What’s the cost of selling a house?

There are plenty of reasons you might be thinking about selling your home. Over time, your needs change. You and your family may have outgrown your current home. You might be looking to downsize in retirement. Or perhaps you’re ready to sell an investment property.

Whatever the reason – selling your home can be an exciting time, especially if you’re looking like you might make some money on the sale. But it’s important to keep in mind that there are also costs and fees that come with selling property.

Depending on your location and situation, the costs of selling property in Australia isn’t always the same across the board. The fees and commissions you might need to pay can vary based on the state you’re in – and are generally higher in metro areas like Sydney and Melbourne. There are also voluntary costs you might decide to pay, as well as non-negotiable costs that you’ll need to budget for.

Generally, there are four main costs you'll need to factor in when selling a property:

• Real estate agent fees or commission
• Marketing costs
• Conveyancing fees
  
• Capital gains tax (CGT)

Let’s explore what these costs are all about – and find out which ones you might need to pay.

Real estate agent fees - someone to guide you

When it comes to selling a property, most people choose to work with a real estate agent to get the job done. An agent is someone in your corner, looking out for your best interests and will do all the heavy lifting for you. From listing the property and arranging open homes, to generating interest through marketing and negotiating with potential buyers – your real estate agent will guide you through the entire selling process.

There are two main ways agents charge for their service:

1. Flat fee – the agent and vendor or seller (which is you) agree on a fixed fee that stays the same no matter what the property sells for.
2. Commission – the agent receives a percentage of the sale price of the home – usually between 1 and 3 per cent. The rate an agent charges can depend on a number of things, including the property value, the agent’s experience and if there was strong competition between agents to take on the job.

You could also choose to use a bonus structure with your real estate agent. This is a voluntary cost that you might decide to pay. If your home sells for a higher price than the agreed reserve, then you pay a percentage of the difference between the reserve price and the final sale price to the agent for their work. The benefit of using a bonus structure is that it might motivate your agent to push potential buyers for a higher sale price – which is a good thing for you!

To save on costs, some sellers choose to sell their property privately (without the assistance of a real estate agent). This way might save you a bit of money, but it can get pretty stressful. Most people prefer to engage an agent to lean on their experience and make the selling process as stress-free and seamless as possible.

Marketing costs - building a buzz

Marketing your property to potential buyers is an important part of the selling process. It’s how you drum up interest and get the eyes of potential buyers on your property.

This is a cost that can vary quite a bit depending on your situation – as each real estate listing is unique, with real estate agents opting to use different marketing campaigns and strategies to showcase the value of your home to potential buyers. Your property can be marketed in a range of ways, including things like signage out the front of the residence, online listings on home sales websites (like realestate.com.au or domain.com.au) or print ads in the local paper.

Marketing costs generally include professional photography or videography, and in some cases, home styling or staging. Home staging involves a professional stylist adding furniture and décor to help make your home look as attractive as possible to buyers, and in turn, potentially increase the market value of your home.

Conveyancing fees - getting the sale over the line

Conveyancing fees are non-negotiable costs as part of selling your home. These are legal fees paid for the transfer of ownership of a property from one person to another.

There are a number of legal documents that need to be prepared and processed in order to finalise the sale – so you’ll need to get a licensed and accredited conveyancer or solicitor to manage this part of the selling process. These fees usually sit around $800 and $2,000 – so remember to factor this into your budget.

Lender fees - finalising your mortgage

If you have a mortgage on your current home, you might also need to pay lender fees as part of the sale process. These fees might include things like:

• mortgage discharge fees
• early exit fees (often associated with breaking fixed term loans)
• settlement fees.

These charges depend on your bank – so it’s a good idea to check in with them to see which ones might be relevant to you before your property is put on the market.

If you’re purchasing another property, you may be able to save on these costs by choosing to keep your mortgage with your current lender. You don’t necessarily have to exit your current mortgage just because you’re selling a property. Many home loans give you the option of taking your mortgage with you when you move into your next home – this is known as loan portability or substitution of security.

Loan portability could also be a way for you to speed up the process. Rather than applying for a whole new loan, loan portability lets you transfer your existing loan to your new property - which is generally a faster option. It also helps you avoid some of the upfront costs involved with exiting a home loan and applying for a new one.

In some cases, you might have found your new home, but your current property might still be on the market. A bridging loan could help you see through the period between selling your existing property and getting into your new home. This is a short-term loan (usually up to 12 months) that gives you the option to make repayments only on your existing loan – but once you sell your current property, you’ll need to pay off the interest on your bridging loan. The size of your bridging loan is usually calculated by the amount of equity you have in your current home and your borrowing capacity.

Capital gains tax - paying for your profit

When the time comes to sell your property, you will hopefully be selling for a higher price than what was originally paid for it, plus transaction costs. If this happens, you’ll have made a capital gain – and that will be subject to capital gains tax (CGT) on any profits made.

You generally won’t pay CGT on capital gains from selling your primary place of residence, but you will if you sell your investment property.

The amount of CGT you’ll pay depends on a few factors, including how long you’ve owned the property, what your marginal tax rate is, and whether you’ve also made any capital losses from other sources that is available to offset your capital gains.

CGT discount of 50% is generally available for individual resident taxpayer who own an asset for 12 months or more. If you sell your investment property before 12 months, you won’t be entitled to the CGT discount. CGT is only applicable on the sale of an asset purchased from 20 September 1985.

As the capital gains calculation can be complex, it is recommended that you consult your tax adviser to ensure your capital gains tax is calculated correctly.

Extra costs - boost your home’s value

As mentioned, there are a few common costs that most sellers end up paying, but let’s explore some of the additional costs that you might want to think about. Although these costs aren't mandatory, they could potentially increase the value of your home – so they’re worth considering. These costs include things like:

• Professional deep cleaning (inside and out)
• Carpet cleaning
• Lawn mowing and landscaping
• General repairs or upgrades to fixtures
• Renovations

Ready to sell up and move on up?

Let’s go on the journey together. At BankSA, we're with you every step of the way. Questions about selling your property and moving into your next home? All you have to do is reach out. Call us on 1300 304 660 or visit your local branch to chat to a BankSA home loan expert about how you can make your next move count.