Selling Costs associated with Australian Real Estate
Agent Commissions
It is possible to sell a house without the assistance of a real estate agent, and kits are available which will take you through the process. However, for most people, and certainly expatriates who don't have the advantage of being in the country, agency fees are a fact of life and the single largest cost of selling a house. Commissions are unregulated and are entirely a matter of negotiation between you and the agent – however, they typically range from 2% to 3%, and may be higher for low-value properties and lower for expensive houses.
Many real estate agents, particularly at the higher value part of the market, may also ask for a "tiered" commission structure. As an example, they may request a flat 2% commission up to the expected sale price, and then a significantly higher commission level above this amount - on the premise that this provides an incentive for them to achieve a sale price above your expected sale price. Implicitly, there is nothing at all wrong with this mechanism, quite the contrary, but it places a significant emphasis on ensuring that the "expected sale price" represents fair value - otherwise, there is an incentive for the agent to manage down your expectations as much is possible.
Both the appropriate "expected sale price" and agent commission structure can only be determined on the basis of discussions with multiple agents. We fully understand that this can be difficult if based overseas, but it is a process that should not be skipped, and you should not simply place your business with an agent based on past relationships, or their profile within the individual market. If a prospective agent doesn't have enough time to participate in a video or telephone discussion regarding the sale of your property, then they probably aren't displaying the sort of vigour and focus you require of an agent.
Advertising Costs
If you are auctioning your property you will almost certainly be asked to pay for the advertising costs – these can be substantial, anything from $1,000 for a modest house to much more than $20,000 for an expensive house. Agent's view advertising as an essential part of the marketing campaign and many will argue that it is unwise to skimp on advertising because it is an innate part of generating interest prior to an auction sale. You should test this desire to spend your money on advertising by linking it with agency commission costs and other selling costs in any appointment discussion.
You may also be asked to contribute to marketing costs if selling by private treaty – whether it is appropriate will depend on your particular circumstances – and again it should be considered as part of the total selling costs.
Note that it has also become much more common of late for properties to be "dressed for sale" - that's to say, third-party furniture is placed within the house during the viewing period. It is considered preferable to marketing and selling a house on an unfurnished basis.
Other Costs
When you sell a property, and depending on the state or territory your house is located in (given the different state and territory requirements), you may be also responsible for paying the costs of:
- search fees - to check you can legally sell the property and to calculate any money owing, such as land tax, water and sewerage rates
- termite and pest certificates, which are compulsory in some states and territories
- mortgage discharge fees, if applicable
- conveyancing costs, if you use a solicitor or conveyancer, and
- if it applies, supplying the house's energy rating
In Summary
To provide a short summary of the type of costs involved in both The sale and purchase of a property in Australia, please review the table below. The exemplar is a $2 million house for sale and purchase based in New South Wales, and of course there can be extreme variability around some of the individual costs. For example, the current condition of the house is going determine very much how much needs to be spent in order to bring it up to the sale condition - $25,000 is used an example, but this may or may not be accurate in individual circumstances.
Remember - FRCGW
From July 1, 2016 all Australian residential property sold by a non-resident or temporary resident valued over $2M were subject to foreign resident capital gains withholding tax (FRCGW) at a rate of 10%. Since July 1, 2017 FRCGW has applied to all sales with a value of $750,000 or more, at an increased rate of 12.5%. Tax advice in advance of any sale by an expat or foreign investor is strongly recommended - particularly as exemptions may be available.
If you would like to arrange assistance in terms of the purchase of Australian property please complete the Inquiry form below and we will respond promptly.