If you’re considering putting your home on the market, you may be wondering about the cost of selling a house in today’s economy. By understanding your potential expenses ahead of time, you could plan your home sale in a way that makes the most sense for you financially.
The journey toward selling your home begins well before you list it. That’s because it takes time and money to prepare your home for sale. You’ll likely want to invest in any repairs or updates ahead of time so you can show your home in its best possible light when you’re ready to sell.
Expenses might include redecorating, cleaning, staging and landscaping. The cost of any improvements should be carefully considered, based on how they could increase the value of your home—especially since these costs will be paid upfront rather than after a sale. Remember that even relatively low-cost updates, such as a fresh coat of paint or some indoor plants, could have an outsize impact on your home’s value.
Your real estate agent may be able to provide pointers on how to present your home in a way that’s going to highlight key features and appeal to the broadest audience.
Once you’ve got your home up to scratch, investing in high-quality photos and effective marketing could ensure you’re attracting the most potential buyers. Your real estate agent may help you source (and even cover the cost of) a photographer, so your home looks its best on the listing.
Although not required, in a competitive market, some seller’s agents may recommend a pre-listing home inspection. For around $500, an inspector will check the inside and the outside of the home, so that sellers can identify and address any issues before they hit the market.
Not only does a pre-listing inspection help prevent any unwanted surprises at a later date, it could also ensure that sellers get the maximum amount from their home sale. That’s because the report can be shared with prospective buyers to provide full transparency and show that there are no hidden issues with the home.
While an inspection reveals the condition of the home, an appraisal indicates the value of it. The cost of an appraisal would typically be paid for by the buyer, since the seller’s real estate agent will likely be able to provide a comparative market assessment (CMA) for free. But if a seller is not working with an agent or disagrees with their agent’s CMA, they may want to pay for an appraisal to get an accurate market value of their home.
A home warranty offers sellers a way of mitigating the risk associated with any of the home’s major appliances (like refrigerators) or systems (like air conditioning) failing during the listing period, before closing. It’s a type of insurance, which could provide peace of mind to both buyers and sellers. Should any costly repairs be required during the process of the sale, they could be covered by the warranty.
A seller’s agent will often recommend this approach, since a breakdown of a home’s major systems once the home is under contract can quickly cause a deal to fall through. For this reason, the real estate agent may even suggest companies and obtain quotes on behalf of the seller.
Typically, a seller does not pay for the home warranty out of pocket. Instead, the cost of the warranty will be covered by the proceeds of the home sale. The cost will be dependent on multiple factors, including the type of policy, the home’s age and the location. But sellers may pay somewhere between $300 and $1,500.
Generally, a home warranty could streamline the sales process and provide reassurance to buyers and sellers. Furthermore, the seller could add an additional incentive for buyers by paying for, and transferring, the cost of the warranty for up to a year.
Closing costs are paid by both the buyer and the seller in a home sale transaction and cover the costs involved in making the deal. Most closing costs are paid by the homebuyer, but there are some fees that sellers are responsible for, such as legal fees, real estate commissions and sales tax.
Legal fees are another cost of selling a house. A seller could typically expect to pay between $500 and $1,000 for a lawyer to complete the title search, letter of direction and other closing paperwork on their behalf.
The biggest cost for a seller in a home sale is usually the commissions paid to both the seller’s and the buyer’s agents. The commission could be 3.5 to 5% of the sale price and is generally covered entirely by the seller.
This commission payment is also subject to an additional sales tax, which varies based on whichever province you’re in. For example, in Ontario sales tax is 13%, whereas in B.C. it’s 5%, which is often a significant amount given the size of property deals.
Although less typical in the current economy and seller’s market, there are also other costs to consider in the form of concessions. For example, as part of the negotiations, the seller could offer to cover some of the buyer’s closing costs or provide credits for certain repairs identified in an inspection.
Capital gains tax is a percentage of any profits you make that you must pay to the government. When selling your home, you could pay capital gains tax on any financial gain, if the home has not been your primary residence for the time you’ve owned it. If you’ve lived in the home for all the years you’ve owned it, then you most likely do not owe capital gains tax.
Once your home is sold, you need to factor in the costs of moving, like hiring movers, renting a truck and temporary storage. But by planning ahead you can minimize these costs.
When selling your home, it can be a good opportunity to declutter and clear out any unwanted items. Not only will this allow you to present your home in the best light, you also avoid the additional financial burden of moving items you don’t want or need.
Using professional movers could make moving less stressful and help limit damage to your furniture and possessions as they are moved. Some movers will pack your items for you, while others will provide the packing materials so you can do it yourself.
It can make sense to pack boxes by room and clearly label each one so that you’re not unpacking blind at the other end. You can also pack a suitcase with some essential items you know you’ll need for your first few days in the new location. Think pajamas, toilet bags, bedding and toilet paper.
You could also have the cost of paying off the remainder of your mortgage balance, including any prepayment penalties, if applicable.
You may also be able to lower the cost of selling your house, by deducting moving expenses. According to TurboTax, you could claim certain moving expenses, such as truck hire, the cost of movers and meals while moving, as long as the move brings you at least 40 km closer to your school or place of work.
Wherever you are on your home journey, Houseful is here to help you make your next move. Discover what you’re looking for with a personalized home search experience, access expert professional support with our network of agents and financial advisors from RBC, and find guidance resources on our blog, Reading Room.
This article offers general information only and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or its affiliates.
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