The "hidden" Costs in Buying Property

Buying property is a long-term financial commitment that aspirant homeowners should not enter into without a comprehensive understanding of the total estimated buying costs involved, over and above the purchase price and deposit. The majority of buyers in South Africa are not in the financial position to pay the full purchase price in cash, which leaves them little option but to apply for the required finance from a financial institution. The approved loan is secured in the form of the registration of a mortgage bond over the property.

Having a reasonable idea of the buying costs before the search for a dream home begins will ensure that buyers search within a realistic and affordable price range. An accepted guideline for the registration and transfer costs is 8 – 10% of the purchase price of the property, which works out to be a considerable amount if it hasn’t been appropriately budgeted for.

The purchaser is liable for the payment of Conveyancing fees & the Deeds Office Levies for Bond Registration & Property Transfer Registration, the Transfer Duty and the Home Loan Initiation/Administration fees. Other costs such as furniture removal and the connection of essential services like telephone, internet and water & electricity may be included in the total home-buying costs. In the case of Sectional Title schemes, a purchaser may be liable to pay a portion of the monthly body corporate levy or a pro-rata portion of the municipal rates as from the registration date.

It is the Conveyancing Attorney’s responsibility to ensure that the transfer of ownership of the property from seller to purchaser is a smooth and hassle-free process.

Bond Registration

The Bond Registration Conveyancing fee is a once-off fee charged by the bank-appointed Bond Registration Attorney for the services they provide in registering the bank’s Mortgage Bond over the Title Deed; this cost is paid before registration of the property. The fee guideline is recommended by the Law Society of South Africa and is calculated according to the purchase price/home loan amount. According to the Conveyancing Tables for April 2016; the recommended fees for both bond registration and transfer are now the same. Attorney’s fees are always subject to the addition of VAT.

An additional fixed levy is charged by the Attorneys to cover the costs of telephone calls, petties and postage (posting documents between the Bank, Estate Agency and Deeds Office) & FICA. This postage and petties fee varies depending on the firm.

The Deeds Office Registry fee for Bond Registration is a once-off fixed cost charged by the Deeds Office before registration takes place for the legal registration of the purchaser’s mortgage bond. The purchaser pays the fee to the Bond Registration Attorneys who in turn pay the Deeds Office. Examples of the fees are given below:

<R150 000 : R340

R600 000.01 - R800 000 : R770

R1 000 000,01 - R2 000 000 : R990

R2 000 000,01 – R4 000 000 : R1370

R4 000 000,01 - R6 000 000 : R1660

R8 000 000,01 - R10 000 000 : R2 310

R20 000 000,01 - R30 000 000 : R3 850

Property Transfer Registration

The Property Transfer Conveyancing fee is a once-off fee charged by the Transferring Attorney for the transferring and registration of the property from the seller’s name into the purchaser’s name. The fee guideline is recommended by the Law Society of South Africa and is calculated according to the purchase price/home loan amount + VAT. It varies from firm to firm.

An additional fixed levy is charged by the Attorneys to cover the costs of telephone calls, petties and postage (posting documents between the Bank, Estate Agency and Deeds Office) & FICA. This postage and petties fee varies depending on the firm.

The Deeds Office Registry fee for Transfer is a once-off fixed amount charged by the Deeds Office for the Title Deed and legal transfer and registration of the property into the purchaser’s name. The amount is calculated on a sliding-scale basis depending on the purchase price of the property. The Transferring Attorney pays the levy to the Deeds Office when the transfer documents are lodged for registration. Examples of the fees are given below:

<R100 000 : R35

R600 000,01 - R800 000 : R770

R1 000 000,01 - R2 000 000 : R990

R2 000 000,01 – R4 000 000: R1200

R4 000 000,01 - R6 000 000 : R1650

R8 000 000,01 - R10 000 000 :  R2 310

R20 000 000,01 - R30 000 000 : R4 400

Transfer Duty

The Transfer Duty is a once-off tax levied by the Government for the transfer of the property from the seller’s name into the purchaser’s name and is calculated according to the purchase price. The Transferring Attorney calculates and collects the Transfer Duty from the purchaser and in turn pays the South African Revenue Service (SARS) before transfer of the property. This fee forms a significant portion of the costs incurred in transferring and registering a property into the purchaser’s name.

0 – R750 000 : 0% (exempt from transfer duty)

R750 001 – R1 250 000 : 3% of the value above

R1 250 001 – R1 750 000 : R15 000 + 6% of the value above R1.25mil

R1 750 001 – R2 250 000 : R45 000 + 8% of the value above

R2 250 001 – R10 000 000 : R85 000 + 11% of the value above R2.25mil

R 10 000 001 and above : Transfer Duty is calculated at 13% of the value exceeding R10 000 000 + R937 500

No transfer duty is levied if the transaction is subject to VAT (the seller is a registered VAT vendor) or if the property has a purchase price of less than R750 000.

Home Loan Initiation & Administration

Financial Institutions charge a Home Loan Initiation fee for the consideration and processing of the purchaser’s application. The National Credit Act regulates this once-off administration fee payable on registration of the bond at a maximum of R5985 including VAT but the fee varies from bank to bank. The majority of Banks will give the applicant the option to either pay the fee to the conveyancer in a lump sum before registration or to include the fee in the loan amount granted. The purchaser is liable to also pay a monthly service fee to the Bank for services rendered.

Financial Institutions like FNB, ABSA & Nedbank provide online tools that assist in calculating the transfer, bond registration and transfer duty costs. These websites, and many others like them, supply the purchaser with the means to plan and budget accordingly, and avoid the emotional, financial and legal implications of a failed transaction.

Alternatively, a reputable Sales Agent with in-depth market knowledge and experience will be able to provide a comprehensive list of the costs the purchaser is liable to pay.