How much does it cost to buy and sell?

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People share stories all the time of making huge profits from real estate and while Sydneysiders have certainly seen the value of their properties go up over recent years, many fail to realise the costs involved when it comes time to sell.

If you need to upsize, downsize or cash in an investment, selling makes sense. However, to be prepared and avoid disappointment, take a look at some of the costs involved with selling one home and buying another.

How much does it cost to buy and sell?

Selling

When you sell your home, you want to achieve the highest possible price. This may include some upfront investment.

Most of us have seen the show Selling Houses Australia, where a team of experts add thousands in value to a home with cosmetic changes. You should be able to achieve similar results (bearing in mind you will pay more than the teams on TV) by adding a fresh coat of paint, updating your home’s ‘kerb appeal’ and finishing any outstanding odd jobs.

Another area to invest in is styling, which involves a team of specialists bringing in furniture to make your house look like a show home.

All this requires some financial investment but should pay off in spades, sometimes adding tens of thousands in value.

The next cost of selling is your real estate agent, who will charge a commission to sell your home. Generally this expense is around 2 per cent of the final sale price but some agents offer sliding scale commission structures as well. Again, this is an investment. Without an agent, you wouldn’t be able to reach the buyers who are most interested in your home. You could potentially come up against a shrewd negotiator who will come at you with a lot of data and talk you down in price. You may also fail to see the ‘easy wins’ when it comes to value-adding upgrades.

Some agents may request you pay marketing fees. This covers the cost of a property photographer, copywriter and listing your advertisement across websites, newspapers, magazines and property brochures. The aim of this strategy is to ensure your home is seen by as many potential buyers as possible. Having just two very interested parties can push the price up significantly so imagine the possibility if there are three or more keen buyers.

When you sell, you will also need a conveyancer. This professional will sort out the legal details so you can transfer ownership of your home to someone else. Conveyancers have an important role to play and will charge between $1,000 and $2,000.

If you do not live in your property, you may have to pay capital gains taxes. The amount you pay will vary depending on a few factors, including how long you have owned the property for, how much you paid for it, how much you have sold it for and your income. You accountant can give specific advice about this but take a look at an online CGT calculator to get a basic idea.

It is worth mentioning that if you live overseas, Capital Gains Tax may apply if you sell an Australian property after June 30 this year, even if it was your main residence and not an investment. If you’re concerned about this, have a chat with your real estate agent and accountant.

Finally, you will need to speak to your bank about mortgage exit fees and the cost of a bridging loan, should you need one to allow you to buy before you sell.

Buying

When you buy, you do not need to pay the selling agent commission, but you may enlist the help of a buyer’s agent to help with your search and price negotiation. This specialist can help you pay the right price and secure a property sooner, but they will also charge commission on your purchase.

Before you purchase a home, building inspections are recommended. These can cost upwards of $500 per property. When buying at auction, sometimes the owner will already have a building inspection done, which you can buy from the inspector online at a discount rate. Make sure you are serious about purchasing a home before you order a building inspection or these costs will quickly add up.

Conveyancing fees apply to the buyer as well. The legal transfer will cost around the same price as it did when you sold your home.

Then there is stamp duty, a sum paid to the government when you purchase your second or subsequent home. As with capital gains tax, this cost depends on the price of the home, the type of property and how you intend to use the home (e.g. investment vs residential home). As a general guide, in NSW you can expect the tax to be around $40,000 for a $1 million home you intend to live in. Click here to view our stamp duty calculator: https://www.jdhrealestate.com.au/resources/resources

A mortgage registration fee of between $100 and $200 will also apply. Your bank may request some funds to rearrange your mortgage or set up a new one as you transition into your new property.

Depending on how much of a deposit you have for your new home, mortgage insurance is another potential expense. However, if you are upgrading or downsizing, you should be able to avoid this.

Finally, there is the cost of cleaning the home you are leaving. This will depend on how much elbow grease you wish to apply yourself, how much work there is to be done and the people you employ to help you (note the beer economy applies for asking friends to help you move).

Buying a new home and selling your old one can be expensive. It helps to be aware of the costs involved when planning your next move and to speak with your mortgage broker and accountant to be clear on what you can afford.

In addition, it is imperative you have the help of an experienced local real estate agent. This professional will help you achieve top dollar for your home so you have more funds to play with when it is time to buy the next one.

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Read our report on how to have a successful home sale, even within these unusual times of COVID-19.