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It could be cheaper to improve your home than selling and moving

Cape Town - Building and home renovations come with their own challenges, but they’re probably worth it when you look at what it costs you to sell and move.

As your life changes, so do your accommodation needs. A new baby, a parent coming to live with you, kids leaving home, a sudden divorce, a sudden change in financial circumstances.

But just upping and leaving is not cheap, nor is it simple. This often comes as a very unpleasant surprise, especially to people who are downscaling to reduce their living expenses.

If you are selling one property, and buying another one on a bond, the various fees and costs can be quite staggering. Some of the costs involved can include the following:

Advance payments on municipal bills. Depending on your particular municipality, you can be asked to pay rates in advance for a couple of months, which might add up to a tidy sum.

Agent’s fees/VAT. Everyone expects to pay the estate agent, but remember that the commission is negotiable. On top of that comes VAT of 14%. On a property of R2m, that could cost you over R73 000. These are paid by the seller.

New bond registration costs. To register a new bond if you are buying elsewhere and not buying cash, will cost you over R33 000 if you are buying a property costing in the region of R2m. That includes the registration costs, the initiation fee and other diverse costs.

Bond cancellation costs. These usually amount to about one percent of the outstanding amount on the bond.

Property transfer costs. On a property of R2m, the actual transfer costs will be about R27 000, and the transfer duty over R60 000. These are usually paid by the buyer.

Electrical certificates. If you are selling your house, you need to have the distribution boards, the wiring, the earthing, the metal; components, the wall sockets, light switches and fixed appliances checked. These have to be fixed and given the all-clear before the house can be sold. You also need a certificate for the electric fencing if you have had that installed.

Water certificate. In Cape Town you need a Certificate of Compliance of Water Installation before transfer can take place. This is not a plumbing certificate, but looks at the correct installation of the water meter, the water cylinder, the discharge of storm water and checks the potable water supply.

Gas compliance certificate. This you obviously only need if your home is fitted with gas appliances. It certifies that the system is safe, properly installed, has shut-off valves and that there are no leaks.

Beetle certificate. This is to check that your home is free of woodborer beetles – this is not a legal requirement, but is often written into sales contracts.  

Capital gains tax. For a primary residence, the first R2m of any capital gain will be exempt from tax, but go over that and you could be facing a hefty bill. It’s complicated, and depends on the financial situation of the individual concerned, so speak to a tax advisor.

Moving costs. Again this depends on how much stuff you have, and how far you are moving, but in any event, it is likely to cost you quite a few thousand.

Connection fees. Things such as landlines, water and electricity accounts all have to be moved to the new address, and usually don’t come cheap.

Even if one disregards the costs of possible capital gains tax, if you are selling on one side, and buying elsewhere with a bond, and there are a few issues with compliance certificates, once you have calculated all the costs on both sides, you could easily be looking at over R200 000 in costs – and you will have nothing to show for it.

For that amount of money, you could do a lot to add value to your existing home, and to solve the problem that made you consider moving in the first place. It won’t stretch to building a second storey, but here are a couple of ideas from which to choose that could change how you feel about your house:

  • you could build or remodel a bathroom or two
  • do extensive painting work inside and outside
  • remodel the kitchen
  • add on a garage and carport
  • remodel the loft space in the roof (this could become an extra bedroom, storage space, or an office).
  • Build a granny flat/extra bedroom or a teen pad or a home office or a play room for the kids

If you are looking to downscale from a large home, it is always an idea, instead of selling and moving, to rather take a look whether the house cannot be subdivided into two separate entrance sections – and then you could earn extra income from renting out the one half.

A clever architect can come up with inventive and practical ideas on how this can be done. Just remember that some municipalities have strict regulations in this regard as to things such as the number of kitchens allowed on a single stand. With the increasing trend of three generations living under one roof, homes with dual living possibilities are increasingly popular among buyers.

And in that way, you will have an asset that has increased in value – rather than having spent R200 000 to move and having absolutely nothing to show for it.

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