Don't let council rate hikes slice property sale profits

Municipal rates and service charge increases July 2016. Source: Chas Everitt International.

So says Berry Everitt, CEO of the Chas Everitt International group, who notes: “At the moment, our experience is that there are many empty-nesters eager to downsize from their large family homes in order to cut their monthly expenses and put the savings towards their retirement plans, and we expect this round of municipal increases to amplify this trend.

“What is more, there is good demand for their properties from developers as well as younger buyers with growing families, so it is quite possible for them to sell quite quickly – provided that they seek the advice of a qualified and experienced estate agent to help them set a realistic, market-related asking price.”

Guard against overpricing

Writing in the latest Property Signpost newsletter, he says that the latest round of municipal increases make it all the more important for prospective sellers to guard against overpricing. “Potential buyers will just to avoid any properties they regard as overpriced and these homes will then stick in the market, causing the owners’ holding costs to mount up and eat into their potential profits.”

Holding costs include everything you have to pay to own and run your home, such as the bond repayment, insurance, maintenance costs, any monthly levy that you pay and, of course, municipal rates and service charges. And, as Everitt says, these can add up to a substantial total each month, so once you’ve decided to sell, it makes sense to do so as fast as possible and not keep paying that amount to live in a home you no longer require.

©karen roach via 123RF

Diminishing profit

“Looked at another way, every month’s delay in selling your home effectively diminishes the profit you stand to make on the sale, and it does not make sense to hold out for an unrealistic asking price on the one hand while losing money on the other. If your holding costs total R25,000 a month, for example, and your asking price is R100,000 above the current market value, any benefit that you might have derived by achieving that higher price will soon be completely eroded.

“What is more, your property may still be unsold and still racking up holding costs, because even keen buyers with all their finances in order are extremely price and value conscious at the moment, and they will literally just ignore listings that they regard as overpriced in comparison to similar properties.”

On the other hand, he says, sellers who work with a reputable agent who can help them get their asking price “just right” will sell their homes in the shortest possible time and maximise their potential profit.