Selling your home can be a daunting task at first glance. The good news is that you stand to gain a sizable chunk of cash for your troubles. However, there are numerous expenses that anyone selling their home must consider.
It is particularly important to know these costs if you plan to buy another property with the cash from the sale. Knowing how much it’ll cost you to sell enables you to budget sensibly for your next home and give you a realistic target to aim for. Let’s take a look at the expenses that you as a seller should expect, both before and after closing the sale.
Pre-Listing Home Inspection ($300 – $800)
You’re not obliged to have your home inspected before putting it on the market, but it can be a very useful service. With a pre-listing inspection, you are forewarned of any issues or repairs that may need seeing to before you market your home. This enables you to act in advance, and since most buyers will require an inspection before committing to buy, it puts you one step ahead in a hot market.
This service may be covered by your Realtor, but if not, or if you’re going it alone, it can cost anywhere between $300 and $800.
Renovations, Staging and Home Prep ($500+)
You only get one chance at a first impression and in real estate, first impressions count for a lot. Anyone who is serious about selling their home would be wise to ensure their home looks stunning, both in photos and in the flesh. There are several points to consider, but the absolute basics would include a deep clean and a fresh lick of paint — inside and out.
You may also consider hiring a gardener or landscaper to fix your garden and make your curb appeal irresistible. Minor and major repairs should also be tackled, the cost of which can vary wildly. Many Realtors will include a number of these services, such as photo shoots, staging and promotion, within their fee. If you decide to sell by yourself, however, it’s well worth finding out how much each service will set you back.
Real Estate Agent’s Fees (3 – 7%)
If you do decide to hire an agent, their fee will be among your highest costs. As the seller, you’re required to pay the commission, which is generally split between your agent and the buying agent. Fees typically range between 3% – 7% of the sale price, but are negotiable – so feel free to haggle. Be sure to check what services each Realtor includes in their fee, as a low commission may not always be worth it. On top of the commission, you may have to pay a sales tax (HST) of 13% of the real estate agent’s fee.
If you decide to sell your home yourself you will avoid the commission, but will have to cover the costs of promotion. It’s well worth hiring an appraiser (around $300) to give you a solid idea of how much your home is worth, plus a real estate lawyer to help with the paperwork.
Legal Fees ($500 – $1,500)
Depending on the complexity of your sale, legal fees can vary widely. Simple sales typically start at around $500. On top of the standard legal fees, it’s likely you’ll have to cover the costs of disbursements such as registration taxes. These can add $300-$400 to your bill. And the total cost is subject to sales tax (HST), which varies depending on your location.
Bank Fees & Mortgage Discharge ($200+)
If you’re still paying the mortgage on the home you’re selling, it’s likely you’ll be subject to a mortgage discharge fee. This fee is set by your lender and typically costs around $200 – $300. You may also be required to pay a prepayment penalty, which can be extremely costly depending on how long you have left on your current mortgage term. Typically, this penalty equates to several months of mortgage payments, which often means thousands of dollars.
If you’re planning to buy a new home immediately or shortly after the sale, there’s a good chance you can avoid these penalties by requesting to transfer the balance of your current mortgage to your new one. You may still have to pay the mortgage discharge fee and additional admin costs, but overall, you’ll be better off. And if you already have your next home in mind, it’s worth thinking about escrow as well: you might have to make a money deposit to show you’re serious about buying.
The Forgotten Costs
The final costs a seller can expect to foot upon selling their home are often neglected, but together they can add up.
- Income property tax – the good news is that if your home was your primary residence, you won’t be required to pay any taxes on it when selling. However, if you’re selling an income property, you’ll need to pay capital gains tax at your marginal income tax rate.
- Utilities and taxes – these must be paid right up until you close the deal. For example, if you sell your home in the middle of the month, you will be required to pay taxes and utility bills for the first half of the month.
- Condo & Townhouse Strata Documents – it’s useful to obtain these in advance as it enables a potential buyer to review the documents and perhaps make an unconditional offer, saving you time and money. To obtain them, you’ll need to place an order with your property management company. The documents generally cost between $30 and $250, depending on how urgently you need them.
- Storage Space – while your home has been on the market, it’s likely you’ve had a big clear out. Many sellers rent storage space for the duration.
- Moving truck – when the big day comes, you’ll typically require the services of a moving company, another cost that can add considerably to the total.
Selling your home can be the end of an era and the start of a new chapter. To put you in good stead for the future, it’s well worth adding up the costs listed above and accounting for the total to avoid being surprised by it. Knowledge is power, and knowing what you actually stand to gain from selling your home enables you to make the best decisions moving forward.