So, you’re thinking of selling your house in BC but don’t know where to begin? I get it, it’s an emotional experience, but it can also be very exciting! On one end, you’re attached to your neighbourhood, you’ve experienced so many memories at home, and you don’t know how you’ll ever survive without your favourite coffee shop down the street. But, there is so much to look forward to, and you’ll make new memories! Maybe you’re upsizing for a growing family, downsizing, or moving into the neighbourhood of your dreams!
You’re crunching the numbers and visualizing drinking your celebratory glass (or two) of champagne once you have sold your house. But, when mentally going through the home selling steps, you’re not quite sure what the costs are when selling your house in BC. Below, I’ll give you an outline of the seven most common expenses you’ll likely come across when selling your house in BC.
Of course, personal circumstances, as well as the real estate market, will all play into your motivation to sell and your home’s list price. However, it’s always a good idea to keep the following expenses in the back of your mind before listing your house on the market.
When selling your home, you, as the seller, are responsible for both the buyer’s agent and listing agent’s commission fees. While there is no “standard commission” in my market, it is typical for the commission to be 6% on the 1st $100,000 and 3% on the balance. That commission amount is split between the buyer’s agent and listing agent (3% on the 1st $100,000 and 1.5% on the remainder). As a seller, you can also ask about a realtor’s commission structure when interviewing listing agents.
For example, say the purchase price of your home is $750,000. The total commission paid by the seller would be $25,500 + $1,275 (5% GST) = $26,775 (based on the commission structure above). That amount is then split between the buyer’s brokerage and the listing agent’s brokerage for a total of $13,387.50 each.
The commission amount is paid to both the buyer and listing realtor’s brokerage, not directly to the realtors involved. Your listing realtor will specify their commission structure in the multiple listing contract. A listing agent is also legally required to present their commission to the seller for every offer and counter offer during the negotiation process.
The good news? Capital gains tax is exempt when you are selling your principal residence! A capital gain is realized when you sell your property for a higher price than what you paid for it. You are taxed on the increase in the value of your investment and the capital gain is recorded at the time of sale. You are taxed on half the amount (50%) of the gain at your personal tax rate.
When determining the amount of your capital gain, it’s essential to account for the costs and expenses to buy and sell your property. For instance, if, after expenses and fees, you purchased a condo for $350,000 and then sold it five years later for $550,000, you would have a capital gain of $200,000. Then, you are taxed on 50% of that gain ($100,000) at your personal or business tax rate.
It’s always best to speak with an accountant if you’re thinking of selling your house.
If you have a mortgage on your property and you plan to pay it off with the proceeds from your home sale before the end of your mortgage term, you will likely have to pay a prepayment penalty. It’s best to speak with your mortgage broker as early as possible to get an idea of your prepayment penalty fees as in some cases they can be quite substantial.
Also, for those home sellers refinancing, even if you may not be thinking of selling at the moment, it’s good to ask about prepayment penalties as that may influence which financing option you choose.
There are a few variables that will be used to determine your mortgage prepayment costs when selling your house. For instance, the amount remaining on your mortgage, whether your mortgage interest rate is variable or fixed, and the remainder of the mortgage term will all be factors.
A mortgage prepayment penalty compensates a lender for the interest payments it loses out on when you break a mortgage contract. Check with your mortgage broker about any prepayment penalties before listing your home on the market as it could have a significant impact on the final price that you will accept and the timing of your sale.
Goods and services tax is a 5% federal tax on goods and services sold. GST may or may not be payable depending on the property’s use or how it is written in the contract of purchase and sale. Whether the buyer or seller is responsible for the GST should be written and agreed to in the contract of purchase and sale. If you are selling a substantially renovated home, a newly built condo, or operating your home as a business (e.g., nightly vacation rental or Airbnb), GST may be applicable. You should always seek the advice of a professional tax accountant to determine what’s best for you.
Keep in mind that 5% GST is applicable on the total commission and is paid by the seller.
Every real estate transaction requires representation either form a lawyer or a notary public for the sale or transfer of a property. A lawyer or notary public must also register the transfer of property at the Land Title Office. Before closing, your lawyer will communicate with the buyer’s lawyer to ensure that all documents are prepared and signed.
Usually, within 1-3 days before the closing date, you will need to meet with your lawyers to sign the closing documents. Your lawyer or notary will review all legal documentation, prepare your statement of adjustments, account for any prepaid taxes, strata fees (if applicable), utilities, and discharge and register title.
You may have to pay some upfront home costs such as painting, staging, and landscaping to attract the right buyer. But it will be worth it! Depending on the market you’re in, and as mentioned in my previous blog post, the goal as a home seller is to create a space where a prospective buyer will have an emotional attachment to your home and will be able to visualize themselves living there.
Additionally, if a buyer chooses to go through with a home inspection, they may ask you to complete some repairs before completion that came up during the home inspection. If you agree, you will have to pay to complete those repairs as agreed to in the amendment to the contract of purchase and sale.
Some examples include:
The total cost of moving will vary for everybody. For instance, moving from a single-family home that you’ve lived in for 20 years, compared to selling a tenanted one-bedroom condo, will likely take up more of your time, energy, and expenses.
If you’re interested, you can read more about my 10 easy home moving tips that I wrote in a previous blog post. A few examples of moving costs that you should be prepared for when selling a house include a professional moving company, elevator move out fee (applies to strata living), renting a storage space, or travel expenses.
Ok, now you can get back to visualizing your champagne toast – cheers!
*Disclaimer: The topics of discussion, content and resources on this website are general information that may not be the right solution or advice for you specifically. Not intended to solicit buyers or sellers currently under contract with a brokerage.
*Stock images from Social Squares