Basic costs involved in selling a property in your personal name

Selling your property is a daunting process, especially when you don't know all the facts. It is so easy to lose sight of the escalating costs involved when the emotions of parting with your much loved home, or hard earned commercial property, get in the way of sound financial reasoning... (...and occasionally the unscrupulous real estate agent who wants to take advantage of your naivety!!!!)

Here is a list of the costs to expect when disposing of property in Zimbabwe, with an example to make the explanation more accessible to the laymen out there. (You don't need to be experts in real estate when there are already experts out there to guide you!!!)

1. Market Appraisals: I suggest you get the market value of your property from at least 2, but better 3 Estate Agents so that you have a fair idea of what your property is worth. (...NOT WHAT YOU WOULD LIKE IT TO BE WORTH!!!!) These market appraisals vary from free of charge to up to $150 each. Normally, the market appraisal is done for free if the property is listed with the agent.

2. Commission: The going rate is 5% plus 15%VAT. This is above the recommended minimum scale of fees laid down by the Real Estate Institute of Zimbabwe. The minimum commission a registered Estate Agent is permitted (by law) to charge is 3% plus 15% VAT.

3. Capital Gains Tax on Individually Owned Properties: In Zimbabwe, this is really quite complicated, so try and bear with me...
If you purchased your property before February 2009 (when we dollarised) then there is a flat rate of 5% of the sale price as capital gains tax. There are certain situations where one is exempt or can apply for a rollover...but this is a whole new topic.
If you purchased the property after Feb 2009, then there is a rate of 20% on the gain of the capital from time of purchase to time of sale. Deductions can be made for improvements and costs like transfer fees and commissions paid.

4.  Private Sales: These may seem cheaper as you save yourself the commission, but you will still need to do some form of advertising and if eventually you do need the help of a registered Estate Agent, they will charge you 3% plus VAT of 15% to do the agreement and everything else. My advice is always to seek professional help either through a lawyer, accountant or reputable Estate Agent as this will save you money in the long run.

Let's look at a working example of an average house sold for $200 000 purchased before February 2009
Sale Price                              $200 000
Commission 5%                    $ 10 000
VAT 15% on Commission    $  1 500

Balance                                  $188 500
5% CGT                                 $    9 425      
FINAL BAL                          $179 075

Now if you bought the house in June 2009 for $140 000 and sold it for $200 000
Balance after Commission is still $188 500
Less Purchase Price                     $140 000
Balance                                        $48 500
20% CGT on this                         $9 700
FINAL BAL                                $188 500- $9 700= $178 800

So the two methods come to the nearly same amount. Remember in the second example you will be able to deduct original transfer fees, and improvements made to the property, which will help bring done your tax bill.

Stay tuned for advise on Company and Trust sales...