PREPARING TO SELL Buying or selling a home and moving to another property is one of the major life stressors, even more so if you don't have all the requisite knowledge and do's and don'ts of the property game at your fingertips. Now that you've made the decision that it's time for a change, where do you start regarding selling your property and managing all the necessary property transactions in the process? Follow our handy tips... ? First steps ? Why you should use Leapfrog ? You’ve choosen a Leapfrog agent. Good choice! ? A firm offer is put on the table ? What the…?
our experiences and best of breed practices into a single powerful marketing and sales plan that is innovative, transparent, upfront and honest, ensuring that you benefit in the end. Essentially, your Leapfrog agent plays a vital role between you, the seller and prospective buyers, managing the legal, financial and marketing logistics involved in the process. Your Leapfrog agent has a wealth of knowledge when it comes to sales techniques, various financing options, valuation methods and all the relevant property laws and regulations. Your Leapfrog agent will also have a solid understanding of your local property market and will always act in the best interests of the client with due consideration to the interests of the other parties involved. In fact, you'll find dealing with a Leapfrog agent is an exercise governed by the highest ethics, honesty and code of professional conduct. We're sure you'll find that selling your home through Leapfrog truly is a pleasure! You've chosen a Leapfrog agent. Good choice! Once you are happy with your marketing plan and understand all your rights and obligations as explained by your Leapfrog agent, you can go ahead and give instructions to our agent to begin marketing your property to prospective buyers by signing the mandate. Many people out there don't fully understand the necessity for a signed mandate – it is an essential document that protects both the interests of you, our client, and the Leapfrog agency. Without a signed mandate, no professional agent will run the risk of marketing your property at considerable expense if there is a chance you will suddenly award the sale of your property to a competing agency. Furthermore, a mandate protects you by ensuringyou get the level of service you require on the sale of your property. As soon as the mandate has been signed, the property will be presented to all Leapfrog agents for their review so that they can provide input into the marketing of your property. For more information about the different types of mandates and what they entail, read the additional info in the Q&A provided.
First steps For starters, you need to do your research. Choose an agent who has the trust of the community, and is visible and active in your area. Typically, you would invite an agent or number of agents into your home to do an evaluation on your property. At this point the agent will review the features of your property, take photographs, list any additional information about the property that you volunteer that will help in the agent determining a fair market value for the property. The agent should then return as soon as possible with a comprehensive valuation and marketing plan for your property. The agent will discuss with you the reasons for arriving at the estimation and then run through the exact marketing plan that they will follow to get your property sold. At point make sure you raise any questions you have regarding the sale of your property and get clarity before proceeding. This is essentially part of your research when it comes to choosing an agent and agency to manage all the logistics entailed in selling your home. . Why you should use Leapfrog... You will benefit by selling your home or property with Leapfrog as we've set our sights on shaking up the real estate industry - from the way that we reward and incentivise our agents and business partners to the way we approach the sales and marketing of our clients' properties. We blend
Your Leapfrog agent will prepare the advertising materials, for all available marketing channels and start the marketing process. It is absolutely critical that you play your part in this process by making sure your property is well presented by keeping it neat and tidy. First impressions are important so make sure your house is appealing by getting rid of the clutter, doing a good spring clean beforehand and making your property appear as spacious and well-maintained as possible. This way, you are more likely to get a buyer interested in a home that effectively sells itself. A firm offer is put on the table! The moment of truth arrives. This is where you hope your agent has a number of offers for your property so you have the luxury of choice. You are not required to accept an offer that does not meet your expectations. It is between you and your agent to determine whether the buyer is open to further negotiation. Once you are satisfied, you are required to accept the offer in writing which creates a contract of sale between you and the buyer. Assuming all goes well with the buyer's application for finance, your house is then officially sold. What a pleasure! What the…? For the definition of some typical real estate terms and phrases that may come up during your selling process, please refer to the terms and conditions page and also the questions and answers pages to answer some of the questions that you may have.
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ACCURATE PRICING Why is Accurate Pricing Important? Anyone who understands simple economics will know that price is a variable of demand and supply. Where demand exceeds supply it results in the price being driven up. The reverse is true where oversupply and lowered demand will drive prices down until the price meets the market expectation. This is no different in the property market. During the boom times, demand for property exploded, there was not enough supply of good quality homes which resulted in sellers getting significantly more for their property. And then the worst economic recession in 30 years struck. So what does this mean for the property industry and those looking to sell in current market conditions?
At the same time, higher costs of living, increases in costs such as electricity and growing household running costs in particular have resulted in some homeowners no longer being able to afford their properties – resulting in an increase in available properties on the market. This has created an environment where there is an abundance of properties for sale but a much smaller pool of “qualified buyers”. In many instances, homeowners looking to make an unreasonable profit who fight against the better recommendations of their agent and try to inflate the asking price for their property will struggle to sell their properties in an increasingly competitive environment where qualified buyers really are spoilt for choice. Getting the pricing right on your property is the result of years of experience on the part of your agent and a solid understanding of the market conditions generally as well as specific to the area.
With global economic pressures, the National Credit Act and the stringent lending criteria of financial institutions, it is significantly harder today for an individual to acquire property finance – the direct result of this is that while there has been evidence of many willing buyers, the number of able buyers has decreased significantly, directly impacting on demand.
Advice when determining the selling price: ? Serious buyers in the current market conditions are looking for bargain properties and now have the luxury of choice. Buyers very soon become knowledgeable about what types of properties are available in their price range and an unreasonable asking price only serves to discourage any potential buyers from even considering your property. ? A property that is correctly priced and actively marketed by your agent will spend less time on the market and will attract the right buyer. They are also far less likely to talk your price down if you have priced it correctly from the start. ? Buyers purchase by comparison and if a property is priced way above similar competing properties, buyers will either discard the idea of making an offer at all or make an offer far below what the property is worth. ? An over-priced property will inevitably stay on the market for too long. It is advertised over and over and soon becomes over-exposed, and still not sold. The logical next step is either for the seller to reduce the asking price over a period of time, or hold out until the market changes or inflation catches up and the inherent value of the property increases - which is not going to happen quickly by any stretch of the imagination. ? As time passes by, a buyer will assume that the Seller is now desperate and again the Seller is faced with low offers. All that time, effort, expense, emotion and in some cases inconvenience, only to reduce the price and start the process all over again!
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THE REALITIES OF SELLING IN TODAY'S MARKET 2008 saw a dramatic change in the property market. The introduction of the National Credit Act (NCA) and the energy crisis played a huge role in this change, along with a total collapse of the world financial markets that is globally seeing markets still struggling to recover from. The result has been a massive fallout in the property market and strict lending criteria imposed by banks, with loans being difficult if not impossible to access without at least 10% deposits from the applicant. So what does this all mean for sellers in today's market conditions? Some history to put things into perspective Growth in the middle segment slowed down to 11% in Dec 2007, with the average house price at R964 000. This was the lowest price growth in eight years. Growth in house prices:? 32% in 2004 ? 22,6% in 2005 ? 15,2% in 2006 ? 14.5% in 2007 ? 3.97% in 2008 ? -0.32% in 2009 ? 6.75% in 2010 **
same time. South Africa's residential property outlook is looking decidedly more positive with a number of factors culminating to inject renewed confidence in the market, and the effects are being felt by estate agents who are seeing a steadily growing number of qualified buyers entering the market, significantly up when comparing the first six months of 2010 with the last six months of 2009. Sales are increasing steadily and the number of buyers is definitely starting to outstrip supply in many areas throughout Leapfrog's 50-plus franchise catchment areas. Slow price growth ahead in 2011 The average house price in South Africa according to ABSA figures is now R1,016,133. This is a negligible 0.04% growth v December 2010 and down v Jan 2010, which was R1,027,480.This gives you an idea of how the January price fits in with the bigger long term picture. ABSA has predicted a 3% nominal house price rise for the year, and it will be interesting to see whether this forecast materialises. We expect to see negative YOY price growths this year until June/July 2011, given the price surge we saw in the first half of last year, before coming back into YOY growth again in the second half. If ABSA predicted 3% growth for the year is to be realised, the second half of the year will need to see high single digit growth YOY to counteract the slow start to the year. The forecast prices for the remainder of the year to get to an annual 3% growth v last year. Unless we see better figures in Feb/March/April (eg a steady 0.8%-1.0% month on month growth) it could prove a stretch to get to a 3% nominal growth this year. Professional agents will be able to work out realistically what a buyer will qualify for in terms of a loan, and save a lot of time and effort searching for properties within a price range that a buyer would simply not qualify for. 100% bonds still remain elusive and for now buyers will still need to put in at least 10% equity in the form of a deposit. If you need to sell your current property before you can buy another one, it is highly recommended that you put your property on the market first and then start your house hunting when a firm buyer is in place. Latest Stats on why home owners are selling:-
So what is happening now? The fact remains that while there has been a lot of doom and gloom around the fall in the property market, globally South Africa is the best performing housing market in the world over the long term according to the latest figures from British news magazine, The Economist. The magazine's global house price index shows that SA house prices rose by a cumulative 418% over the past 12 years, far outstripping any of the other 20 housing markets tracked by the index. The next best performers were Australia (181%), Britain (175%) and Spain (167%) over the
? 21% are downscaling due to financial pressure ? 17% are downscaling in line with life stages ? 8% changes in family structures – death, divorce, marriage ? 9% are emigrating ? 9% were relocating in South Africa ? 18% were upgrading ? 12% were moving for safety and security ? 6% were moving closer to work or amenities ? Average life cycle of a property is 3.45 years
** Economic data source from http://housepricesouthafrica.com/
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THE TRANSFER AND REGISTRATION PROCESS The process for a property transfer in South Africa is fairly long and often confusing for the uninitiated. There are a number of things that happen behind the scenes which are managed by a number of different role players. As a seller, it is important that you understand the process and who is involved. The following is an outline of these stages to help keep you in the loop. ? Offer to purchase ? Bond application ? Instruction to the transferring attorney ? Cancellation figures ? Clearance certificate ? Transfer duty receipt ? Lodgement ? Celebration Offer to purchase The registration of transfer is triggered by the acceptance of an Offer to Purchase by the seller. The Offer to Purchase should contain all the essential details regarding the purchaser, the seller, the property description, the payment of the purchase price and the particulars of the existing bondholder over the property.
of these cancellation figures, he existing bondholder will supply the outstanding amount required for the cancellation of the bond and simultaneously instruct the attorneys to attend to the cancellation thereof. At the same time the existing bondholder will also forward the Title Deed which was kept by them as additional security to the cancellation attorney. Clearance certificate At the same time, the transfer attorney will apply for a Rates Clearance Certificate from the local municipal authority or Body Corporate. Once any outstanding balances are calculated, , the transferring attorney will be advised and must then make payment thereof in order to obtain the necessary Rates Clearance Certificate. No transfer may be lodged with the Deed Office unless accompanied by a Rates Clearance Certificate. Upon approval by the financial institution of the purchasers' bond finance, an instruction will be forwarded to the attorney of their choice (usually the transferring attorneys) to attend to the registration of the necessary bond. Electrical certificate There is a perception in the real estate industry that the furnishing of an Electrical Compliance Certificate is not essential when transferring property and that therefore the clause in the sale agreement requiring the Seller to supply the Purchaser with an electrical compliance certificate, is not necessary. This is only half true. The Occupational Health and Safety Act (‘the OHSA’) aims to provide for the health and safety of persons at work and as such is not an Act that one would expect to find in a conveyancing and property law context. However, the Act determines that responsibility for and maintenance of any electrical installation on a property lies with the owner or lessor thereof; and it also lays down requirements that must be complied with when ownership of any electrical installations (whether installed on residential, commercial or any other property) is passed. Therefore it is relevant to all home owners, lessors and role players in the property market. The aim of the regulations promulgated in terms of this Act is not to ensure that each and every aspect of the electrical installation is in 100% working order, but that the installation is safe. A plug outlet may well not be in working order but nevertheless safe and an electrical clearance certificate can be issued in respect thereof.
Bond application Immediately after the acceptance of the Offer to Purchase, an application for the finance of the purchase price must be made by the Purchaser or his representative to a financial institution, unless the purchaser already has cash funds available and does not require a loan. Instruction to the transferring attorney In order to activate the registration of the transfer process, a copy of the signed Offer to Purchase must be handed over to the transferring attorney upon acceptance thereof by the Seller. Cancellation figures The transfering attorney will then request cancellation figures from the Seller's existing bondholder, if the property is still bonded. Upon receipt
Plumbing and gas compliance certificate (Western Cape only) The City of Cape Town has passed a new water by-law which determines that all sellers of properties within its jurisdiction must furnish a Plumbing Certificate to the municipality before transfer. The certificate serves to confirm that: ? The water installation conforms to the national building regulations ? The property's water meter is registering; ? There are no defects that can cause water to run to waste; and ? no rainwater leaks into the sewerage system. Transfer Duty Receipt The transferring attorney will also submit an application for a Transfer Duty Receipt from the Receiver of Revenue. No transfer may be lodged with the Deeds Office unless accompanied by a Transfer Duty receipt. The attorney who is registering the bond immediately requests from the transferring attorney the draft Deed of Transfer. This is necessary to
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THE TRANSFER AND REGISTRATION PROCESS continued... obtain details regarding the title conditions, purchase price, dates of sales and so on. (This is only done if the financial institution instructs an attorney other than the transferring attorney.) Once instructed to register a bond by the financial institution, the transferring attorney may now proceed to draw all documents regarding the transfer and arrange for the signature thereof by both the seller and the purchaser. Similarly, the bond attorney upon receipt of the Draft Deed proceeds to draw all documents pertaining to the registration of the bond and has the same signed by the Purchaser. The bond attorney then issues the necessary guarantees in favour of the Seller or the existing bondholder of the Seller to procure the cancellation of the existing bond. By this time the transferring attorney would already have received both the Clearance certificate as well as the Transfer Duty receipt and will now be in a position to lodge the documents for registration in the Deeds Office. Lodgement At this stage of a property transfer, the transferring attorney then contacts the bond attorney as well as the cancellation attorney in order to effect the simultaneous lodgement of the various deeds in the Deeds Office. The transferring attorney attends to the registration of transfer of the property from the name of the Seller to the Purchaser whilst the cancellation attorney attends to the cancellation of the existing bond of the Seller and the bond attorney on the other hand sees to the registration of the new bond to be registered over the property as security for the Purchasers' loan. The set of three registrations is then submitted simultaneously in the Deeds Office and after being examined by the examiners in the Deeds Office, placed on preparation where the attorneys - both transfer and bond cancellation attorneys - attend to any notes made by the examiners in respect of the documents. This takes 10-14 working days. After the documents are cleared by the examiners on prep – with all the notes attended to by the various attorneys - the documents are forwarded for registration the following day. Upon registration the attorneys involved attend to the following: ? Present the guarantees for payment of the purchase price, which is then allocated towards the payment of the existing bond in the balance in
favour of the Sellers, being the proceeds of the sale. ? Adjustment and apportionment of rates payments are made and the various parties debited or credited as the case may be. The local
authority is advised of the registration. ? Agent's commission is paid to the estate agent. ? The transfer attorney then forwards the Title Deed to the Bond attorney/Bond holder who retains the same together with the registered bond
document as secured. Celebration And that, in a rather hefty nutshell is the transfer and registration process. . If at any time during this process you feel left in the dark, speak to us. Our agents will provide you with all the information you need to know as to exactly what the status of your sale transaction is. It's all part of
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STEPS IN A REGISTRATION Marketing Process
Seller + Agent + Buyer
Offer accepted and Agreement of Sale completed Familiarise yourself with the terms of the Deed of Sale
Agent's admin department sends copy of Agreement with covering letter to Seller and Buyer and a copy to the transferring Attorney with instructions to attend to the transfer Attorneys request Seller and Buyer to furnish copies of ID documents and other documentation relevant to the transaction and required to prepare the transfer documents
Buyer pays deposit in terms of the agreement and applies for a Bond. Arranges guarantees or cash for balance of purchase price. Most banks will first approve the client and then carry out the valuation of the property. The Buyer signs acceptance of the bond, then the bank instructs its attorneys to register the bond.
Seller obtains an electrical clearance certificate
Seller to continue with bond payments until registration is completed
Attorneys will have Buyer sign bond documents and pay the costs involved. They will also contact transferring attorneys and liaise with them regarding guarantees to secure the purchase price. Transferring attorneys call for the title deed, cancellation figures on the existing bond, and rates clearance figure from the municipality. Once the bond is granted, transfer documents are drawn up by transferring attorneys and must be signed by Seller and Buyer. Buyer will pay transfer costs, conveyancing fees and balance of purchase price, if any. When costs have been paid, the transferring attorneys pay the relevant transfer duty to the Receiver of Revenue and obtain a receipt. They pay the rates amount to the Municipality and await a all clearance certificates. These two receipts form part of the transfer documents. Transfer of Property from Seller to Buyer, ready to lodge
Cancellation of Seller's existing bond, ready to lodge
Buyer's new bond, ready to lodge
All involved attorneys must lodge their documents at the Deeds Office at the same time, for all three transactions to be registered simultaneously. After lodgement the documents are processed and examined in the Deeds Office for a minimum period of 10 working days. AFTER REGISTRATION Attorneys notify the Seller, the Buyer and the Agent ? Attorneys cash the relevant guarantees ? Seller is paid ? Estate agent's commission is paid THE BUYERS ARE NOW THE NEW OWNERS!
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QUESTIONS & ANSWERS ? How does an estate agent operate? ? How do I choose an estate agent? ? Why do I need an estate agent? ? How will an agent market my property? ? Do I give the agent a sole mandate? ? Are there any other options available to me? ? What is a sole mandate and its benefits? ? What market price should I ask for my house? ? What is the most important aspect when selling or buying a home? ? How much should I budget for my new home? ? What is in a Sales Contract? ? What is "Occupational Rental"? ? What should I do inside my home when selling?
What role does an estate agent play? The estate agent is the link between a seller and a buyer and will negotiate the agreement of sale that is acceptable to both parties. If the seller is happy with the estate agent's marketing plan and commission proposal, the seller will then give the agent instructions via a signed mandate to sell the property to a suitable buyer. The offer to purchase is drafted up by the estate agent and must be signed by the
You should consider and ask the following questions: What is the reputation of the agency, length of service and level of activity in the area? A good agent will know the market values in your area and also have a ready database of possible buyers. Are the owners or principals of the company actively involved in the business and are they easily accessible to clients? What marketing does the company do, to promote itself in the area? Besides advertising in the press, do they have a referral network and system in place? How long have they worked for the agency and will they have back-up? Do you trust the agent – what is your gut feel? You both will need to get along during the duration of the marketing period? Is the office visible, professional and is it in close proximity to your property. What properties have the agency and agent sold recently? Choose a company and agent that appear to have the trust of the community. Such trust is usually achieved through expert and honest dealing. 'For Sale' and 'Sold' boards are usually your best indicators of a dominant agency. Why do I need an estate agent? An estate agent's job is more than just showing you homes you might be interested in. Just as important as finding your new home, is coming to an agreement with the seller, and arranging a home loan that suits your financial situation. It is the estate agent's job to ensure that these things are taken care of quickly, and to guide you through the process. There are many pitfalls to buying and selling real estate without engaging a professional estate agent. For example, a buyer needs to know what hidden costs there are to purchasing fixed property. You may ask yourself "How will I know I am viewing the best properties in the area? Who will explain the Purchase Agreement, and how will I know I can trust that person? How can I spot a latent or patent defect in a property? Who will explain the implications of putting my signature to any document? Do I have the expertise to co-ordinate a smooth transaction from purchase to registration of the property?”
buyer, the seller and the agent. The agent will charge a fee or commission for their services which is payable by the seller. Remember that the fee or commission payable by the seller must be negotiated up front prior to commencement of the transaction and is usually stipulated in the signed mandate. In most cases the agent's commission or fee will attract VAT. How do I choose an estate agent? When appointing an agency and agent to represent you, you are entrusting them with the marketing and selling of your biggest asset. Interview your agent/s as if you were the employer and they the employee. DO NOT base your decision on the highest valuation given by an agent – this just leads to unrealistic pricing and creates a false expectation with you.
As a seller, you may ask yourself "When will I allow a stranger to enter my home? How will I qualify a buyer? How much deposit should I require, and when will this deposit be payable? How long does it take to secure a loan? What special conditions should be included in the contract? Do I have the negotiating skills to ensure the best possible price?” How will an agent market my property? When a seller appoints an agent and the company they represent to market and sell their home exclusively, (see below) it is the responsibility of the agent to give the seller a written Marketing Plan in order to explain how they will market the property. In most cases, if the property is being marketed by all the agents in the area, the Seller will usually not be given a marketing plan and will not be promised newspaper and Internet advertising. Our agent will discuss the Leapfrog Marketing Plan with you at the next meeting, once they have concluded the evaluation.
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Do I give the agent a sole mandate? There are four choices options available to you (the first 3 must be in writing) : SOLE MANDATE: One agency is awarded the property to market and sell on behalf of the Seller. JOINT MANDATE: Two agencies are awarded the property to market and sell on behalf of the Seller. Usually, the Agency that sells the property is remunerated. MINI-LISTING: One agency is awarded the property to market and sell on behalf of the Seller (Sole Mandate). That Agency then, either immediately or after a period of time invites other agencies to work alongside them in order to sell the property. Should the sole agent sell the property, they are remunerated. Should one of the other agencies sell the property, the remuneration is usually shared equally. OPEN MANDATE : The seller allows as many agencies as they wish to market and sell the property on their behalf. What is a sole mandate, and what are the benefits? Under a sole mandate a seller instructs a particular Estate Agency to find a buyer and no agent from any other company may market the property during the sole mandate period.
SOLE MANDATE
OPEN MANDATE
A PERSONALISED MARKETING AND ADVERTISING PLAN will be developed to suit your needs. Activity will be monitored and controlled.
You run the risk that none of the agents will put time and effort into actively marketing or advertising your property, because they all expect that someone else is doing it.
A sole mandate is worthy of a generous marketing budget.
Agencies usually advertise their sole mandates first.
A SINGLE AGENT interacts with you to understand your requirements.
Open mandate properties tend to be MERELY ADDED TO A LIST.
A sole agent allows BUYERS TO COMPETE on the property, thereby maximising the realized selling price.
On open mandates. AGENTS COMPETE, thereby compromising price and often puts undue pressure on a seller to accept the first offer.
Continuous feedback from your agent allows for careful PRICE MANAGEMENT, again maximising the realised selling price.
Mismanagement of price can result in a LOWER PRICE being realised.
A sole agent is ACCOUNTABLE to you for results
Agents are LESS ACCOUNTABLE on open mandates.
Real estate MANAGERS monitor and track the service provided by their agents on the sole mandates.
Managers DON’T monitor agents’ performance on open mandates.
Your sole agent will NEGOTIATE WITH POTENTIAL BUYERS to get the highest possible price. Ensure consistency of price.
With an open mandate, buyers will seek out the agent who will offer them the property at the lowest price. No consistency of price.
Less likelihood of COMMISSION DISPUTES
With more than one agency handling your property, COMMISSION DISPUTES often arise.
You have PEACE OF MIND in knowing that only one responsible party has access to your property.
Multiple agents frequently mean multiple keys, and the possibility of COMPROMISED SECURITY.
What market price should I ask for my house? The difference between 'Listing' your home and 'Selling' it is usually PRICE! The value of a home is determined not by what the owner has invested in the property, but by what a willing and able purchaser will get out of it. Principles to keep in mind when considering price: ? Cost: The amount actually paid for a property plus any capital improvements made since the purchase. ? Price: The stated amount an owner is willing to accept for a property. ? Value: The amount a Buyer is willing to pay, given a certain set of circumstances. ? Market Value - The amount that will bring a sale between a willing Buyer and a willing Seller. It is based on the history of similar properties recently sold in the area. ? Valuation:The correct method for an estate agent to price a property is to use a Comparative Market Analysis (CMA). This determines the value of a property in comparison to other comparable properties which have been recently sold and are currently for sale. A 'CMA' should be presented to you in writing. It is the duty of the Estate Agent to sit down with the Seller and study the “CMA” comparatives carefully. Together they should decide on the outcome desired and with this in mind, set the correct asking price for the property in terms of the current market conditions. At the end of the day, the ultimate decision is that of the seller; however, the agent must present the seller with the facts.
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What is the most important aspect when selling or buying a home? Common sense. Don't be in a rush. Do your research, always ask for advice and before you sign anything make sure you fully understand all the terms of sale and all the relevant details and arrangements. How much should I budget for my new home? When you are budgeting for your new home, there are two types of costs involved: ? Once off costs: ? Deposit on your new home ? Conveyancing (attorney's) fees, bond registration fees ? Municipal deposits for water and electricity, telephone ? Cost of moving, new curtains and carpets and so on. Regular monthly costs: ? Repayment of home loan ? Insurance on your home ? Municipal rates and taxes or monthly levy if you buy on Sectional Title. What is in a Sales Contract? The signed 'Offer to Purchase', or more commonly known as the sales agreement, is the document you sign which presents your price and terms to the seller. It must be completed in full, because when the seller signs it, the document becomes the binding 'Sales Contract' which contains the conditions of the sale. If you forget something in the offer, you can't usually add it to your Sales Contract later. Terms and conditions of the contract vary depending on the situation. You and the seller may negotiate and agree on: ? the sale price of the home ? the amount of your deposit ? the amount of the home loan you will endeavour to obtain ? what items go with the home, such as curtains, appliances, swimming pool equipment etc. ? the date of occupation ? any conditions agreed upon by you and the seller which must be met before settlement can take place, such as:
improvements (painting, roofing, etc); ? the ability to obtain a specified home loan within a specified time, or your ability to sell an existing home prior to purchasing the new one.
What is "Occupational Rental"? If one of the parties is in occupation of the property whilst it is registered in the other's name, it is usual for the agreement of sale to make provision for the payment of occupational rental during that period. The exact amount and date of occupation should be clearly stipulated in the contract. What should I do inside my home when selling? Kitchen and bathrooms should be spotlessly clean! Even a minor facelift - fresh paint, new floor tiles and new cupboard doors, for example - will pay off in a faster sale at a better price. It is usually better to keep to light neutral colours when renovating. Make sure countertops are clean and uncluttered and cupboards tidy. In all bedrooms, family rooms and sun rooms, be sure to pack away unnecessary items and keep the floors clear of toys! Create space, where possible, and open the curtains to let the sunshine in. If you have a pool, be sure to keep it sparkling clean. Paint and repair garden furniture and brighten it up with pretty cushions. First impressions count! Keep your lawn neatly trimmed and mowed.
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TERMS AND DEFINITIONS There are a number of Real Estate words that come up in the process of buying and selling a house that may sound foreign to you, so we've tried to give you a simple definition of what these words really mean. Simply put, we've dropped the jargon and given you the stuff you need to know: Addendum A supplementary agreement to an original sale contract covering points agreed to afterwards. It is a separate agreement in its own right and, if it contradicts the original in any way, it is presumed to overrule it. Agreement of sale The basic contract of sale and purchase between a buyer and a seller. No matter what you two have agreed to verbally no contract exists until an agreement of sale is completed and signed by both you and the seller. Breach clause A condition in a contract obliging a seller to give a defaulting buyer written notice to remedy his breach of contract within a specific period (usually seven days) before he can cancel the sale. Conditions of title These are the restrictive conditions limiting an owner's rights which are recorded on his title deed to a property. They cover matters such as mineral right reservations, servitudes and building limitations.
Fixtures and fittings These are attachments to a home which are deemed to permanently belong it. They include light fittings, curtail rails, TV aerials and eye-level ovens and may not be removed by the seller when he vacates the property. Guarantees Written undertakings issued by registered banks guaranteeing payment of part or all of the purchase price on registration of transfer. They are furnished to the transferring attorney. Jurisdiction Most sale agreements contain a clause providing that, should either party take the other to court for any alleged default, he may do so in a Magistrates Court even though the amount in dispute may exceed its normal jurisdiction. Null and void A legal expression emphasizing a final cancellation or lapse of a sale agreement. It puts both parties in the position they were in before the agreement was signed and leaves each without obligation to the other. Prior occupation A buyer's right to take personal occupation of a property before transfer takes place. A rental, agreed to in advance between the parties, will be payable by the buyer until registration of transfer. Offer to purchase A document setting out the proposed purchase price and conditions on which a buyer is prepared to purchase a property. It will be submitted to the seller and, once he signs it, it becomes a valid sale agreement. Property description This is the definition of the property sold in a sale agreement. It can simply be its street address but usually records its erf number and township as described in the owner's title deed.
Cooling-off right A statutory right, recorded in Section 29A of the Alienation of Land Act, giving a buyer of a residential property costing R250 000 or less the right to withdraw from the sale within five days of making a written offer. Electrical compliance certificate A certificate issued by a qualified electrician confirming that the installation on a property from its supply point is safe. Every buyer has to be in possession of one once he takes transfer of ownership. Entomologist's certificate A similar certificate required by law in some coastal provinces to be obtained before transfer of a property confirming that its structure is free of woodborer or termite infestation. Escape clause A condition in sale contract giving the seller the right to cancel it if he obtains a better offer from another purchaser. It is usually inserted when the first buyer is given time to sell his own property first.
Possession A stronger right than occupation which usually only passes on registration. It entitles the buyer to receive all rentals paid by existing tenants while obliging him to pay all assessment rates. Subject to sale An expression used by estate agents to describe a sale contract which will only become unconditional between the parties if and when the buyer sells his own property. A time period of sixty days is usually allowed. Suspensive condition A provision in a contract suspending its operation until a specific condition is fulfilled. A clause stating that the sale will only be confirmed if a mortgage loan is granted is a typical suspensive condition. Voetstoots A Dutch expression meaning that a property is bought "as is" with all its patent and latent defects. A Seller can still be held liable for latent defects known to him which he fails to disclose to the buyer. There are a number of Real Estate words that come up in the process of buying and selling a house that may sound foreign to you, so we've tried to give you a simple definition of what these words really mean. Simply put, it's the stuff you need to know.
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CAPITAL GAINS TAX (CGT) EXPLAINED They say that there are only two certainties in life – death and taxes. As a seller of a fixed asset that has appreciated in value, there is almost a certainty that you will be liable to for Capital Gains Tax(CGT). To understand CGT and what the implications are for you, read on... ? What is Capital Gains Tax ? Will I have to pay Capital Gains Tax? ? Annual exclusion ? Primary residence exclusion ? Determining the base cost ? Assets acquired before 1 October 2001 ? Market value ? Time apportionment method ? The 20% rule What is Capital Gains Tax? CGT was introduced into South Africa on 1 October 2001, bringing the country in line with international practice. CGT is a tax levied on the profit you make from the sale of assets. You only pay tax on your asset when you actually sell or otherwise dispose of them. All taxpayers including individuals, trusts, companies and closed corporations are taxed on the profit made from selling assets or property of a capital nature such as equipment with which goods and services are produced like tools, machinery, buildings and so on. CGT helps to widen the tax net which should help to reduce personal income tax over time.
During the year of your death, instead of the annual exclusion, the exclusion granted to individuals is R120 000, meaning that your estate can dispose of your assets without incurring tax, unless the gain or loss is more than R120 000. Primary residence exclusion As a natural person if you sell your primary residence which is occupied by you for an amount of R2million or less, the sale is exempt from CGT, and if you sell your primary residence for a profit of R1.5million or less, then the sale is exempt from CGT. Capital Gain in excess of R1,500,000 profit will therefore, be subject to CGT. A primary residence and the land upon which it is actually situated, and any land adjacent to it that is used mainly for domestic purposes may also be subject to certain exclusions. The total of all the land must not exceed 2 hectares in order to fall out of the CGT net. If the size of the property exceeds 2 hectares, a reasonable apportionment would have to be made. If the property is not mainly used for domestic purposes, that portion will not qualify for the exclusion. Determining the base cost Capital gains or losses are the difference between the base cost of the asset and the sum received on its sale or disposal. The base cost is calculated by adding up the following expenses: purchase costs; costs associated with the purchase and disposal of the asset (for example legal fees, agent's commission, stamp duty, advertising costs, broker's fees and transfer duty); vat; improvement costs and any legal costs incurred (for example, the legal costs incurred in defending a right to an asset owned by the taxpayer.) Assets acquired before 1 October 2001 Before the base cost can be determined, the value (value of the asset as at 1 October 2001) has to be determined. Once this value has been determined, any allowable expense incurred after 1 October 2001 must be added to determine the base cost.
Will I have to pay Capital Gains Tax? The implementation date for Capital Gains Tax (CGT) was 1 October 2001 (the effective date) and only Capital Gains arising after the effective date will be subject to CGT. All South African residents and nonSouth African residents who make a profit from the sale of a fixed property of a capital nature located in SA will need to pay CGT as well as on profits made from the sale of all assets including properties registered in the names of trusts, companies and closed corporations. Annual exclusion An annual exclusion of R17 500 capital gain or capital loss is granted to individuals and special trusts which means that is you make a capital gain of R17 500 or less for the year, you are not liable for CGT on this amount.
Market value The market value of the asset at 1 October 2001 can be used and this valuation must be in writing. Taxpayers had until 30 September 2003 to obtain a market valuation of the asset. Even though the valuation may have occurred subsequent to 1 October 2001, the valuation must be the value as at 1 October 2001. Time apportionment method This method involves looking at the total Capital Gain made over the period during which the asset was owned and then determining the gain made after 1 October 2001. The 20% rule In terms of this rule 20% of the proceeds received by the seller will be deemed to be the base cost in the event that an asset held before 1 October 2001 is sold thereafter. Allowable expenditure incurred after 1 October 2001 must be deducted from the proceeds before the 20% rule is calculated.
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CGT CONTINUED... A taxpayer need only inform the commissioner of the South African Revenue Service of the option chosen once the asset is disposed of. However, where a taxpayer opts for the market value as the valuation method, proof of the valuation must be submitted with the first tax return submitted after 30 September 2003 in the following instances:
TYPE OF ASSET
APPLIES
WHERE MARKET VALUE EXCEEDS
Intangible assets
Per asset
R1,000,000
Unlisted shares
All shares held by the shareholder in the company
R10,000,000
All other assets
Per asset
R10,000,000
Rate at which the Capital Gains is included in taxable income (inclusion rate). Once a net Capital Gain for the year of assessment is determined, such amount is multiplied by the inclusion rate to determine the individual or entity's taxable gain. Inclusion rate x statutory tax rate = effective rate TYPE OF TAXPAYER
INCLUSION RATE
STATUTORY TAX RATE
EFFECTIVE TAX RATE
Individuals
25%
0-40%
0-10%
Other (local) trusts
50%
40%
20%
Special trusts
25%
0-40%
0-10%
Companies
50%
30%
15%
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HOT OR NOT CUSTOMER SERVICE The term “Exceptional Service without Exception” was coined at the launch of the Leapfrog customer service programme – Hot or Not. This term is an integral part of the brands culture, its meaning is unconditional and is something that we require of each and every touch point we have with our customers. The customer service programme - Hot or Not, grades all our franchises according to a certain benchmark. We pride ourselves by being one of the only real estate franchise groups that has such a programme. We want to ensure that our service offering is consistently world class which is why we feel it necessary to tell you all about it.
Reception Assessment First impressions ? Call Answer ? Telephone Etiquette ? Vibe and Impression Second impressions ? Call transfer ? Message and call back Overall impressions Outcome – were needs seen to Client Calls Clients are contacted and asked for feedback on their experience with a particular agent. On a scale of 1 to 5, with 5 being excellent and 1 being poor they are asked the following questions: ? The agent's knowledge of the property market ? The agent's energy and passion ? Did the agent look after client interests to their satisfaction? ? Was the agent professional at all times? ? The agent's willingness to stay in touch and his/her after sales service? ? What was the general impression of the agent and his/her service? ? Did the client visit the Leapfrog office – if so what was their opinion?
If you feel that our office did not deliver exceptional service, we would like to hear about it via our website or contacting our Cape Town support office directly. There are a number of assessments which are used to determine whether an office is Hot or Not. They are: Physical Assessment Where the following areas in the franchise are assessed: ? Location ? Reception Area ? Boardroom / Meeting Facilities ? Administration and Management Area ? Property Gallery ? Agent Area ? Storage Facility ? Kitchen ? Bathrooms ? Signage
Franchise ratings Calls to clients, physical assessments, receptionist assessments, scorecard and any queries or complaints are reviewed. Franchises are rated on willingness of the principal to assist and provide feedback. It's a simple Yes / No (Does not count towards overall rating BUT must be a yes for a hot office) Quarterly scorecard This scorecard is completed on a quarterly basis and is used to assess whether the franchise has embraced and driven some key Leapfrog values, schemes and partners within their organisation or not. Rated from 1 – 10 with 10 being excellent and 4 and below, way below standard. The measures are: ? Building of Leapfrog culture and the Leapfrog Way ? Improving differentiation with other brands Promotion of BEE, recruitment of black staff ? Promotion of the recruitment scheme ? Promotion of “ForMe” investment benefit ? Promotion of “green initiatives” ? Promotion of Leapfrog through the PR company
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SELLING THROUGH THE WEBSITE Leapfrog Property Group has invested heavily in our online capability, delivering the next generation in web-based real estate marketing that is entirely sophisticated in the back-end, yet effortless and highly effective in the front-end to deliver superior customer engagement and interaction for you. Given our reputation for doing things differently, it was a major imperative for us to bring to market an online platform that would engage with an increasingly sophisticated consumer who is time-starved, yearns for immediate answers and feedback and demands the best in customer service and engagement. Our website has been designed to deliver real benefits and business value to our franchisees and agents along with unique customer insights in order for us to actively bring buyers, sellers and agents together with a common purpose and goal, complete with an entirely new edge. Some of the many benefits of finding your dream property online at include: ? Highly optimised listing search functionality guaranteed to be found in the major search engines. ? Intelligent area and mapping search functionality featuring Google maps. There are several search options catering for users of different
ability. Even the most inexperienced internet user is catered for. ? Automatic branded PDF brochures created of the properties you view. ? Intelligent user journeys guaranteed to deliver qualified results for you when browsing. ? Innovative data display modes including list, gallery, map and table all geared for different user interpretations of the listings information. ? Automatic property alerts allow you to register criteria and receive automatic alerts via email, SMS & RSS for those properties matching
your criteria. ? Additional information resources available which are constantly updated e.g. news & advice articles, area information and suburb
guide pages and so on. ? Ability to feed multiple portals both locally and abroad including Property24, Property Genie, SAHometraders, Cyberprop, MyProperty,
IOLProperty, Right Move (UK), Hot Property (UK) ? Interactive branch and agent locator facilities enabling easy look up of contact information for specific areas. ? Detailed property particulars capture and display including 20 images, 5 floor plans, wealth of features, detailed description with Seller
interview, Room by room descriptions, multiple brochure display, Google location map display. ? Unique show day advertising facility.
A steadily growing number of users are surfing the net looking to either buy or rent a property and research has shown that 90% of internet users will use the search engines to find what they are looking for. The agent still plays a crucial role, however the total experience is that much more enhanced. New digital media and marketing channels are emerging all the time and the fact remains that technology and the propensity for consumers to use it are not going to go away. We have invested our energies into finding ways to develop sustainable and mutually beneficial platforms that integrate with and grow our revenue opportunities. In many respects Leapfrog has been a trendsetter in terms of changing the way we do business, rather than just doing things the same way simply because 'that's how it's always been done'. Our move into online real estate marketing is no different. The International Property Awards in association with Bloomberg Television, has recognized Leapfrog’s website as the 'Best Real Estate Agency Website' in the Europe & Africa region 2010. So, if you are searching for property online, visit our award winning website where you are sure to find what you’re looking for @ www.leapfrog.co.za.
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SHOW DAY TIPS Having a show day for your home is an important part of the marketing process when it comes to selling your property. Your agent will make the necessary arrangements and do the hard work of qualifying any potential buyers who come to view the property, but there is a lot that you can do maximise the show day opportunity and help to sell your property faster: ? First impressions are important so take a good look at the exterior appearance of the property.
Does it need a fresh coat of paint? Take care of repairs and spend a little time and money replacing any cracked windows, replacing broken lights, intercoms and so on. ? Keep the garden neat and tidy mow the lawn, plant some flowers and get rid of clutter and rubbish bags before potential buyers arrive. ? Make sure your house is clean and tidy pack away toys, ornaments and any other items which make the rooms feel cluttered. ? Give the carpets a good, professional clean and sort out any cause of malodour. ? On show day put out a fresh vase of flowers. If it's a warm Summer day, open the windows and allow light and fresh air to circulate. This creates a pleasant, relaxing atmosphere. In Winter, make your home warm and inviting buy turning on the heater, or better still, a burning fireplace adds to the character and cosiness. ? If possible, try house your pets elsewhere for the day with friends or family, especially if you have unruly dogs. ? Don't hang about – leave your agent to get on with the job of selling your property.
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MOVING TIPS Moving is probably one of the biggest causes of stress, understandably so as it comes down to packing up your whole life and moving to a new home and sometimes a new town. Follow these handy tips to make your moving experience as painless and methodical as possible. ? Make a list - Write everything down! You'll thank yourself later. Create a record keeping system and
number each box with an accurate list of everything that is in the box. ? Have plenty of supplies - you'll need lots of boxes, probably more boxes than you think. Ditto for the
packaging tape, bubble wrap and permanent markers. Keep around 10 boxes set aside to use for last minute items on moving day, such as bedding, clothing, and cleaning supplies. Use unprinted newspaper to wrap your goods as printed newspaper can stain. Wrap fragile items thoroughly. ? Don't make the boxes too heavy to lift – put heavier items in smaller boxes and less of them so you don't overload and end up with the bottom of the box and your broken crockery on the floor. ? Color co-ordinate. Choose a colour for each room in the new home, such as yellow for kitchen, orange for dining room and so on. Apply colored stickers on the box near the box number. Put a matching sticker on the door to each room. ? Change the locks and gate remotes - you'll never know how many keys are floating around for your new home unless you get new locks or re-key the existing locks. The previous owners may have given a key to neighbors, workmen, relatives, or former domestic workers. For peace of mind change the locks on all access points and have the gate motor and remotes reprogrammed. Do this before you move in or as soon as possible afterwards. ? Electrical Upgrades - If you're moving into a new home, you may have all the electrical outlets you need. But older homes could be a challenge. You can do the upgrades anytime, but everything is easier to get to in an empty room. Make any upgrades to electrics before you move in such as install extra lighting, ceiling fans and so on. The same applies to any renovations, new carpets or painting that may need to be done.
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BUILDING VS MOVING Buying existing property and renovating it to your liking still offers a better return on investment than building from scratch, especially considering the current low interest rates. The average house construction cost is around R6000m² for basic finishes and anywhere from R10 000m² upwards for more luxurious pads. Construction projects in the W.Cape as an example start at R6000 m² for very simple work and finishes and can run up to R15 000m² for high quality finishes, excavation if you're building against the mountain side and so on. Added to this, you have the frustrations that go with building from scratch. Unless you have the time and experience to project manage it yourself, buying an existing property in a good location and renovating still offers far better value for money and peace of mind. And of course, if you are building, you'll have to wait anywhere from six months to a year and possibly even longer for a totally custom-built home before you move in. While one of the benefits of building is the fact that you get to choose exactly what types of features and finishes you want, the costs very easily mount up and you may soon find the dream home you want is quite unaffordable. When buying you may find that the previous owners have improved the home with many features that may not be affordable if you currently had to purchase them – for example real wooden floors. Finally, building in a new community or development is just that – new! You don't know what developments might be springing up around you. There are countless cases where people spend fortunes building their dream homes in a plush estate, only to have a low cost housing development or informal settlement spring up next door, dramatically decreasing the value of their custom-built homes.
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IS YOUR HOME PROPERLY INSURED? Let's face it – most of us don't pay enough attention to the detail and fine print of our insurance policies. And the bottom line is, failure to do so can cost you a wheelbarrow full of money that you don't have and most of all, could be avoided entirely by taking 30 minutes to critically review and update the true value of your insurable assets once a year. Thanks to the rise in property replacement costs, your home could be significantly under-insured in the event of a major catastrophe - a fire, earthquake, floods or any other major 'peril' as the insurance industry defines them. The true gravity of the impact of underinsurance is
professional fees, removal of debris, new architectural plans (following fire or flood damage), fire brigade charges and public authorities' requirements. Not much of that R300k left when you take all that into consideration! Let's not forget that in the event of a fire or flood, you'll most likely also be looking at having to replace all your household contents, another area where Santam research has shown that some 40% of short-term insurance policyholders are under-insured by up to 45% and that's notwithstanding the fact that South Africans are more exposed than most countries to loss from the likes of crime, burglary and vehicle claims including car hijacking and theft. If you are under-insured in the event of a claim, you may be paid out only partially for the loss. That's because of what the insurance industry describes as the 'average' formula. For example, if you insure household contents for R250 000 but in fact the replacement value is double this amount, you are effectively 50% under-insured. Should you suffer a loss of say R100 000, the insurance company will therefore pay only 50% of the claim at R50 000, leaving you out of pocket for the balance. Imagine what it would mean if your home was under insured to this extent! The onus is on you to make certain your home and assets are adequately insured. When deciding the correct value to insure one must consider the price of rebuilding the house from the ground at today's replacement building costs. The cost of providing sufficient cover is negligible in the greater scheme of things. What's more, you can lump your homeowners' cover with your motor and householders cover (which insures the contents of your home) thereby reducing the overall rate at which your cover is provided.
painfully illustrated in the following example of insuring your most valuable asset – your home. ? You bought your home ten years ago for R300 000 and insured for the same amount. But since then it has appreciated in 'market value' to, say, R750 000. However, the key 'replacement value' – that is the cost to rebuild the home from scratch at today's prices - could be R1million. The under-insured component could therefore be as much as R700 000, based on replacement and other costs. ? Bond insurance would cover around 90% of the original R300 000 loan if the home was financed in the typical way, with a 10% deposit. That cover secures the loan of the bank to the homeowner, but it does nothing to cover the appreciation in market value and today's replacement costs. And even if your insurance policy pays out the full R300 000 after all considerations, you'll be hard pressed to replace anything remotely resembling your original home at today's building prices. And of course you'll also first be liable for all other costs including demolition and
An alarming aside is that property owners who pledge their homes as security for loans are in danger of having to honour those loans out of their own pocket should they be under-insured. Ironically, people will often insure their cellphones before they make sure that their house is properly covered. Some tips when it comes to your insurance cover: ? When it's time to renew your policy check your coverage, but for
peace of mind you may want to do so immediately. ? Shop around for the best rate ? Ask your broker about policy changes ? Check whether you have limited cover for subsidence and landslip.
Most insurers offer limited cover. Full cover can be purchased at an additional premium subject to a satisfactory geological survey. The cost of the survey will be for your account. ? When you make a major purchase, build an addition onto your home or improve it, talk to your broker about increasing the cover to allow for the improvements. ? If the roof construction of your home is thatch, you may qualify for a discount by installing fire alarms and sprinkler systems. ? Finally, keep your policy in a safe place, away from your home, in a bank safety deposit box for example.
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BUYING A PROPERTY AS A PERSON, A COMPANY OR A TRUST There are various ways of purchasing a property including in your personal capacity, through a company or CC or through a trust. There are various important factors to consider when deciding which entity will be most suitable which include transfer duty, VAT implications, protection from creditors, administrative costs and capital gains and other taxes. The individual pros and cons of each of the different entities is listed below but before going ahead, it is always advisable to consult with an attorney and tax expert before making any final decisions.
Individual ? Transfer duty is paid on a sliding scale, which is always lower than the
rate of 10% charged when purchasing through other entities. ? When selling the property, the first R1 million of profit is exempt from
capital gains tax, As long as the property is the individual's primary residence, (applies to South African residents only). After the first million, Twenty five percent of whatever profit is remaining is added to the individual's income for the year, and taxed at the applicable rate of income tax. The maximum net CGT cost therefore, is 10% and this is the lowest possible rate of CGT. ? In the instance of an individual's death, their entire estate, including immovable property is subject to estate duty. Up to a value of R1.5million is exempt from tax but the remaining value is taxed at 20%. ? Properties in your name can be attached to you by creditors and can be taken to cover defaulted debt. For this reason, individuals trading under their own names may elect to register property in another entity. ? There are no auditors or accounting officer's fees as their services are not needed
Private Company ? Transfer duty is at a rate of 10% of the purchase price. Transfer duty
has to be paid even when buying shares in a company that owns immovable property. ? Capital gains tax must be paid on 50% of all profit earned from the sale of property. This is the company's taxable income and taxed at a flat rate of tax of 29% which is effectively 14.5% of the capital gain. ? When a company sells a property, the company must declare a dividend in order for the shareholder to acquire the profit realised on the sale. There is a further tax payable on this amount at a rate of 12.5%. ? Companies can have a much larger number of shareholders than a close corporation. Company shares can be owned by trusts, close corporations and companies, where as a CC can only have a maximum of 10 natural persons as shareholders. ? A company is a separate legal entity and therefore the assets of the shareholders may only be attached to cover the company's debts if the individual had stood surety for the company. ? When buying a property, the agreement of sale can be signed on behalf of a company that is not yet in existence. Thereby giving the purchaser more flexibility. ? A company is prohibited from providing financial assistance to a purchaser of its own shares. Therefore equity in the company cannot be used to assist in the purchase of more shares in the same company. ? A company's financial statements are required to be audited. Close Corporation ? Close Corporations are affected by, transfer duty, Capital gains tax and tax on dividends in the same way as private companies. ? A close corporation, like a company is also a separate legal entity, so personal debts cannot be attached to assets of the CC. ? An accounting officer is required rather than an auditor, thereby reducing administration costs. ? Property can be purchased on behalf of a CC that is not yet in existence. ? Membership is limited to a maximum of 10 natural persons. Trust ? Transfer duty is payable at a rate of 10% when a trust acquires
immovable property. ? Capital gains tax is highest for trusts that sell immovable property.
50% of the gained profits are added to the trust's taxable income and taxed at a rate of 40% which is a net capital gains tax of 20%. ? Property held by a trust does not form part of an individual's estate on death, thus saving on estate duties. ? Trusts are not required to be audited. ? Trusts are separate legal entities, so the trust's assets cannot be attached by creditors of the beneficiaries. ? An Individual cannot act as a trustee for a trust that does not yet exist. Therefore trusts must be in existence at the date of signature of the agreement of sale.
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