Thread by @n2a2o_jay

First Time Property Buyers: What to Expect and How to Best Prepare yourself

A #Thread

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I will be writing a series of daily #Property #Threads during the #lockdownextension

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According to an Investec report, Over 60% of millennials are either renting or living with parents. They are the highest number of new entrants into the property market. First-time buyers contribute to around 50% of bonds granted annually.
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From my experience, I have witnessed costs being the greatest factor and biggest gatekeepers to homeownership. Also, those who do get over this hurdle are usually ill-prepared for the amounts required in CASH, during this process.

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First thing first, get Pre-Approved. This will give you a clear indication of how much the bank is willing to give you towards your bond.
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A pre-approved buyer has the same negotiating power as a cash buyer, the seller knows that the sale will go through and in most instances will be willing to take a lower offer. do not confuse this with a pre-approval, which is an estimate.

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Note: if you’re honest with yourself, the amount you're pre-Approved for should be waaay higher than you can afford towards monthly repayments, don’t get too excited, stick to your initial budget.

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There are two types of sellers one can buy from (1) Developer, (2) Existing Homeowners. Who you choose to buy from will determine the true costs of your home purchasing process.

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Useful definitions:

Transfer Fees: lawyer fees payable to a conveyancing attorney for transferring the property from one owner to the next. These fees also include charges of disbursements, which may include deeds office fees, postages and petties and deeds office searches

Bond registration Fees: lawyer fees payable to a conveyancing attorney for registration a bond in your favour at the deeds office( remember the house belongs to the bank until you pay the last cent, only then will you see a title deed)

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Transfer duty: a tax payable on immovable property purchases based on the value of the property (value determined by SARS), this goes to SARS.

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Buying from a Developer

Usually, No Transfer & Bond Registration Fees Involved. These are advertised as ALL Costs Included. Unless explicitly stated, do not assume there are no transfer fees involved, some developers choose not to include these costs in the purchase costs

Because the developer is VAT registered, you will not be Liable for Transfer Duties as VAT is payable and no double taxation can occur. Some developers only include transfer fees and you are liable for paying bond registration fees. ASK them what’s included in advance!

Buying from an Existing Owner

This is by far the most expensive way to purchase property, with regards to the fees involved.

If the owner is a company then you will be liable for the following: Transfer Fees, Bond Registration Fees & VAT (@15%)

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For an R1 Million house the total costs are:

-Purchase Price: R1000 000 + vat = R1 150 000
-Transfer Fees: R27 032
-Bond Registration Fees: R27 645
Transfer Duty: zero (no transfer duty payable for a VAT transaction)
Total costs: R1 204 667

If the owner is a natural person, then you will be liable for the following:

-Transfer Fees,
-Bond Registration Fees &
-Transfer Duty.

Note: the Purchaser is liable for these costs not the Seller

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For a R1 Million house the total costs are:

-Purchase Price: R1000 000
-Transfer Fees: R25 135
-Bond Registration Fees: R25 748

Transfer Duty: zero (no transfer duty for houses worth R1M and below)

Total costs: R1 050 883

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Lesson: The true costs of buying a house are not necessarily what you see when you purchase the property. Proper knowledge of this information will enable you to negotiate the right price which you can afford and not put you into unnecessary debt.

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To avoid information overload, I will do part-2 of this Thread tomorrow to cover the rest of the issues one should look out for. Note: Bond registration fees are only applicable to people buying through a bond if you’re a cash buyer; you do not need to pay these fees.

Lastly, save up for these fees, you do not want to take a loan to pay these, you have just added a monthly bond into your expenses, the last thing you want is loan repayments on top of that.

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Take Away Points:

-Have full knowledge of who the seller is
-Unless otherwise stated transfer fees, bond registration fees & transfer duty are payable
-Cash buyers do not pay bond registration fees

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-In VAT transactions always factor in tax in the purchasing price offered
- A pre-approved buyer is a KING
-well priced New Developments are a Crown Jewel.

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Thinking of Buying or Selling?

Work with a knowledgeable Property Practitioner who has your Best Interest at Heart.

Mail: [e-mail]
Business Whatsapp: [phone]

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