Calculating the costs of selling your home

Selling a property can be surprisingly expensive. Some costs can be deducted from the final sale price, while others must be paid upfront. Before listing your property for sale, it is recommended that you first do the calculations for all the associates costs so that you can budget accordingly

"Sellers are often surprised by the various costs involved in selling a property. To avoid being left with less than anticipated, sellers should discuss these expenses with their real estate professional and calculate the total costs before marketing their home," advises Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.

Agent's Commission

Many sellers forget that 15% VAT is charged on top of the agent's commission. To calculate what your agent's commission will be, multiply the sale price by the commission rate, then multiply the commission amount by 15%, and then add this amount to the commission to find out the total amount payable.

For example, an agent's commission on a R1 million property at a 6% commission rate plus 15% VAT would amount to R69,000 in total (R60,000 commission plus R9000 VAT).

 Municipal & Levy Accounts

Sellers need a rates and taxes clearance certificate from the local municipality for the transfer to proceed. This fee ensures that rates and taxes are paid during the registration process, often requiring payment for two to six months in advance. If registration is completed sooner, the municipality will refund the excess amount. Similarly, in a sectional title estate, sellers might be charged approximately three months' worth of levies upfront before the sale's registration,

To calculate this, multiply your latest municipal bill and levy invoice by three to have a rough budget set aside to cover this.

Outstanding Bond Costs

"Sellers will need to consider the amount outstanding on their bond in order to calculate how much they will make on the sale of their home. Apart from this, each financial institution also has its own rules and charges for cancelling an existing bond. Sellers should check with their institution to determine the expected fees. Most require a 60- or 90-day notice period; otherwise, penalty fees apply", says Goslett. 

READ: What's the 'golden' credit score number for bond approval?

An article published on Property24 on October 12, 2018, features Mpho Ramatong, FNB Home Finance Division Channel Head: Housing Schemes, who said when lenders assess an application, affordability, which considers your total income relative to living expenses, is an important measure used to determine whether you would be able to keep up with monthly home loan instalments or not.

This can further influence the home loan amount and interest rate you would be quoted for the term of the loan.

"Therefore, taking the time to ensure that your living expenses are declared correctly can go a long way to ensure that you get the best possible bond deal from your bank," said Ramatong as she unpacked some of the common mistakes that consumers make when completing the expenses portion of a home loan application:

1. Duplication

Some applicants fail to get a good home loan deal due to the duplication of expenses.

For example, if you have declared funds that you prepay into your credit card monthly, which you may be using to fill up for petrol and for groceries, you need not complete the groceries and petrol expenses portion in the form.

Ramatong said another form of duplication may arise if you are co-applying with a partner or individual that you stay with. In this instance, only one applicant may declare shared living expenses. For example, rent, water and electricity costs.

If the expenses are duplicated, lenders may not always be aware that the co-applicants stay together and share some expenses.

2. Dishonesty

Being dishonest about your living expenses may lead to your application being declined.

When applying for a home loan, banks require that you submit a payslip and six months' worth of bank statements, amongst other documents. As a result, any disparity in the expenses portion of the form can easily be picked up by the bank.

3. Entertainment

Be careful not to mistakenly declare a high entertainment expense by failing to separate needs from wants.

For example, a need could be monthly costs for educational or recreational activities. A want can be anything that you would possibly cut back on in tough times, such as movies or eating out at restaurants, and so forth.

See what home loan you'll qualify for - click here

Finally

"If you aren't sure about how to correctly declare expenses, it is advisable to consult your bank or an expert to avoid making costly mistakes," said Ramatong.

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Compliance Certificates

Various compliance certificates (electrical, plumbing, gas, beetle, electric fence) are required before the transfer can proceed. Sellers must also cover the costs of any necessary repairs identified during the home inspection to obtain these certificates. The cost for these varies greatly depending on how great the repair works are. Sellers should have a minimum of roughly around R5000 to cover these costs, but if serious issues are found, this amount can escalate dramatically.

"Understanding the possible costs involved in a property sales transaction and doing the necessary calculations ahead of time will give sellers a far more accurate picture of what they can expect to get once the sale has been finalised," says Goslett.

READ: New deadline looms for energy performance compliance for building owners

Compliance certificates are required when selling a home

Electric compliance certificate (ECC)

Your ECC should have been issued within the last two years. There should not have been any alterations to it since it was issued.

It should cover the distribution boards, wiring, socket outlets, light switches, earthing, bonding of all metal components, including satellite dishes and antennas, and isolators for fixed appliances. It is important to check that the company conducting the inspection includes fixed appliances like the geyser, stove, fans or underfloor heating appliances.

Gas compliance certificate (GCC)

The GCC is required for built-in gas stoves, geysers, braais, fireplaces, etc. The certificate is issued once the installation has been inspected and the authorised expert is satisfied that it is safe and that the emergency shut-off valves and other components have been installed in the correct positions, for example, in relation to electrical points. Cylinders outdoors need to be a certain distance from doors, drains, windows and electrical appliances.

Electric fence certificate

This certificate must be issued every time there is a modification to the fence or the property changes ownership. It should have been issued within the last two years.

Water installation compliance certificate (Cape Town)

According to the City of Cape Town, a registered plumber should undertake this inspection and certification. It will only be issued if:

• there are no plumbing defects;
• the water meter is working;
• there are no stormwater connections running into the sewer system;
• there are no cross-connections between drinking water and any grey water, recycled water or ground-water systems; and
• the water installation conforms to the national building regulations and local by-laws.

Selected properties will also be inspected by a City of Cape Town water inspector to ensure compliance. The City will take up any issues of non-compliance directly with the plumber.

Beetle compliance certificate (coastal regions)

This certificate is only valid for three to six months and must be issued by a qualified entomologist and certified member of the SA Pest Control Association.

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