Most of the real estate investors flock to buy properties knowing that it would get them huge profit. Of course, it does. But it needs high cash flow to begin. And do you know that there are also some hidden costs of selling a house apart from the price of the property, that cannot be avoided. From agent’s commission to the cost involved in the maintenance of the property, there are loads of charges that add up quickly when selling a house.
So, if you have invested in a property, then you should also be ready to pay the expenses associated with the process. Moreover, it is good to know all the cost factors before you invest in any another property.
This guide will help you learn about those unknown charges and help you calculate the estimate cost of selling a house.
Renovation or Maintenance
Before selling a property, you will have to make it market ready. It is worth spending some money on appearance and the maintenance of the house to make it more appealing. This would help in increasing the sale price of your property. Any professional agent would recommend you do so. But it doesn’t mean you have to renovate it altogether. Here are few things you need to work on that can actually pay huge dividends.
- Necessary repairs:
Some basic repairs do not cost much, but they are able to add to your property value by thousands of dollars. Just imagine the buyer finds the paint peeling off from walls and rusty drains, chances are, he would not make an offer, or will bargain on sale price for Home Renovations.
So, identify those trouble spots and make sure, there are no leaning fences, chipping off paint, and cracked tiles or pavements. To make it less expensive, you can even use DIY for easy fixes. But if it is not your cup of tea, then hire a professional rather than doing it yourself.
- Property cleaning:
Undoubtedly, a clean and tidy property looks more presentable. So, it is a must to clean the house pre-sale. Have a thorough inspection of windows, walls, floor, and furniture. If there is any sticky dirt on furniture or walls, a pressure cleaning service is a good option.
Also, the outdoor yard of your house should be clean and tidy. You cannot expect a good price of your property if its entrance is non-appealing. And don’t forget about the lawn too. Garden maintenance and landscaping is not very costly, so why not jazz it up.
- Functioning kitchen and bathroom:
Most of the buyers look for an elegant kitchen because it is an essential part of day-to-day living. Although, renovating a kitchen is an expensive deal, but its investment is worthy too. Additionally, a bathroom renovation can also be effective to increase your property value. Look for basic fixes, clean it properly, and get the floor and tiles polished. This is all you need to do.
Real Estate Agent Fee
The commission fee of real estate agent could be thousands of dollars depending on the value of your property. The commission fee varies according to different agents and suburbs. There are two ways to pay the Real Estate Agent fee: one is tiered and other is fixed.
The fixed fee is paid as per settlement in which the price of property doesn’t matter. Basically, the average fixed commission fee is 2-3% of the sale price.
Suppose you want to sell your property at $550,000 and the commission fee is settled at a rate say 2.5%. The agent would get 2.5% commission on the sale price regardless if it is sold at $500,000 or $590,000.
On the other hand, a tiered fee depends upon the selling price of the property. It is arranged to get most out of a sale and is beneficial for both seller and the agent. Let’s make it more clear with an example. So, taking the same example, if you wanted to sell the property at a cost of $550,000, the seller would agree to pay 2.5% commission at any amount less than $550,000. But if the agent is able to kick the sale price above the given amount, then he will get 5% commission on the sale price.
We know that a magnificent marketing strategy works wonders for any kind of sales. So, it is obvious that you need to pay for marketing as well. This may include the cost of ads in newspaper, magazines, flyers, and signboards. Also, it includes the online advertising expenses on website and social media.
Your agent would help running the marketing campaigns and the average cost spend on this should be around 1 percent of the estimated sale price.
A conveyancer is responsible for doing the legal work and transfer the ownership of property to the buyer. So, there are associated conveyancing fees to handle the property transfer. It is good to hire a local person as he would have experience about the local market and would be able to deal with buyer in an efficient way.
If you are selling your properly, you’ll have to pay mortgage discharge fees in case of early exit. So, this could be an additional charge which cannot be avoided.
Capital Gains Tax (CGT)
Another cost to consider is capital gains tax applied on an investment property. That means you will pay CGT if the property you are selling is an investment property and you’d need to pay this if you make a profit from the property. The Capital gains tax is generally calculated on basis of profit you have made from the property subtracting the expenses you applied on the property.
Overall cost of selling a house
So, the overall cost for selling a house includes:
- Home maintenance – $1500 to $9000
- Agent commission – 2% to3%
- Marketing costs – $500 to $5000
- Conveyancing Fees – $600 to $2000
- Lender’s fees – $100 – $2000
Note that the given expenses include the average charges and it varies for different suburbs in Australia.