Buying a property can be one of the happiest and scariest days of your life. Property is one of the biggest investments you can have, and before making the leap, as a Buyer, you should know everything there is to know about the process of Buying property.
From a Conveyancers side, the start of any transfer is a stressful one, especially if the clients aren’t informed about the process that is to come. As Conveyancers, we are first introduced to the property, the Sellers and the Purchasers through the sale agreement. We don’t often see the property we are transferring and we only meet the clients, face to face, once we are well within the transfer process. Therefore, all our information, the Purchase price, parties details, property address, is derived from the sale agreement.
Once we have perused through the sale agreement, we then open our file and send out our introduction letters to the Sellers and Purchasers. Along with the introduction letters we send our Proforma account to the Purchasers. The Proforma account is our invoice for transferring the property into the Purchaser’s name.
The amount of times we are used as a “punching bag” by Purchasers who were “not aware” of the costs involved with this transfer process is frightening. More often than not, Purchasers are not made aware of the outside costs involved with a property purchase and they get a shock when our invoice arrives.
Before purchasing a property, any potential Buyer needs to know the costs involved in transferring a property into their names. Many Purchasers are able to “just” afford a property through obtaining a bond, securing the Purchase price or through a combination of the two. Many Purchasers do not know that they will need to cover the costs of transferring the property as well.
So… what can a Buyer expect when they receive the Proforma invoice from us?
The Proforma account is largely based on the Purchaser price of the property. The Price that the Purchasers are purchasing the property for will determine the conveyancing fee as well as the transfer duty fee that will need to be paid. For the Transfer Duty, SARS works on their own calculations for this fee. Transfer Duty starts at the sum of R1 100 000.00 and the fee increases as the Price does. Any property that is sold for under this threshold does not incur a cost for Transfer duty.
Like SARS, the fee we, as Conveyancers, charge to transfer the property is based on a tariff system. The tariff is set by the Legal Practitioners Council. The Purchasers will then be liable to pay a “Deeds Office Levy” to have the property registered in the Deeds Office, this fee is also based on the Purchase price, and then there are necessary disbursements that are charged to the Purchaser. Specific systems are used to apply for the rates certificate, upload information to SARS, attend to the necessary Deeds Office searches and FICA the clients. All these amounts are included in the proforma account.
Finally, the Purchasers will find an amount for estimated rates and refuse, upon request of the rates figures from the rates department, the rates department requests three months estimated amounts in order to ensure the account is paid up to date during the course of the transfer. On registration, the rates and refuse amounts are prorated between the Seller and Purchaser and the Purchasers rates and refuse accounts are normally paid up for a month or two after registration. This is a big help for Purchasers, although they don’t see it at the time, but the rates department takes a bit of time from registration to open a new account in the name of the Purchaser. What could end up happening, is that once a purchaser eventually obtains an account from the rates department, after registration, they will be hit with a 6 months rates account. However, because we pay three months in advance, the account that the Purchasers receive is a lot less than it would be.
The last amount we include in the Proforma account, all dependent on the property, is an amount for estimated levies and the levy clearance certificate fee. This amount is only included if the property being purchased is a sectional title property. In this case, the Purchaser will be liable to pay a fee to obtain a levy clearance certificate from the managing agents as well as a portion of the levies for the month, depending on when the property is registered. In order for the managing agents to issue a levy clearance certificate fee, the levies over the property have to be up to date for the month.
Many Conveyancers have a different way of working the Proforma accounts, however, I prefer to put all amounts, including the three months estimated rates and refuse as well as the one month estimated levies, if applicable, all in one account and send it to my Purchasers at the beginning of the transfer. This way, the Purchasers know the amount they need to pay in and I don’t need to call for further payments from the Purchasers during the transfer process.
Once the property has been registered, we then send out a final account indicating all the finances that have occurred during the transfer process and then, should there be a refund, which there normally is, we then refund the Purchaser any over payments that they may have made.
Purchasing a property is not a simple task nor is the transfer process that goes along with the purchase. There are a lot of factors involved with the process and costs that need to be dealt with, however, Ulrich Attorneys & Associates Inc are here to guide both Sellers and Purchasers through every step of the process.