There are expenses associated with selling a home that homeowners may overlook or forget to consider before embarking on their selling journey. I’ve compiled a list of common expenses sellers may face, to help you prepare and budget for the home selling process.
1. Staging. Most sellers will be best served by engaging in some form of home staging, whether done themselves or with the help of a professional. I happily provide my clients with a free professional staging consultation to help in this process. I know how much of an impact proper home staging can have on the successful sale of a home. A staging consultation involves a stager coming into your home to advise you on how best to arrange your current furniture and décor to help your home look its best and appeal to buyers. Following the recommendations offered during a consultation is often the best and most economical choice for staging a home. More involved or extensive staging may be the right choice for some sellers. There are many different staging packages available and at a range of costs. A staging consultant in partnership with your real estate agent will be able to advise you on how your investment in staging might impact what you will be able to sell your home for.
2. Realtor Commission. Generally, the seller pays the commission owed to the seller’s brokerage and the buyer’s brokerage. The commission is determined before listing your home and is stipulated in the Listing Agreement you sign with your real estate agent. In most cases, the seller’s brokerage will first apply the buyer’s deposit to reduce the commission owed on closing. If there is any deficiency, the balance of the commission is paid by the seller’s lawyer to the seller’s brokerage from the purchase price once the transaction has closed. Commissions are subject to HST.
3. Repayment of Liens and/or Mortgages. In order for a sale to close, a seller’s lawyer will ensure there are enough funds available from the purchase amount to pay any liens and/or mortgages registered on the property.
4. Mortgage Discharge Fee. If the sale of your home requires a mortgage discharge (paying your mortgage off early), there will likely be a discharge penalty charged by your lender. Contact your lender to determine the penalty amount, if any, or to inquire about the option of transferring your current mortgage to your new property.
5. Capital Gains Tax. A capital gain occurs when you sell a property, other than your principal residence, for more than you paid for it, minus expenses incurred to sell the property. If the property being sold is not your principal residence, e.g., a cottage or a rental property, and you sell it for more than you paid for it, then capital gains tax will be applicable on 50% of that gain. Capital gains tax is not payable on closing but would become due on your next income tax return.
6. Moving Expenses. The cost of moving will vary greatly depending on whether you decide to pack and move on your own or hire professionals. Which moving company is selected and the distance of your move will also impact the cost of moving. Other moving expenses can include incidentals such as mail forwarding, transferring utility and service contracts, etc.
7. Lease or Rent-to-Own Payouts. If any of your home’s components or equipment are leased or were purchased on a rent-to-own contract, any outstanding balance(s) will need to be paid off in full prior to closing. A buyer would not normally be expected to assume a rental or lease contract and these contracts are often non-transferable.
8. Legal Fees. Your lawyer will review the Agreement of Purchase and Sale, prepare and deliver the Statement of Adjustments to the buyer’s lawyer, respond to any questions or concerns received from the buyer’s lawyer as a result of title and non-title searches, fulfill any other requirements of the transaction, and transfer title to the new owner. Legal fees will range in price depending on the complexity of the transaction. Additional fees may apply such as registration of a discharge of the mortgage or other miscellaneous disbursements.
A seller’s lawyer will retain the required funds from the sale proceeds to pay any amounts owing by the seller. A seller may find that due to liens, mortgages, and/or any mortgage discharge penalties, the proceeds from the sale of their home are less than expected so it’s important to take these expenses into account beforehand.
Thank you for taking the time to read this article. I hope you found it helpful. If there is anything further I can do to help you prepare to sell your home, please get in touch. I would love to help!