The mortgage market is expected to have reached its peak. A chorus of economists, industry experts, and market watchers believe that the Bank of Canada (BoC) will cut interest rates this year, allowing the conventional five-year fixed-rate mortgage to ease toward four percent, down from the six percent the Canadian economy has witnessed in the last several months.
As a result, homeowners might consider putting their homes on the open market, whether to upsize to a bigger home or take advantage of the accrued home equity. Of course, before erecting a for-sale sign in their front yard, prospective sellers need to consider the various aspects of this process, from the exorbitant fees and expenses to mortgage charges.
Unsure where to begin? Let’s do a quick overview of some of the hidden costs of selling your residential property in today’s housing market.
What You Need to Know Before Putting Your Home on the Market
Here is a breakdown of the potential hidden costs of selling your home:
Lawyer Fees
Hiring a real estate attorney is an essential aspect of the selling process. This is an unavoidable cost that every seller has to incur when selling his or her property. Lawyer fees can range from as little as $500 to as high as $2,000. Why is this important? Real estate lawyers will generally handle the transfer of your property to the new buyer and discharge the title and mortgage.
Real Estate Agent Fees
While you could technically avoid paying real estate agent fees by not hiring this industry professional, it is wise not to do so. Real estate agents are an imperative part of the buying and selling process. At the same time, you still need to budget accordingly, as these fees can represent as much as six percent of the final sale prices.
Even if you decide to list your property independently, you will still have to pay the buyer’s agent. In any case, it is typically recommended that sellers use a real estate agent to list and sell their property, as the process is easier, and the fees you pay in return are well worth the investment.
Mortgage Penalties
Indeed, there are two primary types of mortgage penalties that you will face:
- Mortgage Discharge Fees: Every mortgage has a discharge fee when you sell your property. The discharge fee is when the mortgage is paid off and usually consists of preparation fees, land title search fees, and land title discharge costs. The cost ranges from zero to $400.
- Mortgage Prepayment Penalty: If you break your mortgage terms because of the sale, you will have to pay a penalty.
Mortgage penalties can cost you approximately three months’ worth of interest.
Home Staging/Photography
To receive exceptional offers on your property, you must ensure it is adequately presented to the buyers. Many sellers have to use home staging services to make this happen, whether in a buyers or sellers market. Of course, depending on the size of the property and the length it has been on the market, home staging can cost you from a few hundred dollars to thousands of dollars. Additionally, most buyers today look at photos of properties online before they decide to view them. As a result, you will have to use professional photographs to showcase the best features of your property. This can add to your list of expenses.
Maintenance & Repairs
In order to get the best offer for your home, you will need to ensure it is in good condition. You may have to conduct repairs and upgrades before you put it on the market. You will also need to invest in deep cleaning the place. For example, if there are carpets, they are highly recommended to be professionally cleaned.
The cost of this depends on the property’s current state and the amount of work needed to be performed to get into good shape.
Moving Costs
Moving expenses are a big one these days. Hiring movers can cost you a couple of thousand dollars, and that’s just the beginning. Even if you DIY your move, you’ll need to feed and or pay your helpers, rent a truck & fuel it, buy moving boxes and consider a professional cleaning both of the place you’re leaving and the one you’re moving into. Don’t forget to factor in utility deposits, pest control, and dozens of little things you discover you need while moving in.
Home Inspection Report
Every seller hopes the home inspection report is returned with a clean bill of health. Unfortunately, life is not like that. If the report highlights issues related to plumbing, electrical systems, foundation, or structure, sellers must cover the repair costs before the deal can close or renegotiate a lower selling price if they want the buyer to take on the repairs after the sale. You might consider heading off these hiccups by having your own home inspection done before listing the home for sale. This also creates an air of transparency with potential buyers.
Roller Coaster Ride
The Canadian real estate market has been on a roller coaster ride over the past four years. From the pandemic-era buying frenzy to the housing market correction to sky-high borrowing costs, buyers and sellers have had to endure plenty of turbulence since 2020. While conditions have stabilized, the hidden costs of selling a home still remain the same. Typically, households will put together a 20 percent down payment. However, industry professionals say you should add an extra five to seven percent to the final tally to help cover the long list of hidden costs.
Originally published on the RE/MAX Canada Blog.