When selling your property the price that your property sells for isn’t necessarily going to be the amount of money that you get into your bank account on settlement day.
So what are the hidden extra costs when selling a property in Australia?
There are many – Here are 10 hidden extra costs so you can know exactly what expenses you’re join to have to pay for when it comes time to sell your property
So let’s have a look at what they are:
Expense number one: Which is one that we all know about and that’s your agent commission. Now agent commissions tend to range between two to three percent however it is a deregulated market so they can effectively charge whatever they want. I have seen agents charge as little as one point one percent, I have seen agents charge over three percent, I have seen agents charge a varying percentage based on the valuation of your property.
So a more expensive property for example; one over a million might attract a lower percentage rate than a cheaper property around five hundred thousand dollars. So it really does vary on your area the best thing to do is to interview a few agents maybe three and to get their valuations of your property as well as find out exactly what they’ll do for you and what day charge in terms of percentage. The goal is not to save as much money as possible on your agent commission; the goal is to make the most profit from your property, and you paying a better agent a high commission to get a higher value for your property which includes more profit even though you’ve got a higher expense. To me that’s seems worthwhile.
Expense number two: Is marketing and so this is something that’s charged separate to the agent Commission so the agent commission is for getting the sale but marketing obviously helps facilitate the sale by getting the property out there. So this includes listing in newspapers, listing on the real estate’s web sites like realestate.com.au and domain.com.au it could involve professional photography which Sam Towns recommends it could be getting video for your property if you’re interested in that then I talked about videos in more detail with Sam Town from Petrusma real estate over at episode 104. So you can get that onproperty.com/104 but there’s all these different ways that you can market your property but these are all going to add extra expense to you as the vender selling the property.
So in most cases you’re going to have to pay for the ads in the newspaper, you’re going to have to pay for the video to be made, you’re going to have to pay to list on the real estate website these are all expenses that are going to come out of your pocket.
Expense number three: Is capital gains tax: So unless this has been your principal place of residence so unless it has being your main home for the entirety of owning the property then you going to be liable for some capital gains tax. Now I’m not an accountant so I’m not going to go into full detail about exactly how much capital gains tax you’re going to be charged because there’s so many different factors you need to look at such as profit, you need to look at how much you are currently earning in that financial year, you need to look at depreciation there is so many different things that you need to take into account.
But capital gains tax is going to be a major expense if it’s been an investment property for the full time or even if it’s been an investment property just for a portion of the time.
Expense number four: Is your legal fee so you will need to hire a solicitor or a Conveyancer in order to manage the contractor’s sales for you and to make sure that everything goes smoothly. So prices for conveyancors and solicitors vary can be as little as five hundred or a thousand dollars if you’re just using a conveyancor or it can go as high as three thousand dollars or more when you’re using a solicitor. So depending on who you go with and how difficult the property is all the price can vary brightly. So again do your research because research is so important to get the best bank for you back, again you don’t want to be a cheapskate and get someone really cheap but who cause all these headaches and issues for you but then you don’t want to spend too much if you don’t actually need that high level of service. So it’s about finding the right fit for you to get exactly what you need within your price range.
Expense number five: Is bank charges and so these are charges that may be associated with you for saving money from the person purchasing the property for you or it may be charges associated with getting out of your loan. So the banks may charge handling fees or different sorts of fees in order to close down your loan.
Expense number six: Which is along the same lines is getting out of your loan. So you’ve got a fixed-loan or if you’ve got exit fees that you need to pay to get out of a loan early because you haven’t finished it up then you’re going to be charged fees in order to do that. Fixed loans a fixed for certain amount of time and often if you choose to break that fixed loan there are large fees associated with that. Variable rates up different and the exit fees have actually gone down significantly over the last 10 years or so, so they’re not that big a deal but it is an expense that you need to take into account.
Expense number seven: Is getting the property ready. So this can be anything from doing basic cleaning basic maintenance but it could pay, you know, doing a full renovation of your property it could be getting painters in to paint the property or a landscaper in to do the gardens. There is so many different ways that you can spruce up your property and get it ready that you need to factor that into your budget. If you’re going to go ahead and do something like staging where you hire furniture to put in the property for the open for inspections and for the professional photos, well then you need to take that into account in your budget.
Expense number eight: Is the property laying Vacant: So if this is an investment property and you’re selling it then chances are that you may want to sell that property without attendant in place. What this means is that the person buying the property can be an owner and can move into the property. If you have a tenant agreement if you have a lease agreement then chances are that it’s going to put off a lot of first-time buyers, it’s going to put off a lot of owner occupiers you want to move into the property as soon as they own it.
So by having a tenant in place it can actually get rid of a portion of your market meaning you don’t get the best price for your property. So it may be a better idea for you to have your property laying vacant but what that means is you’re not getting that rental income in while the property is on the market and while you going through your whole settlement process.
So speak to your local real estate agent about whether or not having a tenant in place is a plus for the property or whether it’s going to be a negative and make it harder to sell but that’s an expense that you may need to take into account.
Expense number nine: Is your outstanding council rates so when you exchange the property it’s not all done and dusted because if you have had a certain amount of period it may be two out of three months of a quarter that you owned of the property and the council rates come in, well you need to pay your portion of the council rates so that might be two-thirds of a quarters Council rates. I don’t know exactly how this is worked out or whether you can actually get out of this when selling a property.
So it’s best to speak to your Conveyance or your solicitor about this because they know more about property law and they’ll be able to help you understand if you’ll have to pay this or if you can get out of it.
Expense number ten: Is outstanding body corporate. So this is similar to the outstanding Council rates but if you live in a unit or Striatal complex something like a townhouse complex or a villa complex you may have outstanding body corporate fees that you need to pay and again it’s probably worth on the same scale where’s if it’s paid quarterly and you where there two out of three months of the quarter you might need to pay of those cost. But again my guess is that or body corporate are different and may means that the new buyer who takes over needs to pay for a full quarter of body corporate rates even though they only been there one month. So you may be able to get out of it but it’s not one hundred percent secure.
So there you have ten hidden extra cost when selling your property so many different things that you need to take into account. So at the end to the day it’s not so much what your property sells for it’s how much money that you actually get added that back into your pocket.
If you want the full transcription of the downloadable podcast of this Episode then head over to Onproperty.com.au/119 for episode 119 and there is also the links over there to check out the cost when owning a property on an ongoing basis and the costs when buying a property as well. So if you’re interested in that head over to Onroperty.com.au/119.
So until tomorrow when the next episode comes up remember that your long-term success is only in shape one day at a time.
Today’s episode is sponsored by Blue Horizons Property – Corr and Helene have already helped hundreds of investors invest in positive cash flow properties with high growth potential in the Surat Basin in Queensland. Don’t invest in the wrong area. View their featured listings for their latest properties.