How Much Does It Cost to Sell a Home?

Selling a home is a major financial decision, and while many homeowners focus on the potential profit from a sale, it’s just as important to understand the costs involved. From real estate commissions to closing fees and taxes, several expenses can significantly impact your bottom line. Proper planning and understanding these costs can help you set a more accurate budget and avoid surprises. Here’s a comprehensive look at the main expenses you should expect when selling your home.

Real Estate Agent Commissions

One of the largest expenses when selling a home is the real estate agent commission. Typically, this fee is around 4% to 6% of the home’s selling price and is split between the buyer’s and seller’s agents. For example, on a $600,000 home, you could pay between $24,000 and $36,000 in commissions. Some sellers attempt to save money by selling their home without an agent, but working with an experienced professional often leads to a faster sale and better offers.

Legal Fees

Hiring a real estate lawyer is an essential part of the selling process. Legal fees typically range from $500 to $2,000, depending on the complexity of the transaction and the property's location. Lawyers handle crucial tasks like reviewing the offer, preparing the deed, and ensuring that the financial transactions are properly managed.

Mortgage Discharge Fees

If you still owe money on your mortgage, you’ll need to pay a discharge fee to close the loan. This administrative fee usually amounts to a few hundred dollars. Furthermore, if you have a closed mortgage and choose to sell before the term concludes, you could incur a prepayment penalty. This penalty can be significant—ranging from three months’ worth of interest to thousands of dollars, depending on your lender’s terms.

Home Preparation Costs

Before listing your home, investing in repairs, cleaning, and staging can help increase its appeal and attract higher offers. These preparation costs can vary widely depending on the condition of your home. Small updates like painting, fixing minor issues, and landscaping might cost a few thousand dollars. Full staging, which involves renting furniture and hiring professional decorators, could add another $1,500 to $5,000.

Closing Costs

When finalizing the sale, sellers may face additional closing costs. These typically include adjustments for property taxes utility bills, and possibly condominium fees if applicable. In some provinces, sellers are also responsible for paying a portion of land transfer taxes, although usually, it is the buyer who covers this cost. It's important to work with your lawyer to calculate these adjustments accurately.

Capital Gains Tax (If Applicable)

In Canada, if the property being sold is not your principal residence, you may be subject to capital gains tax. This means 50% of the profit made on the sale is added to your income for that year and taxed accordingly. If you’re selling a rental property, vacation home, or investment property, it’s essential to factor this potential tax into your cost calculations. Consulting with a tax professional can help ensure you meet all reporting requirements and minimize your tax burden.

Moving Expenses

Once your home is sold, you’ll need to consider the cost of moving. Whether you hire professional movers or rent a truck and move yourself, moving expenses can range from a few hundred to several thousand dollars, depending on the distance and the amount of belongings you have.

Home Warranty for Buyers

In competitive markets, some sellers offer a home warranty to provide peace of mind to buyers. This warranty covers repairs on major home systems and appliances for a set period, usually a year after closing. Offering a warranty can make your home more attractive to buyers but typically costs between $300 and $600.

Potential Renovations and Upgrades

In some cases, sellers invest in more extensive renovations before listing their home to maximize its value. Kitchen upgrades, bathroom remodels, or new roofing are examples of larger projects that can lead to higher sale prices but also require significant upfront investment. It's important to weigh the potential return on investment carefully when considering major renovations.

Utility Costs Until Closing

As the seller, you are responsible for all utility bills up to the closing date, including electricity, water, gas, and other municipal services. If the home is vacant during the selling process, it’s still important to maintain utilities to ensure that inspections and showings go smoothly.

Conclusion by Jag Sidhu

Selling a home involves more than just listing and waiting for offers. A variety of costs—both expected and unexpected—can add up quickly. Understanding the full scope of selling expenses, from agent commissions to legal fees, ensures that you can budget effectively and maximize the profit from your sale.

At Jag Sidhu Real Estate Group, we are committed to providing clear and thorough guidance every step of the way.Whether you're selling your family home, an investment property, or downsizing, we are here to help you navigate every step of the journey and achieve the best possible outcome.