Top Ten Property FAQs

What should I know before I buy or sell property in South Africa?
Is an offer to purchase legally binding?
What guarantees are issued with a property purchase?
What is a sole mandate?
How much commission is reasonable?
Can I buy property as a non-resident?
How do I improve my bond credit ratings?
What should I know about insuring my property?
Are wills and estate planning important?
How do I go "green" at home?

1. What should I know before I buy or sell property in South Africa?

When it comes to transfers, you will need around R1000 for a Rates or Levy Clearance Certificate.
Budget between R2000 and R5700 for Deeds Office and Bank Initiation Fees when you are taking out a bond.
Non-resident sellers should be aware that for sales of R2mn and more, a portion of the purchase price (5% for individuals, 7.5% for companies and 10% for trusts) must be paid to SARS on account of the Capital Gains Tax. The seller can apply for a refund of any amount overpaid.
Once the conveyancer has applied to the seller’s financial institution to issue a bond cancellation instruction, the seller may no longer be able to access funds from the bond and will be required to continue making payments until registration has occurred.
The purchaser will be required to pay transfer duty as early as 6 weeks prior to registration. It is important to speak to the seller’s conveyancer as soon as possible after signing the Agreement of Sale to determine what date payment of transfer duty is required and to discuss bridging finance should this be necessary.
Ensure that tax affairs are up to date, as any unresolved issues with SARS could delay transfer.
If a mortgage bond is not finally approved before the due date then the Agreement of Sale is no longer valid or binding on the parties involved.
All sellers should be advised that in most cases there will be Capital Gains Tax implications and an expert should be contacted in this regard.
Once rates clearance figures have been requested, a seller should not make any further payments directly to the local authority. Payments should only be made to the conveyancer on his or her request to avoid duplicate payments.

This information is courtesy of C & A Friedlander Attorneys.

2. Is an offer to purchase legally binding?

The simple answer is yes. Once accepted by the seller and any suspensive conditions are met, you are committed to the purchase. This could potentially be the biggest investment of your life, so it’s vital that you seek expert advice before entering into any legally binding contract.

3. What guarantees are issued with a property purchase?

The only guarantees issued with a property purchase concern beetle and electrical issues. Often it is the estate agent who appoints the electrician and beetle specialist who inspect the house. Be sure to check that these have been issued prior to signing a contract.
An offer to purchase nearly always includes a ‘sold as seen’ clause. While the estate agent or seller cannot knowingly hold back information about defects, it does mean that any defects that become apparent after your purchase are not the seller’s responsibility. This is why it’s important to carry out a proper survey before the purchase, in order to pick up any structural or hidden defects that aren’t apparent to the untrained eye.

4. What is a sole mandate?

This is a clause that may be included in a contract between the seller and an estate agent, giving the agent exclusive rights to market and sell the property. This means that you are prohibited from selling the property privately or using another agency until the mandate expires.
It’s best to think very carefully before signing an agreement like this, particularly in a time where the property market is so tight. The more exposure your property gets, the higher the likelihood of an enquiry or sale.

5. How much commission is reasonable?

Agencies can charge anything up to 7.5% to market or sell your property and obtain the best purchase price, terms and conditions on your behalf.
If you’re worried that the agency is being unreasonable then it always helps to get a second or third opinion from other agencies in the area.
When it comes to selling property by auction, it might help to know that auctioning property online could save you R25 000 – R50 000 in upfront auction fees, as it is the buyer who ultimately pays the 10% commission on the final sale price (www.saauctions.co.za).

6. Can I buy property as a non-resident?

The great news is that non-residents have almost the same rights as natural citizens when it comes to buying property in South Africa. However, when it comes to the buying process, there are a number of conditions that must be adhered to:

In SA, the seller of the property nominates the conveyancing attorneys who will attend to the registration of the transfer.
The purchaser usually pays the costs of the transferring attorneys to the seller’s conveyancers. Transfer costs, which include transfer duty are payable to the Receiver of Revenue and are based on a formula calculated on the purchase price:
- Natural Persons
  1. No transfer duty is payable on a purchase price under R500 000
  2. 5% of the purchase price is payable on properties worth R500 000 – R1 000 000
  3. Above R1 000 000, 8% of the purchase price is payable.
- Non-Natural Persons
  A flat rate of 8% of the purchase price is paid as transfer duty.

Besides this, there are also conveyancer’s fees for the registration of the transfer, which are payable by the purchaser. These are usually calculated by referring to a recommended tariff, which is based on the purchase price of the property.

Non-residents cannot obtain a mortgage bond for more than 50% of the purchase price. The remaining purchase price must be deposited into a South African bank account from a foreign bank.

Necessary Documentation
a) Proof of identification (passport)
b) Proof of income

c) Proof of residential address

In order to make your monthly loan repayments, you will need to open a bank account with a South African financial institution. Again, the bank will need the necessary documentation specified above and you will then have to deposit foreign funds into the account.
Internet banking is an easy way to access your funds while abroad.
You can transfer funds into any nominated bank account in South Africa. When paying a deposit, this is usually paid into the estate agent’s trust account or the conveyancing attorney’s trust account, depending on the wording of the Agreement of Sale. The same can be done with the balance of the purchase price.
These monies are then invested on your behalf into an interest bearing account.
Once the transfer is registered, the interest that accrued from the invested funds will then be credited to your account.
Signing the transfer documents can either take place in South Africa or be sent to you abroad. It is advisable to give someone in South Africa Power of Attorney if you are not going to be able to sign the documents in the country.
There are certain requirements that need to be adhered to when signing documents overseas: you have to sign them before the South African Embassy abroad or go to a Notary Public, which can be costly.
Non-residents are liable for income tax accruing from a South African source only. In other words, if you lease out the property then the income received from the rental will be subject to South African income tax.
However, if a non-resident who has not permanently immigrated to South Africa is deemed to spend more than a certain length of time in the country then they may be considered as a resident for the purposes of income tax.
When selling immoveable property as a non-resident, you will be liable to pay Capital Gains Tax. If the property is registered in your name as an individual, 25% of the profit will be taxed on the individual’s marginal income tax rate. The maximum marginal rate is currently 40%, which translates into a maximum flat rate payable of 10% of the capital gain.
Once the property has been registered in your name, the title deed will be endorsed with “non-resident” and this will assist you in transferring the profit outside of South Africa should you sell.

The information provided here is courtesy of C & A Friedlander Attorneys.

7. How do I improve my bond credit ratings?

When you apply for a home loan, there are a number of factors that influence your FICO credit score. Generally, financial institutions strive towards a maxim of ‘only good credit need apply’.
There are institutions that will lend to individuals or businesses with very low credit scores, but these loans often come at an exorbitant price, costing you much more than the original purchase.
Even if your credit score is mediocre, you’ll probably end up paying a lot more than someone with a very good credit rating.

Factors considered:

Payment history: this includes payments that have been missed or paid late, as well as the different types of payments that you make each month (car, house, credit cards, etc). About 30% of your credit score is determined by your payment history. To improve your rating, it’s important to show consistent payment on time each month, with little or no missed payments.
Amount owing on accounts: if you have dozens of accounts with high balances then a good credit rating is obviously going to be hard to come by. Try to keep most of your debt traceable to just one or two accounts, such as your mortgage and car payments.
Length of credit history: this has to do with whether you’ve established sufficient history to provide an accurate portrait of how you manage your finances. Lending institutions are interested in whether you have a history of paying on time. If you have managed your credit perfectly, but your account is only a year old then this is unlikely to raise your credit score.
Types of credit: if the credit you use weighs heavily on credit cards and other high interest sources then your credit score will certainly suffer.
New or recent credit history: this has to do with any new credit accounts that you may have opened or whether you’ve made requests for new credit, as well as how you’ve managed all of your credit recently. If you open several accounts at once, this could hurt your credit score. A person with good credit usually has a long history with a few accounts that are in good standing.

The importance of paying your bills on time every month cannot be stressed enough. Many banks have the option of scheduling automatic payments each month and it is advised that you make use of them. Also, don’t open credit accounts if you don’t intend to use them and don’t open and close accounts frequently. Instead, focus on using the accounts that you already have responsibly. This alone will raise your credit score and make it much more likely that an institution will grant you the best loan.

This information is courtesy of the Buy Property website.

If you are interested in taking out a bond or simply want more information, feel free to visit www.sabondtraders.co.za.

8. What should I know about insuring my property?

Always ensure your home and its contents for their replacement value.
There are different insurance options available at different brokers, so it’s important that you shop around for the deal that is best suited to you.

Lost or stolen property:

Always make a police report, providing a full statement and a list of all the stolen articles. Remember to keep the case number.
If you have had a pre-loss assessment or valuation done prior to the incident then your task will be much easier – you can essentially do a ‘stock-take’.
Report the claim to your insurer.
Obtain a quote for the lost or stolen items. An assessor is usually appointed to deal with larger claims.
Insurers may decide either to replace the goods or to pay you out for them.
If you are underinsured then average may apply, which means that you will be paid out only for the amount insured and if this does happen, the payment has to be made in cash.

9. Are wills and estate planning important?

As the old adage goes, “Nothing in life is certain, other than death and taxes”. For this reason, if no other, it is vital that your will is up to date.
Experience suggests that wills should be revised every two or three years, as invariably changes in circumstances will be encountered that necessitate a codicil or even a fresh will.
Changes to the estate duty legislation in recent years could also make it advantageous to revise your will.
The estate duty exemption was increased in 2007 to R3 500 000 per person. It’s important that your affairs are structured in such a way as to take advantage of this concession, as well as other changes to tax law. This will ensure that your estate is not saddled with unnecessary estate duty and capital gains tax.
The cost of reviewing your will and discussing these changes is miniscule in relation to the savings that can be achieved.

This information is courtesy of C & A Friedlander Attorneys.

10. How do I go "green" at home?

Cape Town is generating up to 6% more waste each year and the landfill sites are steadily closing, with two of the available six already closed and another two nearly full.

Water demand is growing by 4% each year and is a problem throughout the country. Eskom is struggling to meet the demand for electricity supply.

What to do: