Factors to consider when selling a property

Whether or not South Africa will experience a buyer's or seller's market for property in 2024 is challenging to predict, but several factors point towards a potential buyer's market for some time to come. The economy is expected to remain weak, which will reduce the number of prospective homebuyers due to affordability constraints, according to Brendan Michie, Director at Hammond Pole Attorneys. 

"High interest rates will lead to higher borrowing costs, indicating a market where buyers may have more bargaining power to potentially lower prices.  On the other hand, a shortage of affordable housing in certain areas could push property prices higher, potentially supporting a seller's market.

"Either way, it is important for potential sellers to monitor evolving market conditions and educate themselves as much as possible on all aspects relating to the sale of their property. One of the questions that arises most frequently for potential sellers is timing: when is it too soon to sell a property you've bought? While there is no hard-and-fast rule when it comes to giving a definitive answer, we'll briefly unpack the main factors involved in making the decision for yourself," says Michie.

Timing - how soon is too soon to sell my property?

Deciding when to sell a house you've bought depends on a few key considerations. Firstly, market conditions matter-if the property market is down, selling at a good price might be difficult. Secondly, your financial situation is a critical factor; selling at a loss may lead to a shortfall owing to your bank, especially if you've taken a large mortgage.

Your personal circumstances also play a role; selling due to a specific need might necessitate a quicker sale. Generally speaking, the longer you can hold onto your house after buying, the better for your financial health. More time lets you build more equity (the difference between how much you owe on your mortgage and the home's value) and take advantage of potential home value growth, while ensuring you can cover the costs associated with the sale of property.

Financial - what are the penalties or costs involved if I sell too soon?

For some, unforeseen circumstances like loss of income or urgent relocations may require a faster sale. You might be forced to accept a lower price than you anticipated, or you might not make as much of a profit as you'd expected.

In such a case, it's important to understand the hidden costs and penalties involved with selling your house.

Bond cancellation fees: Charged by your bank's nominated attorney to cancel your bond to allow the sale of the property. 

Compliance certificates: Required by law for a valid sale - such as electrical, solar and gas compliance certificates, the cost of which vary depending on the type of certificate and the condition of the property.

Estate agent fees: These are the fees that estate agents charge to act as an intermediary between the seller and buyer, usually calculated as a percentage of the sale price.

Other legal and tax costs: Such as legal assistance with any disputes that arise during the sale process. Furthermore, if the property is not used as your primary home, you may be liable to pay capital gains tax on the sale.

Clearance certificates:  A rates or levies clearance is a certificate provided by the relevant local authority, or complex/estate, on application by a conveyancer to transfer a property. This document certifies that there is no current outstanding debt due by the seller on the property.

Practical - what needs to be done before you sell?

To sell your house successfully, there are some basic steps you can follow. First, understand why you're selling and set a realistic price based on expert advice. Know your target audience and hire the right estate agent. Study the current property market and demand in your area. Consider factors like location, condition, and price that affect the sale. Learn about the selling process and stay informed. Make sure your legal and financial affairs are in order and seek advice if necessary. Don't forget to consider the time of year, the economy, and mortgage options available to potential buyers. Paying attention to these details will increase your chances of selling your house at a good time for a good price.

Tough one - when should you not sell and why?

Here are some specific examples of when it may be too soon to sell a house you've bought:

1. If you have only made a small down payment and you still owe a large amount on the bond.
2. If you have made significant improvements to the house but have not had time to recoup this investment.
3. If you have to sell the house at a loss, and you will not be able to cover your costs.
4. If you are selling the house for a specific reason, such as to move closer to work, and you are not sure if you will be able to find a suitable replacement property.

If you are unsure whether or not it is too soon to sell your house, it is always best to err on the side of caution and seek professional advice from a reputable estate agent who is a specialist in the area where your property is situated.

Conveyancing and Property Law attorneys at Abrahams & Gross has put together a list of some important aspects in respect of each compliance certificate.

Electrical compliance certifies that the electrical installation on the property complies with the required safety standards (governed by the occupational health and safety Act)

Often remedial work is required which may take some time (best to attend as soon as possible)
The certificate is valid for two years unless alterations are made prior to the expiration date
Parties cannot contract out of/agree to waive

Beetle certificates certifies that the accessible wood of permanent structures, on the property, does not contain any wood destroying beetles

Usually valid for 3 to 6 months
Not governed by any specific law, but has become practise upon change of ownership of property
If parties agree that no certificate is necessary and the bank requires it for the purchaser's bond, then this is for the purchaser's expenses 

Gas certificates certifies that the gas installation on the property complies with the Occupational Health and Safety Act and requires safety standards

A certificate must be obtained on installation
If any change or amendment is made, a new certificate must be obtained
Cannot contract out of or agree to waive

Plumbing certificates certifies that the water installation at the property is in line with the City of Cape Town Water By-laws

*Only applicable to transfers within the municipal jurisdiction of the City of Cape Town

A new certificate must be obtained upon every change of ownership
Parties cannot contract out of this or agree to waive
NB! Does not confirm all plumbing works in perfect condition!

What does the plumbing certificate confirm?

The water installation conforms to the national building regulations; the property's water meter is in working order; there are no defects that can cause water to run to waste; and no rainwater leaks into the sewerage system

Electric fence certifies that the electric fence installation complies with the required safety standards in terms of the Occupational Health and Safety Act

An existing certificate may be transferred by the seller to the purchaser
A seller need only provide a new certificate to the purchaser if a change was made to the installation after the current certificate was issued
If sectional title, obtain from the body corporate
Parties cannot contract out of/agree to waive

Get expert property advice

It is always recommended that sellers do their inspections at the listing stage and then they will know what they are in for in terms of repairs. In addition, although it is usually required that the seller should provide the purchaser with the certificate by no later than the date of transfer, it is best that the inspection and remedial work is at least done before occupation by the purchaser and better still even earlier, as most banks now request a copy for purposes of clearance of the bond for lodgement.