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Selling a house is a big deal, and it can come with its fair share of stress and costs. It's important to know what expenses to expect, especially since the costs can differ depending on where you're selling.
To make things simpler, let's break down the different expenses that come with selling a home in Victoria. We'll explore expenses such as real estate commission fees, conveyancing, and other potential costs you might run into during the process.
The property market in VIC varies depending on the location, with Melbourne typically being the most dynamic and expensive market. In areas with a high number of properties, you can expect to see lower commission rates because of the increased competition among real estate agents.
According to OpenAgent, In metropolitan regions, you can anticipate a commission rate of roughly 2% - 2.5%. Conversely, in rural and semi-rural zones, the commission rate tends to be higher, ranging from about 2.5% - 3.5%.
On an average level, real estate commission works out to be roughly 2.05% in Victoria. This means a property worth $1,000,000 would incur roughly $20,500 in commission fees.
With this said, area is not the only factor that determines commission. Agents may also charge more based on their proven track record and level of expertise.
In regional areas, commission rates generally lean a little bit higher compared to metropolitan regions. This is mainly because properties often take longer to sell in these areas, requiring agents to put in extra effort to secure a successful sale.
This variation in commission fees just goes to show the significance of understanding local market dynamics and engaging in negotiations with agents to arrive at a reasonable and competitive rate.
To find out what the average commission is in your area, you can use this handy commission rate calculator.
When you begin discussions with agents, the subject of commissions will likely come up. Usually, sellers opt for a fixed commission rate arrangement. However, there's also the option of a tiered commission structure, which can be advantageous if you're aiming to strongly motivate your selected agent to achieve an outstanding outcome.
The most suitable commission approach for you depends on your specific selling circumstances and the recommendations of your agent.
Being informed about these approaches is crucial for sellers as they assess the expenses of hiring an agent. We outline these variations below:
Fixed commission structure
When it comes to deciding on commission structures, the fixed commission fee approach is a popular choice. This method involves a simple calculation: multiplying the negotiated commission rate by the final sale price, which determines the commission payable to your agent.
For instance, if you achieve a sale price of $1,200,000 and agree on a commission rate of 2% with your agent, the resulting commission payable would be $24,000 ($1,200,000 x 2%).
Through this straightforward yet effective approach, the fixed commission structure streamlines the process of calculating agent commissions, offering transparency and clarity for both sellers and agents.
Tiered commission structure
This approach involves establishing different commission rates based on performance targets that the agent meets. Typically, a mutually agreed target sale price is set, leading to the definition of two commission rates:
Imagine you've successfully sold your property for $1,000,000, and you and your agent had previously settled on a tiered commission structure with a 1.5% commission rate for amounts below the agreed sale price and a 2.5% commission rate for any portion exceeding it.
In the event that the sale price falls below the agreed target, the commission rate stands at 1.5%. This ensures that the agent's efforts are still recognized, even if the sale price is slightly lower than anticipated. In this scenario, the commission would total $15,000 ($1,000,000 x 0.015).
However, the true incentive comes into play when the sale price exceeds the agreed threshold. For any portion of the sale price above the agreed amount, the commission rate escalates to 2.5%. For example, if your property is sold for $1,100,000 ($100,000 beyond the threshold), the agent's additional commission would amount to $2,500 ($100,000 x 0.025).
Find out how either of these scenarios could play out for your property by using OpenAgent’s commission calculator.
Another expense that sellers should be mindful of is conveyancing fees. Conveyancing plays the role in the legal process of transferring property ownership from the seller to the buyer.
Conveyancing fees are not standardised; they hinge on the specific services provided by the conveyancer and the level of legal expertise required for the transaction at hand.
In Victoria, the average conveyancing cost ranges between the ballpark of $400 to $2000+, contingent on various factors that influence the course of the transaction.
These factors encompass:
To ensure you make an informed decision, consider consulting a couple of conveyancers to compare their services and fees. Seek recommendations from sources such as family, friends, collaborating agents, and mortgage brokers.
You should always do your due diligence and check that any conveyancer you are considering working with has a current licence. In Victoria, you can check conveyancing licences on the Consumer Affairs Victoria website.
When considering the expenses associated with real estate marketing, it's important to recognize the potential variability in these costs. On average, these costs generally align with about 0.5% to 1% of your targeted property sale price. Based on the premise that your home is worth $500,000, the recommended budget for advertising and marketing is typically around $2,500-$5,000 In Victoria. However, you can expect to pay more or less depending on the extent of marketing you do and the spaces in which you decide to market including:
Find the full breakdown of these costs here.
These marketing costs serve a big role in capturing the attention of potential buyers and amplifying your property's visibility within the fiercely competitive real estate landscape. As you devise your comprehensive budget for selling your property, be sure to incorporate these costs into your financial plan.
To budget your house sale accordingly, you can use this cost of selling property calculator by OpenAgent.
In a private treaty, you, the property owner, take charge of setting the sale price. Your chosen real estate agent then engages in personalised negotiations with potential buyers, aiming to secure a deal that closely aligns with your established price point.
Unlike auction-based methods, opting for a private treaty sale doesn't incur any additional costs, as the sale is facilitated solely by the agent without the involvement of an auctioneer.
Private treaty sales are particularly favoured in regions where auctions are less common. Even within competitive markets, some sellers confidently embrace this approach, trusting in its potential to yield favourable results. For others, the private treaty route offers a way to sidestep the heightened pressures often linked to auctions, creating a more relaxed and less intense selling experience.
Pros:
Cons:
An auction is a public sale where potential buyers engage in live bidding for properties. If the bids exceed a set reserve price (the minimum acceptable selling price), the highest bidder when the auction ends promptly signs the contract, finalising the sale.
In Victoria, auctioneers can charge anywhere between $400 and $1,000 to sell a house but this could turn out to be higher or lower depending on your area and the current market conditions.
Pros:
Cons:
It’s therefore crucial that you speak to any agents you engage about what they would recommend for your property and location.
When selling, the tender process presents an alternative approach to handling transactions.
Here's how it works: potential buyers submit individual offers, often accompanied by a 5 or 10 percent deposit. After reviewing these offers with your agent, you have the flexibility to accept or decline based on your preferences. The cost is determined by the agreed-upon price between you and your agent.
This method is often used for high-end residential properties, homes with distinctive features, or properties with development potential. It proves particularly beneficial for property types (as mentioned earlier) that may lack a clear market value due to their unique characteristics.
Pros:
Cons:
When you decide to sell your property, you might find yourself in the task of simultaneously navigating the prospects of buying a new home and securing a rental place to live in. This can pose both financial and emotional challenges, particularly in a market where available properties for both sale and rent are scarce.
It's crucial to take these potential scenarios into account before embarking on the selling process, ensuring that you're well-prepared.
Many individuals opt to sell their current property before venturing into the purchase of a new one, or they may attempt the balance of simultaneous buying and selling with aligned settlement dates. While achievable, this approach can be pretty stressful and demanding.
In this specific context, the option of a bridging loan could be worth looking at. This financial solution enables you to secure your new home before finalising the sale of your current property, alleviating a significant amount of stress from the equation.
You can find out more about bridging loans here, and you can find out more whether you should buy or sell first here.
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Disclaimer: Property reports contain property estimate data and information provided by RP Data Pty Ltd trading as CoreLogic Asia Pacific ABN 57 087 759 171 (CoreLogic) and OpenAgent Pty Ltd, which is general in nature. It is not a professional property valuation or advice to be relied upon. The actual market value of the subject property may differ. We and CoreLogic do not warrant the accuracy, currency or completeness of the data and information to the full extent permitted by law, each excludes all loss or damage howsoever arising (including through negligence) in connection with the information. You rely on the property estimate at your own risk.
Disclaimer: Doorsteps Finance Pty Ltd ACN 648 541 879 (credit representative no.531036) is authorised under Doorsteps Solutions Pty Ltd ACN 654 334 246, Australian Credit Licence 537369. Any credit application made through Doorsteps Finance Pty Ltd is subject to approval, terms and conditions, fees and charges.
