Top 10 Hidden Costs of Selling Your Home In South Africa: Things Sellers Should Know.

Written By Kunle Adebayo



Selling your home is a huge financial decision, and although many sellers are focused on the possible return on investment or unlocking equity from the sale, there obviously are costs to selling properties that are visible, and then there are several hidden expenses that will just catch you by surprise. These hidden expenses can mount up rapidly and smash your net proceeds from your sale, leaving less profit than was expected by the seller.

From compliance certificates to capital gains tax, the finalization of a property sale in South Africa can be accompanied by a raft of unexpected costs. If the seller is not aware of these, he may face unpleasant surprises and be put under financial strain.

I have seen sellers having to dig into their savings to complete a sale where there was no "profit" from the sale. In fact, the cost of selling was more than any perceived profit or equity in the sale. Do not be surprised about this; home ownership is more than taking a bond to buy a property. One of our blogs features how owners can pay off their bonds early. The name of the blog is "The Ultimate Guide to Paying Off Your Bond Early".

We are going to unveil the top 10 hidden costs of selling your home in South Africa to ensure you are fully aware and prepared for these events. On your part, with prior knowledge of these costs, you will be able to budget more effectively to avert any last-minute financial stress and maximize your return from the sale of your property.

The Hidden Costs

While many of these costs are generally well-known and anticipated by sellers, such as the agent's commission, which represents only a small portion of the financial obligations incurring sellers, most sellers tend to overlook a host of other, less obvious costs that can significantly impact their net proceeds from the sale of their properties. From compliance certificates to the cancellation of bonds, the hidden costs run high and accumulate fast, tapping into your profit if not catered for in your planning.

This article will equip you with the knowledge to be prepared for these costs and not be taken by surprise, thus adding unwarranted financial strain. Another major benefit is the ability to outline this expense, which will help you execute your budget wisely and hence facilitate a better, more profitable selling process.

Top 10 Hidden Costs of Selling Your Home in South Africa

It's quite important to prepare yourself for the more obvious costs when selling a house—a complicated process, but then there are several hidden costs that most sellers overlook. These can add up quite quickly to your final expenses and dent your profit to rather huge extents. It's quite important to be aware of them up-front to avoid any nasty surprises in the road ahead.


1. Compliance Certificates
Before the transfer of a property takes place to a new owner, sellers are compulsorily required by law to provide various compliance certificates. Some of these include the following:

Electrical Compliance Certificate: This is to confirm that all electrical installations in the property are up to safety standards. The cost might vary, especially if repairs need to be done to bring this up to standard.
Gas Compliance Certificate: This is a requirement in case the property has a gas installation; it simply serves to note it is safe according to the rules.
Plumbing Compliance Certificate: Sometimes it is required to confirm the installation and functioning of the water in the property.
Beetle Compliance Certificate: This is more common in coastal areas, giving assurance that the property is clear from destroying insects in wood.

The cost of each of these certificates can run into hundreds of rands to thousands, depending on the size of the property and how extensive any required repairs might be.

2. Rates Clearance Certificate
Before any property can be transferred in South Africa, a seller is required to first obtain a Rates Clearance Certificate from the local municipality, which will confirm that all its due municipal rates and taxes have been paid up to date. Many municipalities require that rates be paid in advance, sometimes as much as 3 months in advance, adding that much to the upfront costs. Any outstanding amounts must be settled before the certificate is issued.

3. Bond Cancellation Fees
If the property has an existing bond (mortgage), you will be required to cancel it when you sell it. The bank charges a cancellation fee on the bond, to cover its administrative charges in closing the account. The charges can differ but usually are between R3,000 and R5,000. If you have not served the bank with the notice usually required to close the bond account—usually 90 days—then penalty charges may be levied.

4. Maintenance and pre-sale Repairs
Your house should be in excellent condition for you to be able to impress your buyers and earn you top dollar. This means that you might need to undertake some maintenance and pre-sale repairs. Such may constitute;

Cosmetic Upgrades: these might include repainting, landscaping, or some small touches in the house that will better the face of the property.
Structural Repairs: may consist of tampering with the roof, plumbing, or electrical systems, which might stand out during the course of an inspection.

These costs can add up quickly, depending on the condition of your home and the extent of the repairs needed.

5. Moving Costs
Once your house is sold, you will be left to think about the cost to move, or to shift to your new residence. The cost of moving will vary as to the distance and the volume to travel and whether a professional mover or not is to be paid for. Other incidental costs may be a temporary storage if there is a gap in time between selling of the old home, and moving to the new one.

6. Capital Gains Tax (CGT)
Capital Gains Tax is taxable on the gains realized from the sale of a property. Though there is a primary residence exclusion not exceeding R2 million, with limitations applied to it, any profit above this will be subject to CGT. The calculation may become tricky, and of course, the tax is going to be relative to your tax rate and how much capital gain you realize on the sale. Consult with a tax advisor with respect to the potential impact on your net proceeds.

7. Staging and Professional Photos FSBO
Today's competitive real estate market is very clear—it requires home staging and the use of expert photos to get your property noticed and sold. Most of these professional services are not necessary, although they do improve your property's competitiveness, let alone its pricing. Staging and photography are both services with a cost, running anywhere from a few thousand to multiples of your local currency, depending on the level of service.

8. Levies and Homeowners Association Fees
Should you be in a sectional title or estate property, you will be expected to pay any outstanding levies or Homeowners Association (HOA) fees before the sale can take place. In addition, some could request a levy clearance certificate similar to the municipal rates clearance certificate. Do remember to provide for this, and note that it may also have special levies that could become due for payment upon the selling of the property.

9. Holding Costs Over the Sales Period
During the selling period, you will continue to experience holding costs like:

Utilities: Electricity, water, and other municipality charges.
Home Insurance: Maintain an insured property during the ownership period.
Mortgage Repayments: The home may not sell fast and you will be compelled to continue servicing the bond.

If your home does not sell quickly, the holding costs will be very substantial.

10. Estate Agent's Marketing Fees
While the traditional estate agent's fees include some basic forms of marketing, many estate agents extend extra services like prime listings, virtual tours, and online advertisements aimed at one particular clientele. These extra marketing functionalities are bound to increase the number of potential buyers instituted, increasing the price as the common commission fees will not include services of this nature.

It becomes critically important for one to understand such hidden costs if one were to maximize their profit and, moreover, to not put themselves under sudden, undue financial stress. Budgeting for such expenses can be guided by experts, along with other crucial considerations, to ease your selling process and provide a desirable outcome from the sale of the property in South Africa.

NOTE
The complete article with a bonus about How To Budget For The Hidden Costs is available on request.