Top 5 Expenses When Selling Your House
When selling your house, you might be thinking mostly about how much money you will make. Your home is an investment but selling your house can cost more than you expect.
Making sure you know the details before you sell is essential for deciding on a selling price that covers them. Costs associated with selling your house include realtor fees, legal fees, staging your home, and possibly mortgage prepayment penalties. So how much does it cost to sell your house? That depends on you, where you live, and your property, but here are five expenses to consider.
The highest cost of selling your home will be realtor fees. Realtor fees depend on the rate you negotiate and where you live, and you can plan on paying 3%-7% of the price your home sells for. The seller typically pays the commission of both the selling realtor and the buying realtor. The fees are paid to a lawyer, who will pay both agents once the sale is complete.
In a seller’s market, you may be able to sell your house without a realtor, but you will need to have it appraised and have paperwork drawn up by a real estate lawyer, and these services have their own fees.
You can also choose to work with a flat-fee or low-cost realtor; this means that you only pay a predetermined fee regardless of what you house sells for. But you will have to do more work on your own than you would with a realtor.
When selling your home, you will need a lawyer’s help for completing legal documents. Sellers in Canada generally pay around $1,500 in legal fees. Your lawyer will complete:
- A title search – Your lawyer will search public records to confirm the property’s legal ownership and for claims or liens on the property.
- A statement of adjustments – A statement of adjustments lists debits already paid by the buyer, like the deposit, and credits, like the property’s purchase price and fees or utilities you have prepaid. The buyer will owe you the credits minus the debits.
- A letter of Direction – This document provides instructions to the buyer on your behalf. It agrees to use the sale proceeds to pay outstanding property taxes and financing debts.
- A closing date fund transfer – Your lawyer will receive funds from the buyer’s lawyer on the closing date. They will register Land Titles documents and make sure the funds are deposited into your account.
Staging your home
Staging your home presents it in the best possible light to potential buyers and helps them envision themselves living there. It helps you compete with other sellers and can get your house sold faster and at a higher price.
You can do some of it yourself by cleaning and decluttering, removing personal items like photos, putting some possessions in storage, and baking cookies before showings to make your kitchen smell inviting.
Selling your home today involves much more than it did 30 years ago. Professional stagers will do everything from painting to moving out furniture to renting art to make your home appealing to potential buyers. Home staging does not need to be this dramatic but having a professional showcase your home’s best feature and downplay its worst ones is a great idea.
How much staging your home will cost depends on what needs to be done, and the cost can be a few hundred or a few thousand dollars.
Mortgage prepayment penalties
It might seem like prepaying your mortgage will put you ahead of the game, but if you will be ending your mortgage early, you will have to pay penalties. If you are ending your variable rate mortgage early, the penalties will be three months of mortgage payments and a discharge fee of $200-$600.
For fixed rate mortgages, the penalties can be even higher, so it is best to talk to your lender to find out what the penalties are before selling and make sure that breaking your mortgage is worth it. You may be able to transfer your mortgage to a new property for a smaller fee than breaking it would cost.
The costs of buying a house
If you are buying a new home when you sell your old one, you also need to budget for the expenses associated with purchasing a home, not just selling. In addition to moving expenses, you must consider how much the new home will cost to maintain and which utilities will need to be set up when you move in. Also, ask you realtor what to expect when it comes to costs like the land transfer fee, down payment, property tax, land transfer tax, home inspection, and mortgage insurance.