So you’ve lived in your starter home now for 5 years. 2 kids, a dog and a cat later your family is outgrowing your once beloved house fast and you’re starting to feel the itch. That’s right, it’s time to upgrade and find a new home that fits your ever changing needs. Last week we talked about the costs of buying a house, now let’s discuss the fees involved in selling a house.
We’re not talking about the cost to fix up or prepare the house, that’s another blog for another day, we’re talking about the costs that cover the actual logistical side of selling the house.
Number 1 would be the realtor fees, hiring an experienced professional realtor to sell your home is well worth the investment. Doing your homework and interviewing more than one realtor then choosing the one that best suits your needs is very important. Depending on what you’ve negotiated with the realtor their fees can range between 3-5% of the final sale price of the property. Keep in mind that if they do not represent the buyer as well then they are actually only taking home half of that fee themselves.
Number 2 would be the lawyer’s fees. These can also vary depending on whether or not you are buying as well and how complicated the file is. Their fees can range between $500-$1000 plus tax and disbursements of up to $200.
Number 3 is the bank’s fees. Unless your home is completely paid off then the bank will be charging you a discharge fee between $250-$325, depending on the bank. To terminate a closed mortgage your bank may ding you for prepayment equal to the great of (a) 3 months interest and (b) the interest rate differential. If it is a floating rate mortgage, the penalty is 3 months interest. If you are buying another property then you can most likely bypass these charges by transferring the mortgage to the new property.
CAPITAL GAINS TAX
And last but certainly not least, number 4, the government. If you are selling your primary residence then you don’t have to pay capital gains tax, WOOOHOO!!! However, if you are selling an income property you will have to pay tax according to your marginal income tax rate on half of the gains, WAH WAH.
And there it is in a nutshell. Of course there are other costs you will incur such as movers and/or moving truck, utility transfer fees, etc. But these are the costs of the process of selling your property. Hopefully after reading this you won’t get sticker shock after your lawyer hands you the bill.