This article focuses on the costs that one often overlooks when deciding to sell a property and, by extension, when calculating the selling price.
In our previous articles, we have emphasised the need to market your property at the correct value and advised using a reputable agent to assist you in determining the market value.
It is crucial to always consider the “hidden costs” when calculating the net amount you are likely to receive when selling your house. You would rather cater for these hidden costs in the selling price or have the amount available in savings, than find yourself on the back foot financially when your house is sold and transferred.
Hidden costs refer to the costs that one sometimes forgets to consider in calculations. Some property owners may be of the view that the only cost that will be incurred during the sale of their property is estate agency fees. Unfortunately, there are other costs that you, as the seller, need to be aware of.
The following are examples of hidden costs:
- Compliance costs
Once you have signed an offer to purchase, it is the seller’s responsibility to obtain various compliance certificates, which may include:
- An electrical compliance certificate is needed to certify that the electrical reticulation system is sound, safe and meets electrical standards.
It is often the case that a registered electrician has to undertake several repairs or earthing corrections to a property’s electrical reticulation system to make it safe.
This cost can range substantially depending on the size and age of the property.
- A gas compliance certificate is only needed if you have gas compliance requirements and certifies that the gas installation is safe and leak-free.
- A plumbing certificate is needed to certify that the plumbing components, such as geysers, water meters, and main pipes, are correctly installed and functioning, according to regulations. It also identifies leaks or issues that are accordingly rectified, eliminating any unnecessary water consumption.
- An entomology certificate is needed to certify that any wooden roof structure is free from infestation, such as wood borer or other wood-destroying insects.
All of these compliance certificates may amount to thousands of rands.
Tip: Before placing your property on the market, source a reputable electrician to undertake an inspection for a small fee. They will provide a report following the inspection of what repairs are needed and the associated cost. An electrical compliance certificate is often the most expensive compliance certificate. Enquire with a plumber and pest control company as to what their estimated compliance fees would be. This would give you an idea of what the compliance component will cost and what to cater for in the selling price.
- Bond cancellation fees
If you have a bond on your property, the bond has to be cancelled when you sell your property. Your bank will levy a fee to cancel it, which is usually around R 5,000 to R6,000, depending on the bank.
However, what is more relevant is that your bond agreement will usually contain a 90-day cancellation clause, which, if not met, the bank will charge an early cancellation fee, which could be substantial.
Tip: Before placing your house on the market, contact your bank to enquire if your bond agreement contains a 90-day cancellation clause and what the bond cancellation fees will be for the following two scenarios:
- If you place 90-day notice of your intention to cancel your bond, and
- what the fee will be if you don’t place the 90-day notice.
The difference in fees could make a vast difference to your budget.
- Estate agent fees
This is not really a hidden cost, as most, if not all, property owners know that one has to pay an estate agent’s commission for marketing and selling a property.
However, estate agencies have different fee structures, and unless you negotiate a fee with them before placing your property on the market, you could be faced with a substantial fee being deducted from your selling price. Estate agency fees can vary from 5% to 8% + VAT.
Tip: When choosing a reputable agent to market your house, enquire with them what their fee is and if too high, try and negotiate a reduced fee. An estate agent will likely reduce their fee if your property is seen as a relatively easy and uncomplicated sale.
- Repairs and maintenance
At face value, your property may look to be in good shape, but don’t perceive that a defect may not be seen by potential buyers. Neglecting to repair a defect before placing your property on the market may prove very costly, as it may:
- Deflect potential buyers,
- provide buyers with negotiating power and,
- potentially delay the transfer of the property.
Or in the instance where you have neglected to maintain your property over the years, getting the property ready for sale may result in substantial costs.
Tip: When deciding to sell, be honest about any repairs and maintenance that are needed before placing your property on the market. Rather find the finances needed to undertake the repairs than market the property with defects.
It could also result in exhausting all of your savings to repair the property before selling, in which case, it may delay the placement of the property on the market.
But this scenario is far more preferable than placing your property on the market, receiving an offer to purchase and then having to effect repairs quickly, often at a higher cost.
- Moving and relocation costs
Although this is often considered part of the selling process and the realisation of moving to another property, owners may only source a quote for moving and/or relocation when the property is sold.
Again, moving costs can be substantial based on the quantity of items to be moved and the area to which you will be moving.
Tip: Before deciding to sell, obtain a few quotes from removal companies to determine the cost of moving. The cost of which can be surprising, and it is preferable to budget for it first and delay the listing if your financial position will be stretched. Rather avoid a cash crunch by trying to find the money to pay for your move following the sale of your house.
This article aims to highlight the costs that you, as a property owner, must be beware of before placing your property on the market. If you don’t, the associated costs may have a significant impact on your net financial gain when selling your property, resulting in a possibly debt-burdened position post the sale of your property.