News from Tinus Strydom Property Group

The hidden costs to purchasing a property

Are you prepared for the expenses involved when buying a property? Do you think R500 000.00 is the only expense when you sign on the dotted line? Think again! Buyers should exercise caution and be aware of the "hidden costs", which may come as a shock to especially first time buyers. Herewith a short breakdown of costs you might have forgotten about.

1. DEPOSIT
You might be required to give a 10% deposit on this R500 000 purchase price, which amounts to R50 000 - is that amount readily available? Do you have money left in your savings for other costs or emergencies?

2. TRANSFER FEES
All attorneys follow a recommended tariff by various Law Societies with the effect that one attorney is not more expensive than another. On a purchased price of R500 000.00 your fee will be R6000.00

3. POSTAGE AND PETTIES
An attorney may also charge you for sundries like postage and telephone calls. This fee is usually in the vicinity of R350.00 plus VAT.

4. EXTRA CHARGES
There are also some extra charges such as a Deeds Office enquiry fee (About R65), a fee for FICA attendance (R150) and a fee payable to the Deeds Office on date of registration of your transaction (up to R500)

5. TRANSFER DUTY
This is a major expense and is a form of tax payable to the Receiver of Revenue before lodgment of your transaction in the Deeds Office. On a purchase price of R500 000.00 you will pay R20 600! Do you have that kind of cash available or will you borrow it under your bond resulting in extra interest charged.

6. RATES AND TAXES
By law, conveyance must lodge a Rates Clearance Certificate for all your transactions. Local authorities collect rates 4 months in advance and charge a small fee to issue this certificate (R25). Bodies Corporate charge up to R600 to issue a clearance certificate on levies, which levies are also payable for a certain period in advance. There may also be, in some cases, a levy payable to a "home owners association", which is also payable in advance.

7. BOND COSTS
Here again, the conveyancer will charge you a recommended fee as set out in by recommended tariffs by the various Law Societies. In our example, your fee will be R4000.00 plus VAT. Here too, are extras such as a fee for a

Deeds Office enquiry (R65), Deeds Office registration fee (up to R500), FICA verification (R150) and the one thing everybody forgets: initiation and valuation fees charged by the bank, which are either payable up front or covered in your monthly installment.

Now that you have paid all of this and the property is finally registered in your name, are there any more expenses? NOT SURPRISINGLY, YES!

8. WATER AND ELECTRICITY
Buyers should also keep in mind that they need to pay a deposit for water and electricity either to the local council or the body corporate, and of course the monthly charges from there on!

9. INSTALLMENTS
You now have to settle your bond payments as well, which in our example may amount to R4490.00 per month. Of course, you should allow for an increase in your monthly installments at any time.

10. LEVIES AND/OR RATES AND TAXES
If you have bought a sectional title, you will also pay levies from now on, which may also be increased should the trustees feel the need to do so. In case of full title, you will pay rates and taxes together with your utility charges.

11. INSURANCES
You might have elected to take out some sort of insurance to protect your mortgage in case of death - keep this in mind in your budget. For full title houses, you will also be required to take out home owners' insurance on the structure, which expense is fortunately included in your levy, in case of sectional title.
At last you have settled all accounts and made provision for all the above monthly expenses. Surely there cannot be any more surprises? YES, THERE ARE!! What about removal costs (and don't forget about accidental breakages during the removal process!), new furniture and curtains for your (bigger) house - with most probably an increase in your house insurance, with the new TV and all. Do you need to install a new alarm system because you are obliged to have one in terms of your insurance policy? Does your new home have a swimming pool - don't forget the maintenance costs!! Is your property properly fenced off to keep your pets inside? Finally, sir, don't forget that the wife wants to repaint the bedroom!

The long and short of this story: be ready to be shocked, make provisions for it, but above all: ENJOY you new home - the best investment you will ever make.

www.tspg.co.za