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"Risk comes from not knowing what you're doing" (Warren Buffett)
Don't risk not knowing what you're doing when you either sell or buy property. Avoid nasty shocks by budgeting properly for the costs you will incur - some of them can be substantial, and some are less obvious than others.
The checklists below are of necessity not exhaustive and you would do well to take specific professional advice and to get cost quotes before you finalise your financial planning.
The costs you will pay as buyer
In the excitement of buying a house (particularly if it's your first one!) it's easy to underbudget and forget all the amounts of money you will have to pay over and above the purchase price.
One suggestion is to budget for costs totaling up to about 10% of the purchase price, but here's a list to help you with your own calculations (ignore any items that don't apply to your purchase) -
- Transfer duty (a government tax payable to the state via SARS unless the sale is subject to vat). You will pay on a sliding scale depending on the purchase price and beware - this can be a substantial cost!
- The applicable transfer fees that the conveyancers will charge for their services in handling the transfer (you must pay these before transfer)
- Deeds Office fees
- Bond registration fees charged by the bank's attorney
- Bond/Home Loan initiation fee payable to the bank (the bank may also require you to take out a home loan protection life policy)
- Occupational interest, if payable when you move in before the transfer takes place
- Pro-rata rates, municipal charges and levies (some payable in advance)
- If you are buying into a complex (sectional title or Homeowners Association) you may be liable for body corporate or HOA levy clearance fees in addition to pro-rata levies
- Don't forget other costs like moving costs, redecorating, telephone and internet connections, water and electricity deposits etc
- Also remember to budget for your ongoing monthly costs of property ownership - rates, levies, municipal services, insurance (building and contents), security, building maintenance and the like.
The costs you will pay as seller
Again, ignore any of these items that don't apply to your particular sale -
- Estate agent's commission (don't forget the vat component)
- Certificates of compliance - electrical, water, gas, electric fence, and the like. Provide also for the possibility of repairs and upgrades to ensure compliance with regulations
- Bond cancellation fees (be careful here to give the bank enough notice to avoid having to pay an early termination penalty as well)
- Rates and levies
- If you live in a complex, there may be other fees payable to your body corporate or Homeowners Association.
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