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WHAT YOU NEED TO KNOW WHEN SELLING A SECTIONAL TITLE PROPERTY FOR THE FIRST TIME
Category Market Advice
The sectional title sector attracts many first-time buyers as these properties generally offer a more accessible step onto the property ladder and they often serve as a stepping stone from which they can upgrade within a few years.
And, when the time comes to sell, it's a natural assumption that the sale process will be a lot simpler than the complicated and convoluted process of the first purchase.
However, this is not necessarily so as the sale transaction has its own unique set of requirements - and these are more complex if the property is sectional title.
Selling a flat or townhouse is different to selling a freestanding house because it is part of a larger property with a community of owners and it's also overseen by a governing body, the Body Corporate or Home Owners Association.
Additional documents
So, in addition to the standard documentation required for a property sale, you will also need:
- A levy clearance certificate from the Body Corporate;
- Documentation from the BC so that the buyer's bank can assess the financial status and management history of the sectional title scheme before they approve a bond.
It's important that the seller doesn't leave it to the last minute to request these documents as any delay in getting these documents could also cause the approval process and sale to be delayed.
And, although it's not a legal requirement, it's also a good idea to give prospective buyers a copy of the schemes rules and regulations before they sign the offer to purchase because once they sign on the dotted line they are essentially agreeing to these regulations.
Some schemes have strict rules regarding factors like pet ownership or the number of occupants allowed per unit and if they are not brought to the buyer's attention beforehand it can cause problems down the line.
Additional factors to consider
Both buyers and sellers should be aware of the following as they can have significant consequences:
- If the body corporate has an 80% quorum vote they can prohibit units from being rented out on Airbnb and quite a few complexes do so as many owners in sectional title complexes find this form of short-term letting invasive and a security risk.
- It's essential that the managing agents are an efficient and reliable company with an experienced Body Corporate team and a good track record in place
- It's also prudent to check the city plans to see if there is any planned construction in the surrounding area as a new development could obstruct your views and are also likely to be noisy and disruptive.
Compliance
Sellers who embark on this transaction for the first time can be in for a rude, and often costly, awakening if they aren't aware of what is required to complete the sale or if they leave everything until the last minute when a number of fees are due.
Property owners are required by law to ensure that the property is legally fit for sale and the transfer attorney must be in possession of the relevant Certificates of Compliance before the transfer can take place.
While these usually only take a few days to acquire and only cost around R500 per certificate, if any problems are discovered which require repair, not only could it delay the transfer it can also be costly at a time when you can least afford it.
The seller' conveyancer should also apply for their municipal rates clearance certificate as soon as possible in order to avoid any unpleasant surprises because any outstanding amounts will have to be settled before the property can be transferred.
Seller's costs
Over and above these initial outlays, sellers must also budget for the following costs:
- Estate Agent's Commission
This is due once the transaction has been concluded, and is usually payable upon registration of transfer from the proceeds of sale. - Bond cancellation - conveyancer's fee
This is the conveyancer's fees for the cancellation of an existing bond over the property. To avoid further costs in the form of penalties, the seller must give the bank at least 90 days written notice prior to the intended cancellation date. - Body corporate and home owner's levy (if applicable)
The body corporate or home owner's association might require payment from the seller of a portion of the body corporate levy figures until date of transfer. - Municipal provision for rates and taxes
This covers all rates and taxes that are payable in advance by the seller. It varies from one local authority to another, in accordance with the valuation of the property but it is wise to budget an amount of around R 5 000 per property. - Capital gains tax-
This tax could apply if you sell your property at a profit, although there is a R2 million limit on "primary residence" sales.
Mandates
It's also important for first time sellers to familiarise themselves with how mandates work before they put their home on the market to avoid the risk of paying double commission.
This can occur in an open or shared mandate scenario when more than of the agents introduces the same buyer to a property. If that buyer submits an offer to purchase through one agent, the other can claim that they introduced the buyer to the property and/or that they were the effective cause of the sale.
Do your homework
Although the sale transaction may seem daunting, if sellers take the time to familiarise themselves with the process and the costs involved, ensuring that they have covered all their bases, it will be a lot less stressful.
Being prepared will also allow you to save money from the get-go rather and will minimise the possibility of ending up with a mountain of unforeseen debt.
Finally, the best safeguard is to enlist the services of a knowledgeable and experienced estate agent who will guide you through the entire process and is also essential to successfully and seamlessly navigate potentially crippling administrative and financial minefields.
Author: Lew Geffen Sothebys International Realty