If you have real estate in British Columbia, the idea of selling may seem appealing. With the average home sale price increasing year after year, it may seem like a fantastic opportunity to make some money. But, many people forget that selling a house can cost you.
Many costs come with selling a home. Sellers need to pay GST, legal fees, real estate costs, property taxes, and more. These costs can cut into your selling price, diminishing how much you earn. But, the remaining balance will always outweigh the cost of selling a house.
In this blog, we will touch on the fees you can expect to pay to sell your real estate property in British Columbia. This will help you get a better idea of what to expect when it comes time to put your property up for sale.
Home Preparation & Staging
Every seller wants their home to make a statement and a prepared and properly staged home does more than just attract potential buyers—it can drive up offers.
Most sellers are strongly recommended some work on their homes before they put them on the market. Some beneficial preparations include:
- Repairs (e.g., repairing cracks in the concrete foundation, uneven floors, holes in drywall, etc.)
- Renovations (e.g., updating the kitchen or bathroom)
- Gardening and landscaping
- Painting
- Staging (e.g., furniture, art, etc.)
The exact amount that you can expect to pay on preparation and staging will depend on both the current state of your home and the extent of the work. If your home requires a lot of renovations, you can expect to pay more. However, there may be some tax credits available to reduce the amount you have to pay out of pocket.
Pre-Listing Home Inspection
Both the buyer and the seller can benefit from an early inspection; the seller can gain an idea of the current state of their home, allowing them to raise the price or advertise the completed pre-listing inspection. A buyer may also be more likely to put in an offer because they know that they do not need an inspection afterwards. It’s a win-win situation, but it will cost approximately $300-$800 depending on the size of your home.
Real Estate Commissions
Real estate commissions, also known as realtor fees, are often the largest expense when it comes to selling a home. But, the amount you pay to your realtor can help you earn more on the sale of your home. Realtor commission typically includes professional photography, marketing, and open house fees—the services that will help attract buyers and sell your home.
The real estate commission fee is also generally split four ways:
- The buyer’s agent
- The brokerage that that buyer’s real estate agent works for
- The seller’s agent, also known as the listing agent
- The listing agent’s brokerage
The total cost of your real estate commissions will be determined based on the realtor’s commission rate and the purchase price of your home. The average commission rate in Vancouver is anywhere from 1-4%, depending on the realtor’s experience, results, and services.
Property Taxes
Amid all of the closing costs is the property transfer tax. This is a sales tax that is applied when the ownership of a piece of real estate changes.
The transfer tax will vary based on the property’s purchase price. For instance, the tax rate is:
- 1% on the fair market value up to and including $200,000
- 2% of the market property value greater than $200,000 and up to and including $2,000,000
- 3% of the market value greater than $2,000,000
An additional 2% tax will be applied to real estate with an offer price of over $3,000,000.
Thankfully, the seller does not have to worry about adding property transfer tax on top of their closing costs; the buyer is responsible for paying the transfer tax.
Legal Fees
All real estate transactions require legal representation of either a notary or a lawyer. While the services of a real estate lawyer may seem like an unnecessary expense, they are incredibly knowledgeable people that will help make the sale of your home easier.
During the transaction, a lawyer or notary will:
- Review the documents prepared by the buyer’s lawyer and explain them to you
- Draft, negotiate and review agreements and statements of adjustments
- Complete a title search
- Help with aspects of financing
- Draft and negotiate closing documentation
- Prepare a statement outlining where the purchase money was distributed and the net proceeds of the sale
- And more
Lawyer fees will typically cost $660-$950 once the down payment has been transferred and the closing costs are complete. If you are selling your home and buying a new one, you will need to add an additional $950-$1,400 to cover the closing costs of purchasing your new home.
If you are purchasing a new home, it’s worthwhile to stick to one lawyer or notary because they may offer a price reduction.
Mortgage Discharge Fees
Make sure to read the fine print of your mortgage before you sell your home. Some lenders may charge the seller a penalty if they sell their home during the loan period. In other words, selling your home before you have paid off your mortgage may cost you more money. However, your mortgage lender may allow you to more the remaining balance of your existing mortgage to the one for your new property.
We recommend that you call your mortgage broker beforehand to discuss whether you will have to pay a discharge fee. If you have to cover a discharge fee, it may be anywhere from hundreds to thousands of dollars. But, this fee could be worthwhile if you are securing lower mortgage rates.
Moving Costs
After you have sold your home, you will need to move out of it and into your new one. That is, only if you are selling your primary residential property.
Every buyer and seller can expect to spend at least $200 on moving costs. But, the total could be much higher if you need to board a pet, cut extra keys, or hire a team of movers to help.
