards these hidden costs.
“Being aware of what these costs are – and how and when you will be expected to pay them, may well prevent the derailing of your purchase agreement,” says Greg Brown, director of Data Services at LexisNexis South Africa.
Going into a deal fully aware gives a buyer confidence and negotiating power. Let’s take a look at what the standard costs are:
- Deposit – this is the amount you have saved to put down as the initial payment for your home. Banks or financial lending institutions won’t always grant 100% bond, so it is a good plan to start saving as soon as you can. This is not included in the estimated 10% for hidden costs and varies depending on how much you are able to pay upfront after reserving enough for the other fees.
- Transfer duty tax is a government tax levied to transfer a property from the seller to the buyer’s name. This is calculated using tables created by SARS and available here. There is no transfer duty on properties under R900000.
- Transfer attorney costs are the legal fees due to the conveyancers who transfer the ownership of the property into your name. These will also include fees for the Deeds Office registration, postage and disbursements charged by the conveyancers.
- Bond attorney costs are due to the attorneys who handle the registration of your bond and includes postage and disbursements incurred.
- Bond initiation and administration fees – these are costs charged by the lending institution for the initiation and ongoing administration of the bond.
- Rates and taxes – these are due to the government and are payable in advance. Remember to keep up to date with when these are reassessed – the onus is on the property owner to check the municipal General Valuation Roll and see that their property has been valued accurately. Failure to do this could result in paying excessive rates and taxes for the period.
- Life insurance – you can either cede an existing life insurance policy to the bank which will cover your bond in the event of your death or you can take out a new policy. Ask your bank or bond originator regarding this mandatory insurance for bonds over a certain amount, and shop around for good deals but ensure that you receive adequate cover.
- Homeowners insurance – this insurance covers the risk to any property damage including fire or storm damage.
- Sectional title levies – buyers need to be aware of levies that are charged by the body corporate to cover costs. These also include insurances. Ask the seller for a copy of their last two months’ statement to see what is covered and what the fees amount to.
“Checking out the property before putting in an offer can give buyers the upper hand in the negotiating process – and save them money that they may need for costs,” says Brown. “Using Lexis PropIQ to investigate the property in advance, the area values and whether or not they have increased or decreased recently can give a buyer valuable insight into factors like area security and resale values.”
- Sectional Title Schemes: Liability for structural repairs to the common property
- Securing your property views
- Facilitating a sale or lease of property: A guide to the Property Practitioners Bill 2017