Understanding the Costs of Real Estate Sales
Before you decide to sell a home, you need to be aware of the associated costs. From agent commissions to closing fees, there’s lots to consider when it comes to selling real estate.
If you are selling your property, make sure you are aware of the costs associated with the sale so you can budget for them. Here is a summary of the key costs you need to be aware of. Talk to your LJ Hooker agent if you need clarity around these costs.
Breakdown of Selling a House Costs
Selling a house involves a range of expenses beyond just the sale price. Understanding the expenses when selling a home will ensure you won’t be met with any unpleasant surprises.
Legal / Conveyancing
In most states, you are not able to sell your property unless you have a contract of sale prepared. Engaging a lawyer or a property conveyancer to ensure your real estate contract is drawn up with accuracy is an important first step. In some states, this is an essential item before you are able to even list your property for sale.
Legal and conveyancing costs vary depending on the complexity of your property, but you can expect to pay around $1500-$3000.
Professional photography of your property
Great marketing is all about using maximum exposure to capture people’s attention and interest in a property. In most cases, the first thing a buyer will see is an image or a walkthrough video of the listing. Therefore, the best way to attract potential buyers is to use a professional photographer and/or videographer who is focused on capturing the best features of a property. With 70% of buyers likely to see your property online, making sure you have high-quality, accurate images of the property will help your property stand out from the crowd.
Cost of a property photographer and professional video: Between $100-$500 for a basic package.
Marketing your property
Marketing your property to sell can help you to achieve a better asking price. However, keep in mind that marketing is a separate cost paid for by the seller on top of the commission that the agent receives when the property sells.
These funds are kept in a trust account and used to pay for marketing material such as signage, newspaper advertising, internet advertising, brochure printing, and auction marketing. A typical marketing budget is approximately 1% of the asking price. For example, on a $600,000 property, you should expect to spend $6,000 on marketing. This could be paid upfront or out of the settlement monies depending on the agreement made with the vendor.
Marketing is normally payable even if the agent does not successfully sell the property.
Budget for 1% of your asking price.
Agent commission is a percentage that is calculated on the sale price and is paid to the agent at the time of settlement. You don’t need to factor this expense in upfront as the agents commission is only paid if your property sells. The average real estate agent commission for selling a house is usually between 2% and 3% but this depends on your location.
To enhance your chances of selling, think about hiring a professional home stager to stage your home to sell. It might sound like an added expense, but it can add an extra 5%-10% of the final sale price.
Styling your home to sell is an important element to a successful sale according to 98% of LJ Hooker agents. This process includes decluttering, cleaning, depersonalizing, reorganizing existing furniture and accessories, or engaging a professional home stylist to replace most belongings and furnish the space with rented items.
To find out how to showcase your home to attract buyers, download our Styling to Sell eBook.
Cost of home staging: Depends on the size of the property, but can cost upwards of $2000.
If you’re selling your property, it’s likely you are moving to a new house. Depending on how many items you have to move, you may decide to organise a professional removalist or even do the move yourself by hiring a van and getting a few friends to help you. This is the cheapest option and will cost approximately $100 to hire a van (and $100 for beers and pizza for your mates!).
If you decide to use the services of a professional moving company it is recommended you get a quote from 2-3 different providers for the services you’re seeking. You’ll also need to decide which type of service you want. This might be a full pack, removal and unpack at your new home, or removal only. Most removalists offer insurance on top of their services, and this can be a useful tool to protect your contents from accidental loss or damage.
Budget range: $500-$3000 depending on whether you hire a professional removalist or decide to hire a van and do the move yourself.
Cost of downsizing
Despite the potential profit from selling a home, downsizing can come with some hidden costs. Some of the immediate costs you might face are real estate agent fees, the cost of marketing your property, stamp duty, and in some cases, legal fees. Given the current fluctuations in the housing market, it's also important to consider the possibility of selling your home below its anticipated value, leading to a reduced return. Moreover, the expenses related to decluttering, staging, and making necessary repairs could eat into the profit margin. Planning for these potential hidden costs is essential for a more accurate financial outlook when downsizing.
Selling an investment property
If you own an investment property and are looking to sell, there are a myriad of costs that you need to factor in. Aside from real estate agent commissions, legal fees, maintenance costs, and marketing costs, you may also need to pay a Capital Gains Tax. Depending on the profit, capital gains tax may apply, impacting the final return on investment. If you own the asset for less than 12 months, you will have to pay 100% of the capital gain at your income tax rate. If you own the asset for longer than 12 months, you will pay 50% of the capital gain. As a general rule, you can avoid capital gains tax when selling your investment property if that property is your primary place of residence (PPOR).
If you are selling your home by auction, you may have to prepare yourself for a higher cost than if you were to sell via private sale. This is because the auction process is much faster, marketing & advertising campaigns are more extensive, and there are extra fees associated including the cost of the auction itself.
If you hire an auctioneer to put your home under the hammer, you can expect to pay between $400 and $1000.
DISCLAIMER - The information provided is for guidance and informational purposes only and does not replace independent business, legal and financial advice which we strongly recommend. Whilst the information is considered true and correct at the date of publication, changes in circumstances after the time of publication may impact the accuracy of the information provided. LJ Hooker will not accept responsibility or liability for any reliance on the blog information, including but not limited to, the accuracy, currency or completeness of any information or links.Share