Have you decided the time has come to sell your house? Whether you’re moving on or selling an investment property, selling a home involves many costs. You’ll find many yourself spending money left, right, and centre from mortgage discharge fees to capital gains tax.
Read on to find out the typical costs involved when selling a house in New South Wales, so you don’t face any hidden costs.
What costs will you face when selling your house?
Buying and selling property involve far more expenses than simply transferring money between purchaser and vendor. What are the various costs you can expect to pay throughout the selling process?
- Repairs and maintenance
- Marketing costs
- Real estate agent fees
- Solicitor fees
- Lender fees
- Taxes, such as Capital Gains Tax
- Mortgage discharge fees
- Auction fees
Moreover, if you’re selling a house, you’re probably purchasing another property elsewhere. This means you’ll also get hit by stamp duty, land tax, home loan application fees, and moving costs. To lessen the expense of your new home, speak to a Sydney mortgage broker about your home loan options.
There’s no doubt that moving home is expensive. However, the overall expense is worth it if the result is living in your dream home.
A conveyancer is in charge of transferring legal ownership of the property from the seller to the buyer. There’s no escaping this cost. Licensed conveyancers or solicitors must complete this in every real estate purchase; it’s best to approach local conveyancing services. They’re more likely to understand local knowledge and recognise issues.
Conveyancers oversee all legal aspects of the home selling process. They can also help arrange inspections and land surveys.
There is no exact cost to conveyancer’s fees, and it’s hard to predict what you will pay. The individual circumstances of the buyer and seller and the property specifics impact legal fees. Even though your conveyancer might advertise a flat fee, you should expect to pay more for additional work.
Estimated Cost of Conveyancing
Vendors could expect to pay anywhere around $500 to $3000. The broad range accounts for more complex cases. Generally speaking, you may pay about $1,000 in New South Wales.
To sell your house, you need to organise a marketing campaign. While the real estate agent organises the home selling process, the vendor covers the marketing cost. Your real estate agent might recommend a marketing campaign, which includes a sign at the front of the house, online advertising, professional photography, floor plan, copywriting, and press advertising.
The amount you spend depends entirely on you. A DIY marketing campaign could cost relatively little. Creating your own sign and advertising in local papers could be pretty cheap. However, you could hire an experienced marketer to do the job, which would understandably cost more.
Estimated Cost of Marketing
Each property is unique. Marketing fees depend on the seller’s budget, the property, and the real estate agent. In Sydney, you might pay between $100 and $3,500. You can adjust the marketing fee to suit your budget. But remember, the better the advertising, the more likely you’ll make a good sale.
Real Estate Agent Fees
Real estate agent fees include a flat fee and a commission. The flat fee is an agreed fixed fee between the vendor and agent. The real estate agent’s commission is a percentage of the final sale price.
Furthermore, some real estate agents might use bonuses. Essentially, they agree to a percentage-based bonus if the property sells for an agreed amount. It could be 10% of the amount above the agreed reserve. For example, if a property value of $1 million sells for $1.1 million, the real estate agent pockets $10,000 as a bonus.
Estimated Cost of a Real Estate Agent
Real estate agents charge between 1% to 3% commission, depending on the property value and competition. Plus, a potential 10% bonus on an amount above the agreed reserve. With a property value of $1 million, this could equal $15,000 for the commission plus a bonus of $10,000.
You will also need to pay about $500 towards auction fees.
If you have a home loan on your current property, you might need to pay your lender a mortgage discharge fee or early exit fee. The discharge process should take between two to three weeks. Fortunately, Australia banned exit fees in 2011. However, if you purchased your property before then, you might have to pay exit fees.
Moreover, even though exit fees are banned, lenders still charge for terminating your contract early. Some lenders also charge break costs. If you have a fixed-term loan, the lender might charge you for the money it would have earned if the loan runs to full term. You may want to speak to your lender about potential mortgage discharge fees.
Estimated Cost of Lender Fees
Mortgage discharge fees range between $150 and $1500 depending on your loan agreement and lender.
Renovation, Repairs, and Styling Costs
Most houses require renovations and repairs before selling. Unless you plan to sell a fixer-upper, you’ll need to complete some basic maintenance and minor repairs. It depends on the state of your home. It could range from a few hundred to tens of thousands of dollars.
Plus, more and more Australians are ‘staging’ their home. To ensure they get the best sale price, vendors are staging their homes to look attractive to potential buyers. You want to do all you can to encourage buyers to increase their offer.
This could include anything from a lick of paint to strategically placed flowers. It could make all the difference. You can hire professional home stagers or do it yourself.
Remember to consider the capital gain. For example, if you spend $20,000 ripping out your kitchen and installing a new shiny one, how much will this add to the overall selling price? If it only adds $20,000 to the property value, it’s not worth the effort.
Estimated Cost of Renovating and Styling
Pre-market repairs typical expenses could cost anywhere between $100 to $30,000 and up. Professional styling could cost between $2000 and $8000.
Capital Gains Tax
The Australian Tax Office charges Capital Gains Tax on the profits from a property sale. Capital gains are added to your overall taxable income and paid at the tax rate for your threshold. Remember to deduct all other property-related expenses from your capital gains to reduce your taxable income.
However, Australian residents are eligible for the CGT main residence exemption. You do not have to pay CGT if you sell your home after living in it for 12 months.
Estimated Cost of Capital Gains Tax
Most property capital gains will push you into the top tax bracket, meaning you’ll pay 45% capital gains tax.
Example Cost of Selling a House in Sydney
Let’s look at an example of all the real estate fees you might pay when selling a house.
Ellie sells investment property in Sydney for $1.8 million, making a capital gain of $500,000. She may expect the following costs
- Legal fees: $1,000
- Marketing costs: $1,000
- Real estate agent’s fees: $27,000 commission plus $30,000 bonus.
- Lender fees: $500
- Repairs and renovations: $1,000
- Home staging: $3,000
- Capital gains tax: $195,667
Overall costs of selling: $259,167.
Of course, you could do it far more cheaply – or more expensively. Capital gains tax is the primary driver of expense in Ellie’s case. If she were to sell the same property as her principal residence, the total cost would be $63,500.
Selling a property is almost as costly as buying one. However, you can reduce the overall expense by making smart decisions and opting to DIY a lot of the work, such as home staging, renovations, and marketing.
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What are the steps to selling a house?
You’ll need to prepare your house for selling, completing repairs, and maintenance. Then, find the right agent and conveyancer to complete the sale process. Finally, determine the property value and asking price.
What costs are involved in selling a house?
When selling a house, vendors might expect to pay legal fees, real estate agent fees, marketing costs, lender fees, and home staging costs. You might also need to pay Capital Gains Tax.
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