Selling your home can cost you a lot more than you realize. Before you list, it’s important to be aware of all the hidden expenses that can seriously eat away at your profits.
As a seasoned realtor, I’ve heard stories, even from the savviest of sellers, getting blindsided by unexpected costs. If you want to avoid losing more money than you planned, stay with me as I reveal the hidden costs that can arise when selling your home.
Let’s dive in and get you fully prepared to maximize your sale and avoid those costly surprises.
Real Estate Agent Commissions
As you know, real estate agents charge a commission fee to list and sell your home. That fee is based on the selling price of your home. Which when paid out is split between the listing agent’s brokerage and the buyer’s agent’s brokerage.
Now, this fee can vary by province and individual agent agreements. For example, in the Vancouver area the Listing agent often charges 7% on the first $100,000 and 3% on the balance.
IMPORTANT NOTE: It’s important to be aware, that commission fees can vary from one REALTOR to the next based on they’re specific business model and the services they provide. However, seven and three is what a lot of sellers will pay to list their home.
But what exactly does “7% on the first $100,000 and 3% on the balance” mean to you the seller? To ensure that you are not up for an unexpected surprise, let’s break it down with a quick example…
Let’s imagine you were to sell your home for say a $600,000. In this case, you would pay $7,000 on the first $100,000 of the sale price and $15,000 on the remaining $400,000 for a total of $22,000.
As a side note, not that it really matters to you, but just so you’re aware, the full amount of $22,000 does not go directly into your listing agent’s pocket. Approximately half of it goes to the buyers brokerage and the remainder goes to your listing agents brokerage. Then, each of the brokerages takes their split and pays the balance to their respective agents.
Again, it’s important to note that the commission fee you will pay as a seller will be dependent upon the agent you choose and the province in which you are selling your home.
In Toronto for example, sellers will commonly (but not always) pay their agent a flat 5% commission fee. Again this wlll vary based on the individual agent business model and services offeded.
But for the purpose of our example, if you’re home were to sell for $600,000 the total commission you would pay your listing agent would be $30,000.
Legal Fees
You’ll need to hire a lawyer or notary to handle the legal aspects of the sale, including reviewing the purchase agreement, preparing legal documents, handling the discharge of your mortgage, and ensuring a clear title transfer. Legal fees generally range from $500 to $2,000.
Interestingly, notaries often turn out to be more expensive than lawyers. Make sure to do your homework when interviewing both.
Mortgage Discharge Fees
If you have a mortgage on your property, you may have to pay a penalty for paying it off early. This could be a few months’ worth of interest or an interest rate differential (IRD) fee. Additionally, lenders may charge a fee to discharge the mortgage, which can cost an additional $200 to $500.
Property Repairs and Staging
Necessary repairs and maintenance to make your property more marketable can add up. For instance, painting your home can cost between $500 for touch-ups to over $10,000 for a full interior and exterior job.
Professional staging can help sell your home faster and for a higher price, but costs range from $1,000 to $5,000 or more. Even without full staging, sprucing up your home with new bedspreads, throw pillows, and towels can make a big difference.
Moving Costs
Moving expenses include hiring a truck and movers, packing supplies, and transportation costs. These can vary widely based on the distance and amount of belongings, from a couple of thousand dollars for local moves to tens of thousands for cross-country relocations.
Capital Gains Tax (if applicable)
If the home you’re selling is your primary residence, you’re exempt from capital gains tax. However, if it’s an investment property or secondary residence, you’ll need to pay capital gains tax on the profit. Consult your accountant to understand the tax implications.
Miscellaneous Costs
Don’t forget about smaller miscellaneous expenses, such as bank fees for wire transfers and utility hook-up fees for transferring utilities to the new owner. It’s crucial to budget for these costs to avoid surprises.
Final Thoughts
When selling real estate, it’s important to budget for these various costs to avoid surprises. Ask your realtor or mortgage broker for a Net Sheet to help determine your net proceeds from the sale after all expenses are accounted for.
If you’re in the Fraser Valley—namely Surrey, White Rock, or Langley—and would like help selling your home, click the link below to schedule a call with me. If you live elsewhere in Canada, I can connect you with a fantastic agent in your area.
