SELLING A PROPERTY

TIPS FOR SELLERS

WHOSE PRICE IS RIGHT ? It is a fact that all sellers think their property is worth more than it is and will use a number of immeasurable factors which have nothing to do with position, bricks and mortar to arrive at a selling price. Sounds familiar? – Capital Gains Tax, University fees for the next 4 years, 10 years of amazing family holidays!!

It is another fact that the buyer is the person who in the end determines the prices. A property is, at any one time, only worth what a buyer is prepared to pay for it. You, the seller, don’ t have to accept that price that is on offer but then you don’t achieve a sale and your price remains a theoretical price until an offer proves it is market related.

The only way a seller can hope to arrive at a price which is as close to a market related price [one which is indicated by the market] is to utilize the services of an agent who is able to supply a valuation based on recent comparable sales. The figures derived from recent comparable sales are very good market indicators and are bench marks for what a buyer is or isn’t prepared to pay in the area where the seller’s property is listed. This is a Comparative Market Analysis [CMA] and listing the property at the price indicated by this CMA is a seller’s best chance of achieving a sale at the best possible price and in the quickest possible time. Remember that it is human nature to listen to what you want to hear. Don’t make this mistake with what is your largest investment – don’t listen to an agent who inflates the listed price because it is what you want to hear.

3 COMMON MISTAKES SELLERS MAKE:

  • “I AM LISTING AT A HIGHER PRICE BECAUSE I CAN GO DOWN BUT NOT UP ”: Buyers have a very good sense of ‘market value’ and will avoid over-priced properties….especially in the buyer’s market we are experiencing right now. Over priced properties in many cases eventually sell for a price way below a market related price [if they are not withdrawn from the market]. Over-priced properties help to sell the other well-priced properties in the area
  • “I AM NOT IN A HURRY TO SELL..I AM PREPARED TO WAIT FOR THAT ONE BUYER WHO WILL GIVE ME MY PRICE” The best chance a seller has of selling his property is within the first 6 weeks of listing it. An over-priced property that remains on the market for too long becomes stale and ‘shop-soiled’ and it gives potential purchasers the idea that it hasn’t sold becomes there must be something wrong with it.
  • “MY BEST CHANCE IN SELLING IS TO GET AS MANY AGENTS INVOLVED AS POSSIBLE” Agents only earn commission if they sell your property and if there are four of them working on your property, they have a one in four chance of earning that commission. Why would they put 100% effort, time and money into marketing your property when they could rather concentrate all their efforts on marketing a sole mandate property when they have a 100% chance of earning that commission? 

CAPITAL GAINS TAX: HOW WILL IT AFFECT YOU

CGT is money that you, a seller will be required to pay to the Receiver of Revenue, when selling a property. The CGT figure is arrived at by calculating the difference between the base cost or valuation of the property and what it is sold for…in other words the Capital profit you have made.

The base cost figure is what you actually spent acquiring the asset together with capital expenditure directly related to that asset over the time the property is held.

The Capital Gain once calculated (less the annual allowance) is then added to the income for the Individual/Special Trust or Company after deducting the annual exclusion (Individuals & Special Trusts only) and are then taxed in accordance with the table below.

If the property sold is a primary residence, and you have measurable proof of this, there is an exclusion for capital gains of up to R2 000 000, 00.

Non residents do not qualify for this exclusion unless they have proof that they have lived in the property for a period longer than 12 months prior to the sale.

Capital Gains Tax is paid by the Capital Gains Amount less all deductions as indicated in the table below being added to your taxable income for the tax year in which the sale took place.

CAPITAL GAINS TAX (CGT)

No changes from last year:

​Type ​2021 2020
​Individuals and Special Trusts ​​18% ​​18%
​Companies ​​22.4% ​​22.4%
​Other Trusts ​36% ​36%

*Proposed rates as announced by the Minister of Finance in the 2020 Budget.

Events that trigger a disposal include a sale, donation, exchange, loss, death and emigration. The following are some of the specific exclusions:

  • R2 million gain or loss on the disposal of a primary residence;
  • most personal use assets;
  • retirement benefits;
  • payments in respect of original long-term insurance policies;
  • annual exclusion of R40 000 capital gain or capital loss is granted to individuals and special trusts;
  • small business exclusion of capital gains for individuals (at least 55 years of age) of R1.8 million when a small business with a market value not exceeding R10 million is disposed of; and
  • instead of the annual exclusion, the exclusion granted to individuals is R300 000 for the year of death.