Purchasing a home can be an exhilarating journey. For many, it's the largest investment they'll ever undertake. Therefore, future homeowners should thoughtfully plan their purchase to avoid undue stress.
Understanding Costs and Affordability
As the first and perhaps most crucial step, prospective buyers should examine their financial readiness. Hidden costs can abound in property buying; hence, thorough financial planning can prevent contract breach due to unexpected expenses. These costs may include:
The property's purchase price
Conveyancing fees for property transfer
Bond registration fees
Applicable Transfer duty or Value Added Tax
Clearance fees from homeowners association or levy, if applicable
Potential occupational rent
a budget for hidden costs or unexpected repair work
Remember, conveyancing fees typically fall on the buyer. Many buyers overlook this detail, which can lead to unfortunate surprises despite the sale agreement usually mentioning this requirement. Prospective buyers can estimate these costs using a cost calculator (see our website cost calculator).
If you're considering a mortgage to finance your property, remember that each bank has its own lending criteria. You may not get the full loan amount you applied for, so it's prudent to pre-calculate your monthly bond instalments to ensure affordability, as well as make provision for any interest rate hikes, which we have seen in recent times can be significant, and result in you paying much more each month.
Typically, properties are purchased in the buyer's name, but buying under a trust or a company is also an option. Each method comes with distinct legal and tax implications as well as various administrative costs. Hence, consulting a legal advisor or tax practitioner for advice based on your specific financial circumstances is advisable, especially given the different administrative and regulatory considerations of each option.
Residential or Sectional Title Property?
Whether you opt for a residential property or a sectional title property will depend on your unique needs and situation. If you're considering a sectional title property, remember that you'll automatically become a member of the body corporate and be bound by its rules upon transfer. It is prudent to check if the body corporate is functioning well, follows good governance principles, and practices sound financial management of the body corporate's funds. If you're leaning towards a residential property, be aware of any restrictions or servitudes in the title deed.
Be sure to understand any additional charges like levies, and potential special levies if you become a member of a homeowners association or body corporate.
Understanding the Sale Agreement
Once the sale agreement is signed, ignorance of its content is not an excuse. Therefore, it's strongly recommended to get legal advice before signing, as the "caveat emptor/buyer beware" priniciple applies. Annexing a "defects list" to the agreement before signature can help avoid disputes about disclosed defects.
Ensure that you're aware if transfer duty applies to the sale, or if Value Added Tax will be charged in addition to the purchase price. If your agreement includes suspensive conditions, the agreement should clearly outline how these are to be fulfilled and by when.
With regards to property occupancy, understand the difference between "occupation" and "possession." Typically, possession passes to the buyer on registration of transfer.
The Transfer Process
Unless a specific date is indicated in the agreement of sale, the property transfer to the buyer usually takes 2-3 months following the fulfilment of any suspensive conditions.
The seller's conveyancer typically attends to registration of the transfer, but the buyer can request their attorney to oversee the process for additional costs.
The standard transfer process involves:
Signing the agreement of sale.
The conveyancer gathering necessary information, such as FICA.
Requesting guarantees or payment of the purchase price.
Requesting advance municipal rates clearance figures.
Preparing and signing transfer documentation.
Requesting a transfer duty receipt or a transfer duty exemption receipt from the South African Revenue Services.
Requesting a levy clearance certificate if applicable.
Preparing all documents for the deeds office and lodging the transfer.
The deeds office examining the documents and registration occurring within 5-15 working days if all is in order.
The transfer being registered and the seller being paid.
Remember to organize property insurance in advance to ensure coverage upon registration. Also, if you're selling a property, you may have to pay capital gains tax. Therefore, keep copies of all invoices related to capital expenditure on the property. And lastly, use a firm who are professionals in the conveyancing experience. YOU as the Seller have the right to nominate your conveyancer, and Spence Attorneys would be pleased to assist you in the process. Get in touch : email@example.com
Remember, the information provided in this article is for general guidance; for significant legal decisions, always consult with an attorney and conveyancer.
Disclaimer: The information provided in this article is intended for informational purposes only and does not constitute legal advice. Always seek advice from an attorney before making any decisions related to property.