If you are using a real estate agent to help you sell your home, you are probably prepared to pay agent’s commission, but did you now that there are also other hidden costs that you might not have been aware of?
The Australian property market is big, and data released by CoreLogic estimated the Australian Residential Real Estate market to be worth $7.4 trillion in November 2017.
What are The Hidden Cost When Selling Your Home?
It goes without saying that there certainly is money to be made in real estate, but very often, home sellers disregard the extra costs associated with selling a property. These costs will ultimately have an effect on the amount of profit a home seller makes on the sale of their property, but if home sellers take them into account when setting up a budget for the sale of their property, they can plan efficiently, so as to not spend unnecessarily large amounts on things like moving and marketing.
When speaking to a reputable, qualified and experienced estate agent, he or she will lay these hidden costs out for you, but it is always good to know what you are letting yourself in for.
This article provides a breakdown of some of the extra costs that you’ll incur when selling your property. Take note of them, plan for them, shop around to get the best possible price, and you’ll still be able to make a fair amount of money on the sale of your property – with the help of a real estate agent that knows how to sell at the right price, of course!
1. Maintenance costs
Before putting your house on the market, it is important to ensure that all maintenance to the property has been done. A house that seems dilapidated will struggle to sell, and maintenance is important when it comes to the first impression your property creates with potential buyers.
Meticulous buyers will keep an eye out for a number of key concerns when coming to view your property, and you should take special care to ensure that these are in order before putting your house on the market.
Plumbing and any other water-related repairs need to be done as soon as you become aware of water intrusion due to leaks, signs of damp, water stains and corrosion. A musty smell will immediately signal trouble to potential buyers, so it is of paramount importance to ensure that these repairs and maintenance are done before you give your real estate agent the green light to go ahead and bring potential buyers to see your property.
In addition, giving walls a fresh coat of paint after patching up cracks goes a long way to enhance the cosmetic and aesthetic appearance of your home to potential buyers. Pay attention to do maintenance to the roof and ceilings of your home, because a roof or ceiling that has fallen into a state of disrepair is another aspect that buyers immediately steer clear of.
The cost of maintenance will depend on what must be done, and what the size of the task that needs to be undertaken is. Your real estate agent will be able to advise on what maintenance absolutely needs to be done, and what can possibly be left to the new owners (should you decide to sell your home as a fixer-upper, rather than a property that can be moved into without the need of further enhancements, additions or repairs).
If they don’t take on the task themselves just before moving out of a current property, home sellers will have to get the home thoroughly cleaned (this includes having the carpets and windows of the house cleaned, as well as tidying up the garden). In this regard, the amount of money that professional cleaning and landscaping services charge is justified, as these masters of their trade know exactly how to get into those nooks and crannies that you haven’t cleaned since first moving into the property.
While it is true that maintenance is an additional cost that home sellers may not have taken into consideration, neglecting to do the necessary maintenance before your house goes onto the market – where it will be competing with hundreds of other properties – can have a definite influence on when and if your house will sell. Home sellers should look at maintenance as an expense that is not just justified, but is also imperative if you want your house to sell at the right price.
2. Moving costs
If you have been living in the property you are looking to sell, it goes without saying that you will have to move somewhere else. Moving costs are expenses that are often last on the list for sellers, but it can be quite costly and should not be forgotten. In fact, a recent study found that 50% of the people that were surveyed had not budgeted for the costs associated with moving, while a further 48% had exceeded their moving budget.
ING’s Cost of Moving Home Report also revealed the average cost that removalists (these are the service providers that help you get your belongings from one property to another) charge is $1,618, even though these costs may vary widely, from $2,099 for moving furniture and belongings, but not packing and unpacking them, to $3,655 when removalists do everything, including packing and unpacking.
Removalists charge for their services either by the hour or half hour, or with a flat fee. If the company you use to help you move opts to structure their pricing using the latter option, someone will be sent out to assess the size of your move and provide a quote detailing what is charged for what. Many home sellers might prefer this option, because it gives them an accurate idea of what to budget for beforehand. A time-based bill is more difficult to budget for because of the many factors that are in play on move day – traffic, for instance, could unexpectedly delay the process significantly, leading to more time spent and a higher price charged. On the other hand, home sellers can stand to save a lot of money on their move if the process takes less time than expected.
Whichever way a removalist service chooses to quote, the distance that you will be moving also has an influence on the final price. Moving less than 20km sets home sellers back an average of $1,116, while costs escalate as the distance increases. Moving 100km within the same state costs an average of $2,501, but moving interstate will cost an average of $3,606.
Of course, the size of the home you are moving will have an influence on the price you ultimately pay to transport items to a new home. The ING study found that the average price of moving a two-bedroom apartment or smaller was $1,197, while $1,460 was charged for a three-bedroom house on average, and moving a house with four or more bedrooms cost $2,329.
When looking for a removalist to help you move house, take care to look for companies that are registered with the Australian Furniture Removers Association (AFRA). Accreditation by this body requires its members to adhere to minimum standards for equipment, training and insurance cover, and when you are having people you don’t know move all of your earthly possessions, this should set your mind at ease.
Still, using removalists to help you move is not a requirement, and many home sellers opt to handle the move themselves, utilising their own car or trailer (in which case the average cost was determined to be $624 in the ING study) or by hiring a truck or trailer (of which the average cost was determined to be $782).
Whichever way you look at it, you will have to pay something to get your possessions from one home to another, and because of the high costs associated with this, including moving costs in your budget daren’t be forgotten.
3. Marketing costs
Aside from agent’s commission, which is a given, agencies might also charge for the marketing of the property. This includes listing on real estate websites, listing in newspapers, and professional photography or videos that may be used in marketing your property to buyers. Marketing is usually charged separately from commission, so confirm the cost of this with your real estate agent.
The cost of advertising and marketing campaigns may vary widely from state to state, city to city and agency to agency, but all campaigns have certain elements in common.
- Real estate agencies use professional photographers (and sometimes videographers) to document your home for marketing in print and online media. Costs for photographers typically vary between $300 and $800, but this depends on the rates of the photographer.
- The “For Sale” signboard that is put outside your home costs roughly $300 to $400.
- A drawn-up floor plan of your property costs $370 on average
- The printing costs of the brochures that are handed out at home inspections come to about $200.
These are the basic marketing costs involved in selling your property, and we haven’t even gotten to additional print advertising in newspapers, or online advertising through the many real estate portals on the internet. All in all, marketing costs for your property could easily reach over $6,000, and $4,000 if you opt not to use print advertisements.
If you doubt whether proper marketing could have a meaningful influence on the interest there is in your property, consider the following example. In 2012, JA Group auctioneers randomly sampled 365 auctions and split them into two groups. The first group consisted of properties where owners spent less than $5,000 in total on their marketing campaign, whereas the second group of property owners spent an amount greater than $5,000.
The first group (consisting of 282 out of the 365 properties) received 13.3 groups of inspections over a period of five weeks, whilst the second group (made up of only 82 properties) received 32.2 groups of inspections over the same time period. This means that a wider marketing campaign yielded more than twice the amount of home inspections for the second group, leading to a greater amount of potential buyers that were reached, together with a greater level of buyer competition and, potentially, a better sales result.
4. Legal fees
The term “conveyancing” refers to the legal transfer of ownership from the seller to the buyer. Conveyancing is usually managed by a solicitor or conveyancer who is a member of the Law Society. Should you employ the services of a conveyancer or solicitor to help you manage the sales contract and other legal fees, this will be an extra cost.
Conveyancing fees for sellers in Australia are broken down into three categories:
- The fixed professional legal fee, made up of the lawyer’s and conveyancer’s time, the labour and the conveyancing works.
- Standard search fees, including utilities, third-party costs payable to the council, etc.
- Additional costs which cover services that are not included in the standard conveyance and standard search fees, like the General Power of Attorney draft or review, the Licence Agreement drafting or review, the caveat lodgement or the Deed of Rescission drafting or review.
Being unfamiliar with any of the terms relating to conveyancing is exactly why you will need a professional conveyancer or solicitor to handle this part of the selling process. Costs may vary, but it is of the essence that you use someone who is qualified and experienced. When you start searching for a conveyancer, remember to ask whether they are licensed with the Australian Institute of Conveyancers.
A detailed, albeit not specific breakdown of conveyancing costs in your state is available online. Take note that this does not necessarily guarantee that you will pay the exact amount mentioned, as different states have different legislation and requirements for searches, and conveyancing fees for a specific property depend on the specific lot, the different parties that are involved in the transaction, as well as a person’s specific goals and needs.
When deciding on a solicitor, shop around and remember to ask for references, as these will give you a good idea of who you are dealing with. Even if people are increasingly buying do-it-yourself kits, which enable them to handle the conveyancing requirements themselves, it is always advisable to use a professional, as small mistakes can cost a home seller dearly. On the bright side, conveyancing fees that are charged to the seller are typically a little lower than the conveyancing fees a buyer has to pay.
5. Bank charges and outstanding council rates and/or body corporate
If you have a home loan with a bank, the bank will charge handling fees to close down your loan. Mortgagage discharge fees, settlement fees and government fees for sellers typically come to roughly $150 to $600. However, loans that are fixed for a certain amount of time might incur an exit fee and early repayment costs, which could be quite large. Contact your lender in advance to find out how much these fees may be. Your solicitor or conveyancer can handle this on your behalf if you sign your lender’s discharge form and hand it over to them.
What exactly you’ll have to pay depends on the amount that is still outstanding on your mortgage at the time of sale. Should the amount that is outstanding on your mortgage be greater than the price your property fetches when it is sold, it is known as a negative equity. This may be the case for home sellers that bought their property at the top of a housing cycle, but sell when there is a downturn in the property market. In the case of negative equity, home sellers will still be required to settle the outstanding amount by making repayments at the same rate as they used to before.
However, if a person sells for an amount greater than the outstanding amount of the mortgage, the seller will simply be required to submit the discharge form to the lender via a conveyancer or solicitor about a month before the settlement date in the contract. A discharge request will take approximately 2 to 4 weeks to process the discharge request, and it is important to submit the request in a timeous fashion to leave enough time for processing before settlement day.
Another aspect of the final costs that a home seller needs to pay is to settle any outstanding council rates and body corporate (if the property is located in a townhouse or villa complex) before the property changes hands. These fees are usually paid every quarter, so it could be possible that you have a month or two outstanding by the time of sale. Make sure what these amounts are, and settle them before the new owner takes control of the property.
Home sellers are often not informed about the totals costs involved with the selling of a property. There are a number of additional costs that home sellers are required to pay, aside from payment for the services of a qualified, licensed and experienced real estate agent.
These include costs associated with maintenance and repairs to the property that is being sold. Depending on the amount of maintenance or repairs that a property requires, these costs may become quite high, but home sellers should take note that they are necessary if the home is to be sold in a timely fashion at the best possible price.
Another cost that home sellers may not have bargained for is the cost of the marketing of the property, which is often not included in the fees that a real estate agent charges for their services. Because photographers and other service providers are often outsourced, home sellers will have to pay these separately. If the home seller has any doubt as to whether professional photos, floor plans, flyers and advertising on online real estate portals are really necessary, they needn’t look any further than the amount of time that it took for properties that did include these things in their marketing to be sold.
Even if many home sellers are opting to handle conveyancing and other aspects of the legal transfer of their property themselves, experts recommend that people employ the services of a professional in this regard, as the technicalities that are associated with this process do not fall within the field of expertise of the average Joe, and mistakes are easily made.
Banks charge mortgage discharge fees when a property is sold, and this is but one of the fees that banks may charge when a home is sold, depending on the type of sale and the outstanding amount owed on the mortgage. Your conveyancer, solicitor and real estate agent will be able to explain the details of your personal situation more clearly, but home sellers are advised to make contact with their lenders early, to ensure that all fees are paid before the settlement date.
Lastly, moving costs should not be disregarded. Even if half of home sellers do not work these into their budget, the costs associated with moving belongings from one dwelling to another can turn out to be much higher than expected. Home sellers will have to decide whether they want to handle the move themselves, or if they will use the services of removalists to assist them, but all of these options will cost an amount of money. Deciding which option works best for the seller and budgeting for it will ensure that home sellers don’t get a nasty surprise, come move day.
An experienced and qualified real estate agent will always be transparent about the amount that is charged for his or her services, aside from commission. Consult with your real estate agent about the other costs associated with selling your property, and he or she will recommend someone to help with the more technical financial aspects regarding the sale of your home.
If you are still looking for a real estate agent you can trust with the sale of your property, look no further than Perfect Agent – our service is completely free, and the agents we recommend are based on your personal needs and preferences.