PROPERTY PURCHASE COSTS
The following information is provided for basic reference purposes only. It is no substitute for obtaining detailed quotes from vendors, estate agents, local authorities, attorneys and anyone else involved in your property transaction.
So who pays what?
- Generally speaking, the seller of a property (also sometimes referred to as the vendor), pays the estate agent’s commission, the conveyance fees for the cancellation of the existing bond over the property, and the costs for clearance certificates such as electrical, borer-beetle, and rates & taxes (although the latter are frequently paid by the purchaser and deducted from the final settlement)
- The purchaser of the property usually pays for the costs of transferring the property into their name, and the cost of raising a mortgage loan, and registering a new bond over the property
The information provided on this page focuses on the buyer’s cost in more detail.
The costs incurred by the buyer are usually dependent on the following factors:
- The purchase price of the property
- The size of the mortgage bond that is registered over the property as part of the purchase
- The nature of the sale / seller – i.e. is this an existing residence that is being purchased from another individual, or is it a unit in a new development or a commercial property that is being purchased from a VAT registered vendor?
What are the approximate costs for the buyer?
Transfer costs are made up of
- deeds office fees
- attorneys’ fees
- The cost is driven by the property value and whether or not the property is being purchased subject to VAT (e.g. a unit in a new townhouse complex)
- If the property is being purchased directly from a developer, the purchase will often attract VAT instead of transfer duties – in such a case, you should consult the seller for specific details – including deals they may have arranged with an attorney to register the property in your name
- The same applies to commercial properties that are purchased from a VAT registered seller – the sale may attract VAT instead of transfer duties, and the VAT may be reclaimable – but you should discuss the details of the transaction with your attorney to confirm this
In other cases, as from 1 March 2017, transfer duties are determined according to the following table (this applies to individuals, close corporations, companies and trusts):
Value of propertyRateR 0 – R 900 0000%R 900 001 – R 1 250 0003% on the value above R 900 001R 1 250 001 – R 1 750 000R 10 500 + 6% of the value above R 1 250 001R 1 750 001 – R 2 250 000R 40 500 + 8% of the value above R 1 750 001R 2 250 001 - R 10 000 000R 80 500 + 11% of the value above R 2 250 001R 10 000 001 and aboveR 933 000 + 13% of the value above R10 000 001
- The deeds office fee for transferring a property is also based on a sliding scale and to give you a rough idea, this will be in the region of R78 for a property of R150,000k; R978 for a property of R1m; R1,846 for a property of R5m; R2,568 for a property of R10m, etc.
- The transferring attorney will charge conveyance fees to transfer the property into your name, and these are also based on the property value. Excluding VAT, these fees will be in the region of R5,535 for a property of R150,000; R18,030 for a property of R1m; R47,430 for a property of R5m; R65,930 for a property of R10m, etc.
- The transferring attorney will also usually charge for the recovery of petty expenses such as postage, and will charge a deeds office search fee – typically these costs add up to around R1,500 excluding VAT
- You will also have to pay VAT on the conveyance fees and the additional charges
In total, assuming that transfer duties apply (i.e. not VAT), the total transfer costs could amount to approximately
- R7,000 for a property of R150,000;
- R27,500 for a property of R1m;
- R91,000 for a property of R2m;
- R440,000 for a property of R5m;
- R1,011,400 for a property of R10m, etc.
Bond costs are made up of
- more deeds office fees
- more attorneys’ fees
- bank fees
- Bond costs are primarily driven by the size of the bond you register over the property (which in turn depends on the size of the mortgage loan that you need)
- Once again, the deeds office fee for registering the bond is based on a sliding scale and to give you a rough idea, this will be in the region of as R376 for a bond of R150,000k; R978 for a bond of R1m; R1,846 for a bond of R5m; R2,568 for a bond of R10m, etc.
- The attorney who registers the bond will charge conveyance fees for the bond registration which are based on the size of the bond. Excluding VAT, these fees will be in the region of R5,535 for a bond of R150,000; R18,030 for a bond of R1m; R47,430 for a bond of R5m; R65,930 for a bond of R10m, etc.
- The attorney who registers the bond will also usually charge for the recovery of petty expenses such as postage, and will charge a deeds office search fee – typically these costs add up to around R1,500 excluding VAT
- You will also have to pay VAT on the attorney’s fees and the additional charges
- The bank will charge you a once-off bond initiation fee of R5,250 plus VAT
- For commercial bonds, a raising fee will usually apply
In total, excluding raising fees for commercial bonds, the bond costs could amount to approximately
- R12,000 for a bond of R150,000;
- R23,500 for a bond of R1m;
- R30,500 for a bond of R2m
- R56,400 for a bond of R5m;
- R78,400 for a bond of R10m, etc.
Adding it all up, assuming an 80% mortgage on the purchase of a normal residential property that is not subject to VAT or a commercial raising fee, your total transaction costs could amount to approximately
- R19,000 for a property of R150,000 with a bond of R120,000;
- R51,000 for a property of R1m with a bond of R800,000;
- R121,500 for a property of R2m with a bond of R1.6m;
- R496,400 for a property of R5m with a bond of R4m;
- R1,089,800 for a property of R10m, with a bond of R8m, etc.
What else should I consider?
- As a purchaser, you will usually be required to pay your municipal rates and taxes for up to a year in advance before a clearance certificate is issued. In addition, if the seller is in arrears with rates or other municipal accounts, you may need to pay these on their behalf and have the amount deducted from the final settlement – this can mean having to come up with extra cash in the short term in order to ensure that the transaction can go ahead
- The above costs are all in addition to what you will need to pay as a deposit – they are generally not costs that can be added to your bond except if specifically agreed with the bank as part of your finance application and assessment