Consider municipal hikes when setting your asking price
Category RealADVICE
Within the next few weeks, homeowners around the country are going to be facing huge increases in their municipal bills as both property rates and service charges are hiked.
"July is the month when most local authorities around the country implement their new tariff structures," notes Gerhard Kotzé, CEO of the RealNet property group, "and this year these are going to be well ahead of the rate of inflation in most areas, making it even more difficult for households to make ends meet."
In addition, he says, these hikes are going to have an immediate effect on home sellers whose properties are currently still on the market, by raising their "holding cost", which is the amount it costs to keep a property between the time you've decided to sell it and the time it is transferred to a new owner.
"These holding costs include bond repayments, insurance, maintenance, security, and any levies payable as well as the municipal property rates and taxes that you still need to keep paying, and they can quickly mount up to a sizeable sum if the property remains unsold for one or other reason."
However, there are steps that home sellers can take to reduce these costs, the most important of which is to ensure that you price the home really competitively, with the help of an experienced and knowledgeable property professional. "It is also a good idea to keep fine tuning the asking price when anything happens that affects buyer affordability.
"When the tariff increases are implemented in July, for example, prospective buyers will need more disposable income to cover the higher charges on whatever property they purchase, and this could make it more difficult for them to obtain a home loan," says Kotzé.
"Sellers whose homes are on the market at that time may want to take that into account and adjust their asking prices accordingly - if they don't want to end up paying higher holding costs. Dropping their price by 10% and then advertising that fact to attract more potential buyers, for example, could end up costing them a lot less than sticking to their original asking price and paying holding costs while their property remains unsold."
Another possibility, he says, is to make some energy-efficient upgrades to your home before you list it for sale. "Sustainability and energy-efficiency are increasingly strong selling points and will reduce water and electricity bills for the current owner as well as the future buyer. The most popular 'green' upgrades currently are solar geysers, solar panels and inverters and rainwater harvesting systems."
Then thirdly, says Kotzé, home sellers should always take a hard look at the municipal valuation of their home. "This is the number that will be used to calculate your property tax, so you want to make sure it's accurate or you could be overcharged every month for several years.
"In SA, residential properties are revalued by the local authorities every four to five years, and the new values are then published on a valuation roll. This is open to the public for a certain period and if you believe your property valuation is too high, you can object and ask for it to be lowered. To support your case, the best move is to enlist the help of your trusted local property professional to provide you with an estimated value, taking into account comparative properties in your area with lower assessed values.
"And if the municipal value is lowered, this will automatically lower the monthly property tax and make the property more attractive to prospective buyers. It is important to note though, that the municipal value is completely different from the market value of your property, which is the number that you and your property professional should use to set your asking price."
Author: RealNet
