Hidden costs of buying and selling your home revealed
It is not uncommon for buyers and sellers to be surprised by unexpected costs.
And with pressure on to purchase before the market rises further - or sell before the market slows - experts warn it's important to keep these expenses in mind to avoid budget blowouts. Here are some of the common costs people forget.
MARKETING, RENOVATION AND STYLING COSTS
The Property Bureau's Alastair Mairs said the cost of preparing a property for sale could add up, particularly if the vendor wanted to hire show furniture.
Furnishing a two-bedroom apartment could easily burn a $2000 hole in a vendor's pocket, Mr Mairs said, while National Property Buyers director Antony Bucello said a client recently spent $5000 furnishing their home for a four-week auction campaign.
Mr Mairs added that the longer a campaign ran, the higher its marketing costs would be.
Wakelin Property Advisory director Jarrod McCabe warned marketing costs such as listing a home for sale on real estate websites differed depending on the suburb.
Those who lived in ritzy inner suburbs could expect to pay more than their regional counterparts, Mr McCabe said.
Some agents would also offer a low commission, but buyers needed to watch out for any tactics they used to claw the money back.
"Some agents will reduce their sales fee but increase their marketing costs," Mr Mairs said.
"What I've seen lately is agencies offer a 1.5 per cent commission, but they then want 10 per cent of anything over the reserve value.
"You could be losing extra, because as we're seeing, places are selling for $200,000, $300,000 or $400,000 over reserve, so that's a hell of a lot of money you're missing out on."
LENDING, INSURANCE, LEGAL FEES
Some loan costs were added to the balance of the loan and were not something buyers needed to worry about upfront, Mr Bucello said. These include lender's mortgage insurance, which comes into play if a purchaser borrows more than 80 per cent of the property value.
But mortgage registration fees, loan application and establishment fees, and even property evaluation fees, could add to those expenses and cause them to blow out.
Conveyancers and solicitors also needed to be hired to draw up and check contracts before selling or purchasing a home, he said.
Mr McCabe said buyers should consider taking an insurance policy before settlement, to make sure their new home was covered.
"Theoretically, the vendor should maintain insurance. But a lot of solicitors suggest you take it out, so it is a cost that may come about a little bit earlier than expected," he said.
The cost of stamp duty often catches buyers by surprise - but so can the significant savings on offer in some circumstances.
The fee is calculated based on the value of your purchase, and online calculators can offer an idea of how much you will be stung.
But first-home buyers are entitled to discounts in several states, with those who spend less than $600,000 on a home in Victoria are notably exempt from paying the tax.
There may also be reductions for those buying off the plan.
BUILDING AND PEST INSPECTIONS
Building and pest inspections were necessary, particularly when buying an older property, Mr Mairs said. It was best to know before signing on the dotted line if a serious structural issue needed repair, and how much it would cost.
Mr McCabe said such inspections could quickly add up - they typically cost $500-$800 each - particularly if buyers had to get them for multiple properties. But he said trying to save a few dollars by skipping an inspection was like playing Russian roulette.
"If you do find there's something wrong by getting that building inspection done, instead of it costing you a few hundred dollars each time you want to bid on a property, it's saving you hundreds of thousands of dollars if you make the wrong decision," he said.
OWNERS CORPORATION FEES
If you buy an apartment, unit or townhouse, these will likely apply.
They can range from hundreds to thousands of dollars a quarter, depending on the extent of common property in a complex.
This could include driveways, carparks, foyers, gyms, pools and more.
Mr Mairs said it was also worth asking if any upgrade works were planned for the complex, as that could cause the fees to be raised.
Settlement dates don't always match up when selling one home and buying another.
Mr Bucello said this may result in having to shell out for rental accommodation.
Buyers also needed to factor in the cost of breaking a lease early if they bought a property but still had time left to serve on their rental contract.
Mr McCabe said older buyers should be aware they might not be eligible for bridging finance, and therefore needed to sell before they looked to buy.
"But if the right property doesn't come up, and you don't want to be pressured into a decision of buying just for the sake of it, you need to be open-minded that you may need to sign a six or 12-month lease," he said.
If planning to sell a rental property, landlords needed to account for reduced revenue flows, particularly if they planned to compensate their tenants for open homes, Mr Bucello said.
His clients had offered anywhere from a week to a month's free rent to entice tenants to vacate the property early so it could be sold with vacant possession, he said.
Mr McCabe said the laws in some states dictated compensation needed to be paid to tenants throughout the sales campaign.
In Victoria, renters are entitled to half a day's rent or $30, whichever is higher, per inspection organised by their landlord.
"If you've got a fixed-term lease in place and you're unable to offer vacant possession, then it may limit your potential to get the best price for your property because a lot of owner-occupiers won't consider the property if they can't move in straight away," he said.
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Originally published as Hidden costs of buying and selling your home revealed