With the reserve banks decision to cut the interest rate to 7.25%, the lowest since 1973, the property market is buzzing. With all the excitement of becoming a home owner, buyers sometimes enter into an agreement without considering or understanding the costs involved in the purchase.
Regardless of the fact that property is the best investment one can make, it’s always adviced that you educate yourself with what a purchase entails before entering into an agreement of sale.
Firstly and most importantly is the selling price. A specialist area agent should be in a position to correctly advise a buyer on the selling trend and prices of properties in the specific area that you are interested in buying. With the assistance of a lightstone report the agent should also be able to show the buyer the comparative selling prices in that area. Based on that information the buyer should be in a position to understand how the purchase price is calculated. Once the buyer agree and signs on a certain price the buyer will decide on method of payment. Whether it be a cash purchase, bond application via the banks or partially cash and the balance bonded.
On all these scenarios the same principle applies as far as transfer fees, transfer duty and bond registration costs are concerned. The only deciding factor on amounts will vary based on the method of funding.
Firstly there is the Cash transaction. On this transaction transfer fees (Attorney fees) are payable, as well as transfer duty fee (fee payable to SARS). No bond registration fees are payable because there is no bank involved and no security to be registered on behalf of the bank (this is usually done by a bank appointed attorney, acting on behalf of the bank). So the only saving the client will have will be on the bond registration fees.
Secondly there is the full bond transaction. On this transaction Transfer fees are payable (to the attorney seeing to the transfer), Transfer duty fee (payable to SARS) and bond registration fees (payable to the bank instructed attorney).
Thirdly there is the cash and bonded transaction. This is applicable where a buyer is paying a portion of the purchase price with a cash deposit and the balance on a bank loan. In this instance the transfer fee will be payable on the full purchase price, the transfer duty fee will be payable on the full purchase price, but the bond registration fee will be calculated only on the amount the bond was approved for.
These are only applicable on residential properties and not commercial properties. Furthermore SARS is also exempting transfer duty fees up to R 1 000 000 meaning the purchaser will only start paying Transfer duty fees from R1 000 000 and up.
Additional fees charged by attorneys are postage and peties, deeds office fees and clearance certificate fees. These fees are minimal and usually forms part of the general cost quotation issued to the buyer by the attorneys.
At Seeff we however always advice our buyers to be fully aware of these costs beforehand to be sure that this will be within their financial reach. These costs needs to be paid directly by the buyer to the attorneys and are as a norm not funded by the banks.
In order to calculate or prepare financially we suggest the OOBA application. This application can be installed on any smartphone and is an excellent tool for calculating bond and transfer costs, monthly bond repayments as well as pre qualifying yourself for a homeloan. Alternatively send an email to firstname.lastname@example.org or call or send a WhatsApp to Nicola on 082 447 1512 to enquire on any property related questions.
Happy house hunting.