The property market in Perth right now is red hot. What’s driving the heat? Lots of factors:
- There are fewer properties on the market listed for sale (8,680 compared to 12,069 this time last year).
- Australia is experiencing its highest consumer confidence levels since August 2010.
- Borrowers have access to the lowest interest rates in history (now below 3%).
- The Government enforced rent freeze (due to COVID) ended on 31 March 2021, and the resultant increase in weekly rents is making it cheaper to buy a home with low-interest rates than it is to rent a property.
- House prices are on the way up, so there is a fear factor in the market of missing out.
- Employment prospects in WA are strong, with more jobs now available than 12 months ago and low levels of unemployment.
- Buying land and building a new home is a less attractive proposition currently as builders are presently overloaded with first home buyers from Government COVID grants, and prices are rising for new builds. (For example, a bricklayer was getting $1 per brick 12 months ago; they are now earning $2.50 per brick.)
With property prices still 15.9% below the 2014 peak, buyers feel they are getting great value.
But it’s still a sellers’ market with homes taking, on average, 27 days to sell (the fastest rate since 2014).
If you’re thinking it might be time to throw your property into the mix and experience the high of it being ‘Under Offer’ before its first home open (something at least one of our clients has experienced recently), it’s best to remember all the hidden costs of a selling a property. These costs might be the difference between selling being a truly worthwhile proposition and not.
1. Pre-sale maintenance
The pavers that have come loose. The walls that need painting. The dead or struggling plants in the garden. All the petty annoyances and unsightly things you can put up with when living in a house (or when you have tenants living in a rental property) have to be addressed before you can put it on the market. And addressing them can add up to several thousand dollars very quickly. Before deciding to put your house on the market, it’s essential to:
- look at your property with the critical eye of a potential buyer,
- make a list of what needs fixing, and
- get the appropriate trades to give you a quote for those fixes.
2. Home staging
What is home staging? It’s when an interior design professional styles your home (using a combination of your furniture/accessories and theirs) to make it look as roomy and appealing as possible. Buying a house tends to be heavily influenced by emotion in the buyer and home staging done well maximises the various spaces in your property to show just how lovely it can be to live there.
While home staging is an optional cost, and while you can expect to pay anything from $1500 for the styling of just two rooms to $4000+ for the styling of an entire home, it can add significantly to the final sale price. A conversation with your selling agent will help you do a cost-benefit analysis here.
3. Marketing and advertising
There’s a lot that goes into marketing a home for sale:
- Professional photographers
- Production of floor plans
- Production of the For Sale signboard that will sit at the front of your property
- Printing of brochure for the agent to hand out at home opens
- Placement of your home in real estate listings on sites like reiwa.com.au
Your selling agent will usually request you give them a marketing budget of around $3500. Any unused funds from this budget will be returned to you at settlement.
4. Real Estate agent commission
Most real estate agents charge between 1 and 3% of the final sale price. If your property sells for $500,000, you could be looking at up to $15,000 in real estate agent commission. This might sound like a lot, but your agent does work hard for that money between:
- consulting with you,
- running home opens,
- corresponding with potential sellers, and
- using their knowledge of the market to negotiate a selling price that will put a smile on your face.
5. Settlement and other legal fees
Legally transferring the ownership of a property from a seller to a buyer can be done by you as the seller, but almost everyone who tries to do this themselves regrets it as there is a lot of legwork involved. And small mistakes can cost you dearly.
While it is ‘yet another cost’ to engage the services of a settlement agent, they will save you time and stress, and also identify any potential roadblocks or pitfalls early in the process.
Settlement fees typically run at around $1000 (which covers the settlement agent’s time and also the various legal searches and document preparation they have to do).
6. Bank charges, outstanding council rates and/or body corporate
If your property has a mortgage on it, selling the property (and thus discharging the mortgage) may attract a fee. It’s a good idea to contact your lender before deciding to sell your property to determine exactly what fees might apply here.
You will also be required to pay any outstanding council rates and body corporate fees (if applicable). Since these fees are generally paid quarterly, you might be up for a month or two of these payments before the new owner takes over.
7. Capital Gains Tax
Capital Gains Tax (CGT) won’t apply to you if you’re selling your primary place of residence (the home you’re currently living in). If you’re selling an investment property, however, you will likely need to pay CGT. CGT isn’t a straightforward calculation. Discounts apply to how much you will pay if you’ve owned your property for at least a year before selling. And the overall amount you pay will be dependent on where you sit income tax-wise for the financial year.
As you can see, there are many hidden costs involved in selling a home. This is why it’s always good to have a financial advisor on hand to help you rationalise the decision to sell and ensure it’s serving your needs both now and into the future.
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