Hidden cost of buying a home

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 Hidden cost of buying a home
                                                                         SOLD PRICE INDEX

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 Buyers are often unaware of the " hidden " costs incurred                 CIIc Here

 in buying a home . Diana Mcllrath of Shepstone & Wylie
 Attorneys property department highlights some of the
 things you need to budget for.

 "You need to list these costs and draw up a budget correctly
 before signing an offer to purchase and being burdened with
 costs you may be unable to afford ," advises Diana Mcllrath of
 Shepstone & Wylie Attorneys property department.

These include items such as transfer and bond costs as well as
removal costs , monthly rates and taxes, bond repayments,
insurance and utility bills once the house is registered in your
name," she adds.

Transfer costs are legal costs payable by the purchaser of a
home and are related to the purchase price of such property.

"It is important to differentiate between transfer or
conveyancing fees and transfer duty," says Mcllrath.

Transfer duty is a form of tax levied by SARS on the purchase
of immovable property , payable on the amount paid or on the
fair value of the property , calculated as a percentage of that
price or value . It is collected by the conveyancer on behalf of
SARS . Transfer duty is payable to SARS prior to lodgement of
the transfer documents in the Deeds Office . " So mortgage
bonds that include your costs will not necessarily assist you in
paying for transfer duty ," warns Mcllrath.

She adds that generally with the transfer of residential
property, transfer duty is payable and not VAT . However if it is
the sale of a property by a developer who is a VAT vendor, then
VAT may be payable on the purchase price and not transfer

A different rate of transfer duty is payable depending on
whether the purchaser is a 'natural person ' or a legal entity, for
example, a company or close corporation or trust.

Conveyancing fees are attorney ' s fees charged by the
conveyancer in attending to the registration of the property into
your name . These fees are guided by the Law Society ' s tariff in
respect of conveyancing fees.

http://www.property24.com/Property24/News/PrintArticle .aspx?Id=7438 2008/05/06
                                                                         Page 2 of 3

 In addition to conveyancing fees , there are additional
 disbursement costs including FICA identification and verification
 costs as conveyancers are held to be accountable institutions in
 terms of the Financial Intelligence Centre Act and are required
 to identify and verify their clients.

 "The majority of buyers require some form of financing through
 a financial institution, mostly in the form of a mortgage bond
 registered over the property," comments Diana Mcllrath. In
 such an instance, the buyer will incur conveyancer's bond
 registration fees and bank costs which are generally collected
 by the conveyancer on the bank's behalf. "Fortunately, the
 National Credit Act has gone a long way in assisting the buyer
 in spelling out the additional costs as well as the interest being
 charged on mortgage bond finance," she adds.

 The bank charges include a bond initiation fee and a bank
 administration fee. Once the property is registered in your
 name your monthly repayments will begin.

 Other than the legal costs relating to the purchase of the
 property, service connection costs, including utility deposits for
 electricity, Telkom, and so on, are generally required.
 Insurance costs, repair and/or removal costs and monthly
 levies to the body corporate if you are in a sectional title unit
 must also be included in the equation.

 Now that the Municipal Property Rates Act is in place, rates are
 being calculated according to the value of your property.
 Sectional title units will now also fall within the ambit of the
 Act. It would be wise to find out what the municipality intends
 charging as rates for the property you intend purchasing.

 "Certain agreements of sale provide that the purchaser is
 required to pay a deposit and lodge it with the conveyancers
 and, if you are taking occupation of the property prior to
 registration of the property into your name, you will be
 required to pay occupational rent," says Mcllrath.

She advises that prospective buyers should make a list of all of
these costs and put down an approximate figure next to each
item, before signing a sale agreement which binds them to
their purchase of their dream home.

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