What are the costs involved in a real estate transaction?
A real-estate transaction involves various costs that are paid by the vendor and the purchaser on a transfer of property.
In this week's edition I will use the opportunity to detail the fees associated with a real-estate transaction. This type of transaction is usually governed by written terms, and, as such, the parties can agree that the fees associated are paid in whatever agreed way. This leads me to the first fee payable being the agreement for sale.
The transaction is started with an agreement for sale and both the vendor and the purchaser usually share this fee equally. The purchaser is usually required to pay his half cost upon executing the agreement and the same is usually non-refundable. The agreement for sale is paid to the attorney-at-law with the carriage of sale and the one who prepares the agreement.
The next fee associated with the transaction is the stamp duty which is paid to the Tax Administration of Jamaica. Prior to the new tax reform on April 1, 2019, stamp duty was assessed at four per cent of the sale price. However the amendment has fixed the stamp duty at a flat fee of $5,000.
The next fee is the transfer tax which is usually paid by the vendor only. As with the stamp duty, the transfer tax is paid to the Tax Administration of Jamaica and is assessed at two per cent of the value of the property. Prior to the reform, transfer tax was formerly assessed at five per cent of the sale price. One should bear in mind though that due to the fact that it is an assessment, the stamp commissioner can assess the property above the agreed sale price, and as such, the transfer tax will be assessed at two per cent of whatever the value accepted by the stamp commissioner.
Upon paying the stamp duty and the transfer tax, the next fee payable is the registration fee. This fee is paid to the National Land Agency and is 0.5 per cent of the sale price and is usually shared between the vendor and the purchaser.
The attorney-at-law with carriage of sale will also charge a flat fee, usually between $10,000- $30,000 to prepare the transfer form, letters to the utility companies, letter of possession, etc, and this is usually shared between the vendor and the purchaser.
Last, but not least, you will be required to pay your legal fees. This fee is paid to the attorney-at-law acting on your behalf in the matter and each party is required to pay their own legal fees. The fee charged by most attorneys is usually three per cent of the sale price, exclusive of general consumption tax.
A vendor who engaged the services of a realtor will also be required to pay a real estate commission to the realtor which is usually five per cent of the sale price.