What the Seller Should Know
You can sell your property through an Estate Agency or you can sell it privately.
Now, you may be wondering which way is right for you. The truth is that each way has its pros and cons. We look at the pros and cons so you can decide what would best suit your circumstances.
Selling through an Estate Agency
Since most property in South Africa is sold through Estate Agencies, we take a look at the professional services they offer:
- They will be available to show your property to prospective buyers removing the necessity for you to be present.
- They will ensure that the potential buyer is not a security threat before he she arrives to view your home.
- They will pre-qualify the prospective buyer, thus stopping the time wasters from bothering you.
- They will provide a Comparative Market Analysis and will assist in establishing the correct selling price so that the property does not go ‘stale’ by being on the market for too long.
- They will be able to answer questions relating to legal or zoning issues and deal with issues relating to foreign investment queries.
- They will assist in the negotiation process.
In addition, reputable Estate Agencies will increase your chances of locating a buyer for the following reasons:
- They will have an extensive database of potential buyers
- The larger Estate Agencies have an extensive national and international network
- They will advertise your property on numerous websites and in the print media at no cost to you
- They will assist buyers in raising finance
- Your property will be displayed in their shop window
- They will provide signage at no cost to you
It takes a great deal of time and money to provide these services and agents only get paid commission if there is a successful sale.
Selling Privately
Although most property in South Africa is sold through Estate Agents, the trend has been for more sellers to use the internet. The decision to go private would depend on how quickly you want to sell your house and whether you are suited to the task.
Here is a checklist to see if you are well-positioned to sell your property:
- Have you got the available time to show your property to potential buyers?
- Have you got security backup to avoid vulnerability from threatening strangers that might view your home?
- Are you able to deal with criticism of your home?
- Have you got the necessary inclination and ability to negotiate the sale to a successful conclusion?
If the answer to all these questions is YES, then there is no reason that you should not sell your own property.
ShowMe has developed an inexpensive and very effective platform for sellers like you, giving you the option to save on commission while also allowing you to take advantage of an agent’s network. Read about ShowMe Private Sales
Capital Gains and Estate Duty
On the sale of a property, Capital Gains Tax (CGT) is payable based on the profit made. If your property was owned by you prior to 1 October 2001, when CGT was introduced, the profit will be calculated based on the valuation of the property as at that date.
You were required to obtain that valuation by 30 September 2004. If you did not have your property valued as at 1 October 2001 by 30 September 2004, you will be taxed on the basis that the value of the property as at 1 October 2001 was 20% of the proceeds of the sale.
Valuations of over R10m as at 1 October 2001 were required to have been submitted to the South African Revenue Service together with the first Tax Return after 30 September 2004.
The first R2m of profit on the sale of your primary residence is exempt from CGT. The primary residence exclusion is only available to individuals and special trusts. In the case of multiple owners, the exclusion will be applied in proportion to the ownership.
In addition an annual exclusion of R30 000 is granted to individuals on any capital gain.
The maximum tax rate payable for an individual is 13.3%, for a company, 18.6%, and for a Trust, 26.7%.
Example – Primary residence exclusion
Mr X sells his primary residence for R9 million. The base cost of the residence is R6 million. The capital gain is calculated as follows:
Proceeds R9 000 000 Base cost R6 000 000
Capital gain R3 000 000
Primary residence exclusion R2 000 000 Annual exclusion R30 000
Aggregate capital gain R970 000
On death, CGT is immediately triggered and after deducting an abatement of R3.5m from net assets and the deemed CGT payable, estate duty at the rate of 20% is payable.
However, if the deceased bequeathed the assets to his or her spouse, no CGT or Estate Duty is payable. Instead of the annual exclusion of R30 000 for CGT, the exclusion granted to individuals is R300 000 during the year of death.
For a more detailed explanation of CGT and the withholding tax for non-resident sellers, click here