Hidden costs can be frustrating and seem to appear unexpectedly in land transactions . At Zenawi Real Estate Company, we prioritize transparency and empowering our clients to make well-informed decisions. In this blog post, we will shed light on the hidden costs associated with land transactions in Kenya, providing you with valuable insights as an investor.
Understanding Hidden Fees:
Hidden fees, also known as undisclosed costs, are unanticipated charges that buyers may encounter when purchasing a property or service. In the realm of real estate, hidden fees refer to additional costs that are not immediately disclosed during the buying process.
The Legality of Hidden Fees:
Charging hidden fees can be considered a violation of consumer protection laws, as consumers have the right to full disclosure of costs involved. In some countries, legal action can be taken against deceptive charges to seek compensation.
The Importance of Considering Hidden Costs:
Understanding and considering hidden costs are essential for effective financial planning. By being aware of these costs upfront, you can budget accordingly and avoid financial surprises.
Common Hidden Costs in Land Transactions:
1. Site Improvement Costs:
Site improvement costs, such as site development costs, vary based on factors like soil type, site plans, local charges, and permission costs. These costs include utilities like electricity, water, internet connections, driveways, sewer systems, and excavation. Assessing these costs before finalizing a land purchase is crucial.
2. Loan Application Fees:
Loan application fees are associated with applying for a loan from a lender. These fees typically represent a small percentage deducted from the total loan amount. It’s important to inquire about these fees and whether any exemptions or waivers are available.
3. Earnest Money:
Earnest money is a deposit made by the buyer to demonstrate serious interest in purchasing the property. It is usually a fraction of the total purchase price and is deducted from the final payment.
4. Stamp Duty:
Stamp duty is a government tax imposed on legal documents, particularly in the transfer of assets or property. In Kenya, stamp duty is charged at a rate ranging from 2% to 4% and is paid at designated banks. Confirming whether the cost of stamp duty is included in the land price is crucial.
5. Legal Fees:
Legal fees cover the cost of legal services during a land transaction. These fees include the preparation of sale agreements, transfer forms, and other legal documentation. Always budget for legal fees and confirm with the land seller whether they are included in the overall price.
6. Registration Fees:
Registration fees are paid to the Lands Registry for the entry and printing of titles. These fees typically amount to around $5 for registration and $10 for attestation. Be aware of these fees and whether they are included in the total cost.
7. Rates and Rent:
For leasehold properties, the registered owner is responsible for paying rates to the county government, while rent is paid to the National Government. Request up-to-date records of rates and rent payments from the seller for future reference.
8. Consents of Transfer:
Consents of transfer refer to the written permissions required by the laws governing land registration. Depending on the tenure of the land, specific consents may be necessary, such as Land Control Board Consent or Consent to Transfer from the Lessor. Clearances, such as rates clearance certificates, may also be required. Factor in these costs.
9. Valuation Costs:
Land valuation is the process of determining the market value of a property for taxation or transaction purposes. Valuation costs may vary, but some real estate companies may cover them on behalf of clients. Confirm whether the valuation cost is included or needs to be accounted for separately.
When purchasing land, it is crucial not to make assumptions about the costs involved. By being aware of and considering hidden costs, you can avoid unexpected financial burdens. At Zenawi Real Estate Company, we are committed to providing our clients with comprehensive information and support throughout the land purchasing process.
Do you have any questions about hidden costs in land transactions? Feel free to share your queries in the comment section below.