Selling a house involves various expenses that sellers need to consider. Understanding the actual costs is crucial for budgeting and making informed decisions.
Campbell Cooney, director and auctioneer at Hodges, one of Melbourne's oldest real estate agencies, emphasises the importance for vendors to be fully aware of the costs involved in selling their home before entering the market.
While agent fees, conveyancing, and marketing are the three main costs, Cooney advises vendors to base their choice of agent on something other than price. Instead, he highlights the significance of selecting an agent representing their interests and ensuring a successful sale.
This blog post will decode the key factors affecting selling house costs in Australia, covering everything from real estate agent fees to legal and administrative expenses.
Critical Factors Affecting Selling House Costs
Real Estate Agent Fees
Australia's real estate agent commission computation is usually based on a house's selling price percentage. While the exact rate can vary significantly across states and individual agents, Australia's average real estate agent commission generally falls within 2-3%.
Several factors influence how much a real estate agent charges for their services. One crucial factor is the property's location, as different states, territories, and even specific suburbs may have varying fee structures.
Additionally, competition among agents can play a role in determining the commission rate, with agents being more likely to offer a more competitive rate when vying for business. The house's value also plays a part, as agents may be inclined to provide a more favourable rate for higher-value properties.
Finally, the agent's experience can impact their commission, as more experienced agents are often more skilled in selling houses, enabling them to sell more homes and charge a lower commission rate. Sellers need to consider these factors and negotiate with potential agents to ensure they receive a fair and competitive commission rate for their property.
Australian State or Territory | Average Metro Real Estate Agent Commission | Average Regional Real Estate Agent Commission |
Queensland | 5% on first $18,000, then 2.5% | 5% on first $18,000, then 2.5% |
New South Wales | 1.8–2.5% | 2.5–3.5% |
Australian Capital Territory | 2.5–4% | 2.5–4% |
Victoria | 1.6–2.5% | 2.5–3.5% |
Tasmania | 3.25% | 3.25% |
Northern Territory | 2.55% | 2.55% |
South Australia | 2–2.75% | 2.75–3% |
Western Australia | 2.44–3.25% | 2.44–3.25% |
Source: upside.com.au
Home Preparation Expenses
Deciding whether to invest in renovations or repairs for your property is a personal choice that depends on factors such as time and budget. However, it is worth considering if there is a chance to recoup the costs through a higher sale price. While each house is unique, setting aside funds for minor repairs is advisable.
Ask yourself a few questions to determine the areas that could benefit from improvement. Could enhancing the exterior of the property make it more appealing? Would a kitchen revamp contribute to a higher sale price? Could a fresh coat of paint significantly enhance the house's appearance? Would the addition of a garden shed facilitate a quicker sale? Additionally, compare other properties for sale in the area and compare their features.
Home staging may or may not be necessary, depending on the condition and presentation of your property. If you hire a professional home staging company to upgrade your furnishings, consider it an investment rather than an expense. A well-staged home is more likely to attract potential buyers.
Professional home staging companies typically offer consultations to discuss prices and ideas. Furniture is leased for approximately 4 to 8 weeks and returned once the house is sold. The staging rate usually includes insurance, furniture delivery, and pick-up.
It's important to note that home staging costs vary widely depending on the furniture's quality. The general range for home staging fees falls between $2,000 and $8,000 or more for home staging services. Factors such as property size, the staging duration, and the desired customisation level all impact the final cost that you'll be paying.
Marketing and Advertising Expenses
In today's digital age, online marketing is crucial. Professional photography can make a substantial impact on potential buyers' interest. Listing fees on popular real estate websites provide broad exposure for your property. Also, explore paid social media advertising options to target specific audiences effectively. The particular expenses include:
● Real estate photography: Capturing high-quality photographs of your property to showcase its features and attract potential buyers.
● Property floor plan and listing description: Creating a detailed floor plan and well-crafted listing description to provide potential buyers with comprehensive information about the property.
● 'For sale' signboard: Placing a prominent signboard in front of the property to attract local passersby and generate interest.
● Open inspection brochures: Preparing informative brochures highlighting the property's key features and specifications for distribution during available inspections.
● Online property listing: Listing your property on popular real estate websites such as realestate.com.au to maximise its exposure to a broad audience.
● Print property listing: Advertising your property in print media publications to reach potential buyers who prefer traditional advertising channels.
● Auctioneer's fees (if applicable): If you opt for a sale by auction, the services of an auctioneer will be required, and their fees will be included in the marketing costs.
Ask your agent for a breakdown of the costs associated with your property's marketing plan. Each agency may have unique arrangements with suppliers, such as photographers and copywriters, and partnerships with different advertising platforms.
While advertising costs, like agent commissions, are not fixed, they can sometimes be negotiated with the agent. It is also possible to pay for the marketing expenses as they are incurred or have them incorporated into the agent's fee, which would be paid once the property is sold. However, it is essential to note that the vendor must cover these costs regardless of whether the property sells.
The vendor is responsible for covering the marketing expenses, which typically include placing a street-facing board in front of the house, listing the property, professional photography, pamphlets, creating a floor plan, copywriting, and press advertising. The budget for each marketing campaign varies based on the property and can be adjusted accordingly.
The average marketing campaign cost in the Melbourne market ranges from $6,500 to $8,000 in 2023. Meanwhile, in Sydney, the marketing cost can vary between $4,500 and $10,000, depending on the property and the advertising schedule, according to Michael Minogue from Laing + Simmons in Woollahra.
Legal and Administrative Costs
Real Estate Attorney Fees
Engaging a real estate attorney can help you understand the legal processes of selling a property. They ensure that all necessary documents are in order and protect your interests. Attorney fees are calculated based on the transaction and location, so discussing these costs upfront is essential.
Home Inspection and Appraisal Fees
Home inspections and appraisals are critical steps in the selling process. Buyers often request inspections to assess the property's condition, which may lead to repair costs. Appraisals give you an estimate of your home's possible market value. While these services benefit the buyer, sellers cover the associated costs.
Closing Costs
Conveyance Fees
The general costs for conveyancing in Australia may be between $499 and $2,500. Conveyancers may generally advertise a flat fee or fees. The circumstances of the home buyer and seller, details about the property, and how much work needs to be done all contribute to the total cost. The more complicated a disclosure document is, the more you must pay.
Stamp duty
Stamp duty refers to the tax state and territory governments impose on specific documents and transactions. Stamp duty payment is mandatory and usually used for motor vehicle registration and transfers, insurance policies, leases, and mortgages. The government levies this tax to cover the costs associated with these legal processes and ensure compliance with regulations.
Stamp duty, typically 3% to 4% of the property value, is handled by the conveyancer or solicitor and paid by the property buyers, not the sellers. The cost of stamp duty can impact how much potential buyers are willing to spend on a house. Rising stamp duty costs and increasing house prices in Australia can deter many individuals from finalising a property purchase.
Transfer Taxes and Recording Fees
During the closing process, certain costs are incurred. Transfer taxes, imposed by local governments, vary depending on the sale price and location. Recording fees cover the cost of officially recording the property transfer. It's important to understand these expenses to avoid surprises.
Title Insurance
Title insurance protects buyers and sellers in case of any unforeseen title issues. While the buyer typically purchases the policy, sellers may be responsible for the buyer's title insurance premium. Understanding the average costs of title insurance coverage helps sellers anticipate this expense.
Negotiating and Transaction Costs
Buyer's Requests and Repairs
After the buyer's inspection, they may request repairs or concessions. Sellers should budget for potential expenses resulting from these requests. Effective negotiation strategies can help manage costs and reach a mutually beneficial agreement.
Miscellaneous Transaction Costs
Throughout the closing process, miscellaneous transaction costs can arise. These include fees associated with escrow, notary, and courier services. While these expenses may seem small individually, they can add up, so it's essential to account for them.
Summary of Selling House Costs in Australia
State | Marketing costs | Conveyancing fees | Lender fees | Styling or staging fees |
New South Wales | $600 to $10,000 | $1000 to $1500 | $150 to $1500 | $2,000 to $8,000 |
Victoria | $500 to $8,000 | $500 to $2200 | $100 to $1300 | $2,000 to $8,000 |
Queensland | $600 to $2,000 | $500 to $2200 | $100 to $1400 | $2,000 to $8,000 |
Australian Capital Territory | $1,500 to $3,500 | $700 to $1,300 | $150 to $1,500 | $2,000 to $8,000 |
South Australia | $400 to $5,000 | $500 to $2200 | $150 to $1600 | $2,000 to $8,000 |
Western Australia | $500 to $6,000 | $500 to $2200 | $200 to $1400 | $2,000 to $8,000 |
Tasmania | $400 to $4,000 | $500 to $2200 | $150 to $1,000 | $2,000 to $8,000 |
New South Wales | $600 to $10,000 | $1000 to $1500 | $150 to $1500 | $2,000 to $8,000 |
Source: different.com.au
Conclusion
When selling a house, vendors need to have a comprehensive understanding of the costs involved in selling a house. This includes considering home preparation expenses, such as repairs, staging, and marketing and advertising costs. Legal and administrative expenses, including attorney fees and conveyancing, should also be considered.
Additionally, sellers should be prepared for negotiating and transaction costs that may arise during the selling process. By understanding these factors and planning accordingly, sellers can make informed decisions and increase the likelihood of a successful and financially sound selling experience in the real estate market.
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