One of the first questions homeowners ask when selling property to family or friends is how they should approach the sale.
Adrian Goslett, CEO of RE/MAX of Southern Africa advises:The best way to approach selling a property to family or friends is to deal with the transaction in a professional and business-like manner. “This can be achieved by following all the procedures and processes one would normally follow when entering into a property transaction with a person whom you don’t know,” says Adrian Goslett, CEO of RE/MAX of Southern Africa.
For this reason, he advises sellers to obtain a comparative market analysis to determine the market value and therefore the asking price of the property before family members or friends are even informed of the decision to release the property onto the market. “That way, the Receiver of Revenue, which defines ‘market value’ as the value of a property in an arm’s length transaction between a willing buyer and a willing seller, cannot deem the property a donation, which will be the case when a property is sold at an amount significantly lower than the market value,” says Goslett. This course of action will also safeguard the seller from being held liable for donations tax, which is calculated on the difference between the selling price and the market value as determined by the Receiver of Revenue. “Paying a market related price will also be in the best interest of the buyer, should he/she ever decide to sell the property in the future, seeing that capital gains tax will apply to the difference between the below-market value purchase price and the market value of the property at the time of the initial sale,” notes Goslett.
Other aspects Goslett advises both parties to consider is listing fixtures and fittings that will be sold with the property and drafting a legally valid contract with the assistance of a conveyancer as to ensure that all aspects they’ve agreed to are fully understood and put down in writing.“By involving a third party such as a conveyancing attorney or an accredited estate agent at some stage during the sales negotiations, both parties can rest assured that the transaction will be dealt with and concluded in a professional and objective manner,” concludes Goslett.