It comes as a surprise to many people that there are a variety of costs involved in selling a home, so the amount you end up with is less than the actual sale price. But how much will you pay and what should you budget for? Here’s a list of some of the costs involved to give you an idea of how much it costs to sell your home.
Agent Commissions
The most notable cost when selling your home is the commission for the selling and buying agents. This commission is generally paid by the seller of the home and is a percentage of the sale price, which is then shared between the seller’s agent (also called the Listing Agent) and the Buyer’s agent (also known as the Co-operating Agent). The actual percentage can vary depending on the services offered, so it is important you discuss and agree on a commission rate with your agent before you list your property.
Legal Costs
Once sold, you will need a lawyer to manage mortgage instructions, check the property title, and arrange the land transfer. The fees can vary depending upon the complexity of the home sale, but industry standard runs from $1,000-$1,200 per transaction.
Mortgage Discharge
Depending on the timing of your transaction and if you have a mortgage on the property, you will likely need to pay your lender a discharge penalty for closing your mortgage mid-term. In such a case, most institutions charge three months’ worth of interest as the fee. However, depending on the terms of your loan, and the rate you are paying, this could be a lot more. Some institutions will waive or refund this fee if you elect to use them again on your next mortgage. For such cases, you should speak with your mortgage representative to get a clearer picture of what your lender is willing to do.
Capital Gains Tax
In Canada, you do not need to pay capital gains tax on the sale of your property if it was your principal residence for each year you owned it. According to the government of Canada, a property is your principal residence if it meets the following four criteria:
- It is a housing unit, a leasehold interest in a housing unit, or a share of the capital stock of a co-operative housing corporation you acquire only to get the right to inhabit a housing unit owned by that corporation.
- You own the property alone or jointly with another person.
- You, your current or former spouse or common-law partner, or any of your children lived in it at some time during the year.
- You designate the property as your principal residence.
It is important to remember that you must report the sale of your principal resident to the CRA when you fill out your end of year tax return in order to qualify for the capital gains tax exemption.
If you sell a home that was not your principal
residence for each year you owned it, you will have to pay tax on the gain in capital you acquired. You are taxed on 50% of the gain at your marginal rate, so the amount can vary greatly depending upon both the sale price of your home and your income. We recommend talking to a qualified accountant or financial advisor to learn more about capital gains tax and how it might affect you when selling your home.
Home Improvements/Staging
There are a variety of improvements and fixes you may want to make in order to increase the value of your home and help you to sell it faster. You may also decide to have your property professionally staged in order to maximise its appeal to potential buyers. All of these can cost money and, depending on how big the fixes are, it may add a fair amount to the cost of selling your home.
Moving Costs
Whether you plan to move your belongings to a new home or place them in storage, you will have to pay money to move out of your home. You can keep the costs down by renting a truck and doing the hard work yourself, or pay a bit more and hire a removal company to do the work for you. It is not the most expensive addition but still something that needs ot be kept in mind when calculating how much it costs to sell your home.
