One of the big advantages of dealing with an experienced bond originator or an estate agent who has been trained to help and mentor his buyers, is that the buyer will not be confronted, as the sale nears fruition, with a range of extra costs which he, quite possibly, was never aware of.
This is according to Mike van Alphen, National Manager of the Rawson Property Group’s bond origination division, Rawson Finance, who says all too often, those working in real estate marketing assume that buyers will know the ins and outs, and the extra costs associated with buying a home. However, he says this is not always the case. Even among highly qualified people, e.g. university academics, they frequently find that they do not know about the extra costs involved in buying a home and have difficulty raising the cash needed for these.
Van Alphen says these extras come under three headings: transfer costs, bond costs and bank charges. The transfer duty is a government tax and is much slanted in favour of lower income groups.
The buyer of a home with a sales price of R600 000 or less will pay no duty at all. If the price is in the R600 001 to R1 million bracket, he will pay only three percent of the value exceeding R600 000. If the value is from R1 million to R1.5 million, the transfer duty will be charged on a flat rate of R12 000 plus five percent of the value exceeding R1 million. If the property sells for R1 500 001 or more, the duty will be R37 000 plus eight percent of the value above R1.5 million.
Also payable under the transfer cost heading is a Financial Intelligence Centre Act (FICA) charge, and this fee enables the attorney to check the buyer is bona fide. A conveyancing fee is also payable to the attorney effecting the transfer of the property. These fees’ limits are stipulated by the Law Society and are calculated on a sliding scale in relation to the property value.
Van Alphen says in general, the fees are between one and 3.5 percent of the sale price. The conveyancer will also add a small charge for what is known as posts and petties, i.e. the direct office expenses incurred in getting the transfer registered. All property transactions are lodged with the Deeds Office, whose fees range from between R350 to R1 500.
The next charges to be met by the buyer are related to the bond registration and bank charges. Here again, a conveyancer will be involved (not necessarily the conveyancer who handled the transfer) and the maximum conveyancer’s registration fee is stipulated by the Law Society. Posts and petties will apply again.
In addition, the Deeds Office will charge a fee of anything between R450 and R2 000, and the banks will charge an initiation fee, with a stipulated maximum of R5 700 for processing the bond application.
“All in all, on the average middle class home, a buyer is likely to find themselves paying five percent in extra costs before the transfer can take place. It is essential therefore, that buyers pre-qualify themselves with those who understand these matters before they actually begin their house search. Too many sales have fallen apart because these extra costs were simply not known.”
Van Aplhen says those wishing to do some research before they approach a bond originator or a bank should note that all the major banks, legal firms and estate agencies have online transfer and bond cost calculators, and often, tables in which they set out exactly what costs will apply on the purchase of properties (usually between R100 000 and R15 million). These are easy to understand — they are based on the current regulations regarding minimum and maximum charges.