Whether it’s your owner occupied home or an investment, selling your property can be a huge windfall if you sell at the right time in the market.
However, many first-time sellers fail to consider the costs of selling a property.
Some of these costs are necessary but some can either be reduced or avoided completely.
Property selling costs calculator
In this way, you can get a more realistic return on investment (ROI) figure.
Read on to find out how you can reduce these costs and maximise your ROI!
What are the legal fees?
Most people enlist the help of a solicitor or conveyancer when selling their property.
The conveyancer will make sure all of the legal formalities are undertaken correctly and that the Contract of Sale is in your best interest.
A typical conveyancer can cost anywhere between $800-$2,000 depending on the nature of the sale and the state in which the house is located.
These fees cover such costs as:
- Title search: $20 to $100
- Transfer of Certificate of Title: $300
- Local council building certificate: $53 to $133
Check out the recommended conveyancers section for our pick of solicitors across Australia.
Do I really need a solicitor?
It’s totally legal to sell your home without help from a qualified conveyancer, however, you open yourself up to making mistakes in the settlement process.
These mistakes can cost you thousands of dollars.
DIY conveyancing kits are available online at a cost of around $100 but it can be difficult to find a reputable provider.
On top of that, you still have to pay the government costs when transferring the property title.
Beware when dealing with a real estate agent
There’s nothing wrong with using a real estate agent.
The best ones have considerable market knowledge and work hard to get you a good price on your home.
As a general rule, don’t ask the agent what they can get you for your house.
They may have some idea but they really don’t know and will often inflate the price, setting your expectations too high.
This is known as “buying the listing” and it’s one of the oldest real estate tricks in the book.
Although it’s not a perfect predictor, you’re best checking property market research websites like RP Data and Australian Property Monitors (APM).
We have a subscription with APM meaning that we can provide you with a free suburb report for a location of your choosing.
The report will detail how long the property has been on the market, how many previous owners/tenants there have been and how much the property has sold for in the past.
A report detailing the last 6 months is a safe bet to help you make an educated guess of your selling price.
How much does a real estate agent cost?
The average commission rate for a real estate agent is 2-3% of the selling price.
So if your home is sold for $550,000, you may have to pay up to $16,500 in agent commissions.
There may also be a marketing fee of around 1% of the selling price to cover the costs of signage, newspaper advertising, internet advertising, flyer printing and auction marketing.
So, on that same property, you may have to chip in another $5,500.
That’s over $20,000 in commission and marketing costs!
The costs of repaying your mortgage
The government banned exit fees on all variable rate mortgages in 2011 but break costs still apply on fixed loans.
If you were to pay back a $550,000 mortgage fixed at 4.70% within the fixed period, you could be looking at around $3,300 in break costs.
Try the break costs calculator to discover how much you may have to pay to break a fixed term loan.
Capital Gains Tax
Capital Gains Tax (CGT) is only applicable when selling a rental property.
It doesn’t apply if you’re selling your principal place of residence or a property that you’ve resided in for at least 6 months.
If CGT does apply, how much will it cost you?
Well, because it relates to your taxable income, it’s not a direct cost. There are a couple of things to keep in mind.
CGT is calculated as the proceeds you make from selling the property minus the cost base.
The cost base refers to the costs of not only selling the property but the initial costs of buying the property in the first place.
For example, if you bought an investment property in New South Wales for $400,000, you may have paid around $13,800 in stamp duty as well as $2,000 in legal fees.
If you later sold the property for $550,000, you would have to pay around $2,000 in conveyancer’s fees and around $20,000 in real estate agent fees. However, you could claim around $60,000 in depreciation costs.
This leaves you with a cost base of around $97,800 and a capital gain of $52,500.
If you lived in the property for more than a year, then the net taxable income can be halved meaning you only have to declare $48,900.
This amount is added to your regular income and tax is paid according to your new tax bracket.
With the help of an accountant, you may be able to reduce your level of capital gains by claiming other depreciation costs and money spent on repairs over the years.
Getting your property ready for the market
Before selling your property, you may want to give it a quick “once-over” with a paint brush and some minor repairs.
How much you spend is totally up to you but, remember, spending a lot may not necessarily see you get a return on your investment.
Work you may want to undertake includes:
- Replacing carpet: $40-125 per square metre.
- Refinishing hardwood floors: Between $30 to $50 per square metre for sanding and an extra $8-15 per square metre for the stain.
- Repainting the interior walls: For a 3-4 bedroom house with 2 bathrooms, you’ll need about 18 litres of paint. This can cost around $650 all up.
Depending on the nature of the property, the above minor reparations may be enough to make it look enticing to buyers.
However, some people choose to invest more money into renovation and fit-out work including:
- A new kitchen: Less than $20,000 if you leave most of the electrical and plumbing intact.
- A renovated bathroom: $5,000 – $15,000.
A tip for investors
If you have a tenant living in the property at the time of selling your home, you may want to rethink this.
Having an active lease agreement in place can put off a lot first-time buyers because they want to be able to move into the property right away.
However, the drawback of leaving the property vacant while it’s on the market means is that you miss out on rental income.
You’re also still having to pay your mortgage and bills.
Council rates and body corporate fees
Depending on how quickly you sell the property, you’ll have to pay at least pay a portion of the council rates for the current quarter.
If you’re selling a unit or apartment in a strata building, then you’ll also need to pay a portion of the body corporate fees.
These rates form part of the settlement costs so it’s important to check with your conveyancer to find out how much you’re liable to pay.
Download ‘Costs of selling a house’ checklist
Do you need a home loan?
It’s always good to speak with a conveyancer when calculating the costs of selling a property.
As expert mortgage brokers, we can help make the settlement process smooth and simple by organising a simultaneous settlement.
It’s often a much cheaper and simpler option!
Please call us on 1300 889 743 or complete our free assessment form if you’re planning to sell your property soon.