By: Brendan Michie, Director at Hammond Pole Attorneys
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. 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.
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:
- If you have only made a small down payment and you still owe a large amount on the bond.
- If you have made significant improvements to the house, but have not had time to recoup this investment.
- If you have to sell the house at a loss, and you will not be able to cover your costs.
- 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.
