Ten essential budget items for buying and selling property at the same time
Here are 10 costs to consider that will help you to avoid financial stress while you’ve got your property up for sale and you’re scouring the market looking for your next home.
Never take your eye off the ball. Anyone who’s played cricket or tennis knows that is a crucial piece of advice. When it comes to buying and selling property at the same time, taking your eye off the ball means getting distracted with one side of the equation, maybe that beautiful new home near the beach, and you end up copping a bouncer when costs you haven’t considered sneak up on you. To get you started, we’ve got both sides of the process covered.
Real estate agent’s fee
Real estate agents often work in two ways: flat fee or commission, a percentage of the final sale price. This is generally between 1% and 3%, but be warned, cheaper is not always better. You are buying experience and knowledge to get a premium sales price.
The vendor covers the cost of marketing. A good marketing campaign will include photography, video if it’s a premium property, a floor plan, copywriting, and production of any brochures and flyers that are used for inspections and auctions. A rule of thumb is to budget 1% of the sale price for advertising ($7,500 on a $750,000 home), but this can vary depending on the marketability of the property, and the type of buyer we want to target.
You need a licensed conveyancer or solicitor to transfer the legal ownership of the property. Solicitors can often cost more but have more legal expertise and can also offer advice when the property transaction involves more complex contracts, as well as advising on estate planning to ensure your assets are protected. It’s best to get quotes, but expect to pay up to $2,000 depending on the nature of their involvement.
Mortgage exit fees
The majority of lenders charge exit fees when you sell your property, and for some loan types, you may have to pay early repayment costs. Talk to your lender about the costs specific to your mortgage but count on spending anywhere between $150 and $1,500.
A nice throw rug on your favourite, but tired-liking chair, or the temporary addition of plants and other finishing touches can add a wow factor when people inspect the property. And that wow factor can mean a better sales price. Impressions count, and a home stylist is often a worthwhile investment. Costs range from $1,000 to $5,000 depending on the size of the home, and the number of items needed to create a winning look.
Pest and building report
These are essential in protecting you from having to make any costly repairs and avoiding any other last-minute shocks that a potential buyer uncovers when they do their due diligence. You don’t want the discovery of asbestos, termites or other hidden problems surface and your buyer walks away. Inspections and reports by a qualified person can cost up to $1,000, and at the higher end, the price might include both the building certificate and pest inspection.
So often forgotten is what happens after settlement. You’ll need to arrange to vacate the property, which without a doubt means hiring a removalist to help you with one of life’s more arduous tasks. Removalist costs are based on the size of your move, the distance of your move, and the quality of the service. This means prices can vary greatly, from a few hundred dollars for a smaller property, a local move, and you’ve done the packing yourself, through to thousands of dollars for premium services that include wrapping and packing. Think about your circumstances, and start getting quotes for this essential budget item.
Still commonly referred to as stamp duty, transfer duty is a fee paid to the state government based on the property’s sale price or its current market value, whichever is higher. In NSW, the transfer duty is calculated using a schedule of fee per $100 of the sales price. For example, homes valued at between $310,000 to $1,033,000 incur a transfer duty of $9,285 plus $4.50 for every $100 over $310,000. That means that a home sold for $1 million would have a transfer fee of $40,335 (from 1 July 2020). Transfer duty must be paid within three months of signing a contract, except for off-the-plan purchases. Different fee schedules apply for residential properties worth more than $3 million. Check the NSW Government’s transfer duty calculator to determine your costs.
Lenders Mortgage Insurance
This likely won’t apply if you’ve owned your home for some time and have equity in it. That said, if you don’t have 20% of the home value to stump up as a deposit, you’ll likely have to pay Lenders Mortgage Insurance (LMI). Different lenders have varying rates and ways of calculating the LMI, speak to your lender about those costs, which can run into the tens of thousands of dollars.
Stata reports are useful for buying an apartment, unit or townhouse owned under a strata title, where the individual unit or ‘lot’ owners have joint ownership for common areas and the land. But shared ownership also means shared costs. A strata report will tell you about the strata scheme used to manage the complex: its history, the financial state of the scheme, annual fees for maintenance and repair, levies, disputes between owners, and any future costs or obligations that you need to know about. Professional strata reports can cost up to $500 and are essential for peace of mind.
Buying and selling at the same time can be a smooth process. Talk to us about bringing the processes into line and having our team look after you’re buying and selling.
Nothing excites me more than hearing the phrase, “it can’t be done”. To outsiders, selling real estate can look like a straightforward business, but there are numerous challenges and pitfalls that always make it interesting. But I love a challenge. I love working with people and helping solve problems. I’m the sort of person who takes on a sale that others have put in the too-hard basket. What I get out of it is the satisfaction that I’ve helped someone with a major moment in their lives, passing on my knowledge and experience gained from 23 years in the industry to help clients achieve their property goals.