Toronto couple Peter and Nadine couldn’t wait to sell their tiny two-bedroom house and move into a home big enough to accommodate their growing family. They knew their house would sell fast in Toronto’s hot real estate market – what they didn’t count on was how much it would cost to make the sale. Nadine, who was shocked by the costs, reckons they paid around $50,000 for real estate agent commissions, legal fees and the money they spent to fix up their home for a quick sale, on top of the purchase price of their new house. That figure also includes the hefty land transfer tax they had to pay for the new home they bought.
“All told, the cost of selling took a big bite out of our down payment on a new home,” says Nadine, noting they brought their original budget down.
If you’re thinking of selling your home, you need to budget for the added costs involved in making the sale – especially if you’re using the proceeds to finance the purchase of another home. That means keeping an eye on the following expenses:
Real estate agent commissions: These can run anywhere between 3% and 7% depending on where you live and what you negotiate with your agent. A 4% real estate commission on a house that sells for $350,000 will set you back $14,000. In a hot market, you may be able to avoid this fee by selling your own home. But it’s wise to still consult an appraiser to help determine your home’s worth (starting at around $300) and a real estate lawyer to draw up the paperwork.
Legal fees: Budget for at least $500, sometimes more depending on how complex your deal is.
Home staging: Paul and Nadine painted their house, moved all of their stuff out and even rented art to make their home look great to potential buyers. Total cost for them: $1000, but that can vary depending on how much fixing up your place needs.
Land or property transfer tax: If you are buying a new home, land transfer tax can easily be your biggest expense. The tax is based on a percentage of the purchase price of the home and it varies from province to province (ranging from .5% to 2% of the total property value).
Moving costs: Depending on where you’re moving and how much stuff you have to shift, you’ll likely need to factor in at least a couple of hundred dollars for moving expenses. Unless of course you have your own truck and willing friends who will work for pizza and beer.
Simply put: Selling a home can cost a lot of money. And you need to make sure you budget for the costs – otherwise you could get a nasty shock when it comes time to close the deal.
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