Cost of Selling a House 2024
What are the costs of selling a house?
The major costs of selling a house (or seller closing costs) include the real estate commissions, legal fees, and sales tax on real estate commissions. These vary based on province, region, and your agent’s commission cost structure. You can save on the cost by selling your home FSBO.
What is real estate commission?
Real estate commissions are the fees that you pay to your real estate agent for their services. Your real estate agent works very hard to market, stage, and sell your home. In Canada, generally the seller pays the commission to both the buyer and seller agents. The real estate commissions are first paid to a lawyer, who will then pay out the commissions to both the buyer and seller agents after the transaction for your home has been completed.
As a seller, you can choose to self-list your home to avoid commission costs; however, we advise that you should have some previous experience with real estate transactions. A one percent agent charges a commission as low as 1% and can help you save on commission.
Real Estate Commissions in British Columbia
BC real estate commission is usually charged on a graduated scale. The commission rate on the first $100,000 of the final purchase price of the property is usually 3% to 4% while the commission rate on the remaining balance is 1% to 2% .
For a $1M home, the commission would be $17,000. This is the sum of the commission on the first $100K of $3,500 and the commission on the remaining portion of $13,500.
The commission is typically split between the seller and buyer agents based on an agreed upon amount. Real estate commissions are negotiable and vary based on region. To get a close estimate of what you might be paying, select the region (Greater Vancouver Area, Victoria Area, Fraser Valley, or Kelowna) and refer to the Closing Cost Breakdown, which will show the commissions for the buyer agent and seller agent.
Real Estate Commissions in Alberta
Thereal estate commission in Alberta is also calculated on a similar graduated scale. The first $100,000 commission rate starts at 7% while the remaining portion is typically charged at a rate of 3% of the final purchase price of the property. The commission is typically split 50/50 between the seller and buyer agents.
Real Estate Commissions in Ontario
The combined real estate commission in Ontario usually ranges between 3.5% to 5% of the purchase price of the property. The buyer agent portion of that combined commission is usually fixed at 2.5% with the remaining 1% to 2.5% going to the seller agent. Real estate commissions in Ontario are typically negotiable and you can check real estate commissions that agents nearby you are charging.
Real Estate Commissions in Saskatchewan
Saskatchewan also uses a graduated commission scale for real estate commissions, similar to Alberta and British Columbia. In Saskatchewan, there are two graduated scales commonly used to calculate real estate commissions:
- 6% of the selling price for the first $100K, 4% for the second $100K, and 2% for the remaining portion of the selling price
- 7% for the first $100K and 3% for the remaining portion of the selling price
The real estate commissions charged are usually split 50/50 between buyer and seller agents. These commissions are also typically negotiable, so make sure to check with your agent beforehand.
Real Estate Lawyer:
Real estate lawyer fees generally range between $500-$1000 but the actual cost you pay may vary. The calculator estimates lawyer fees to be around $750. Some of the services that your lawyer provide for you include:
- Title Search: The seller lawyer must ensure that the seller closes any outstanding permits and agrees to pay any outstanding items from the proceeds of the sale of the house. If the buyer’s title search reveals any restrictions or easements, then the seller’s lawyer offers solutions to satisfy the buyer so that the transaction may proceed.
- Letter of Direction: The seller lawyer will verify any mortgages and line of credit on the property and provide the buyer lawyer a Letter of Direction that states that any proceeds from the sale of the property will be used to pay off debt and taxes owing. Finally, the seller lawyer will verify the property tax information and provide it to the buyer lawyer.
- Statement of Adjustments: The Statement of Adjustments is a list of the expenses owing or prepaid by the seller at the time of closing. This list includes items such as property taxes, parking permits, condominium fees, and more. For example, if the seller has already prepaid the parking permit for an entire year but the house is sold halfway through the year, then the buyer will be required to pay the balance for the second half of the year to the seller. The seller lawyer is required to verify the amount and term of all the items on the Statement of Adjustments.
- Closing Date:On the closing date, the buyer lawyer will electronically transfer funds to the seller lawyer. The seller lawyer will confirm receipt of the funds and use them to pay outstanding mortgages and debts. Following, the seller lawyer will prepare a report and release the keys to the buyer lawyer. The seller lawyer will also deduct the cost of closing (such as lawyer fees and real estate commissions) and credit the final remaining balance to the seller. You can typically expect to collect these funds within 24 hours of closing.
Do you pay tax on real estate commissions?
Yes. In each province, the real estate commissions are subject to the sales taxes at the sales tax rate for each respective province. These are:
The closing cost calculator calculates the sales tax for the combined real estate commissions for both the buyer and seller agents.
The real estate commission fee in Ontario is 5%, or $25,000, with 2.5% going to each agent. The sales tax in Ontario is 13% of the real estate commission fee, or $3,250. The legal fees are approximately $750.
In total, Bobby will pay $29,000 in the cost of selling his home. Assuming he owns all of the equity in his home, he will receive $471,000 upon closing.
The buyer agent real estate commission is 3.255% on the first $100K and 1.15% on the remaining $900K in the Greater Vancouver Area, or $13,588. The seller agent commission is 3.875% on the first $100K and 1.33% on the remaining $900K, or $15,913. The sales tax in BC is 5% of the real estate commission fee, or $1,475. The legal fees are approximately $750.
For Sale by Owner:
There are many considerations to be aware of if you choose to sell your house yourself (For Sale By Owner/ FSBO). The main advantage of selling your home by yourself is that you will be saving on the seller agent commission, which is one of the major closing costs. The issues you should take note of when self-listing your home include pricing/staging/marketing, proper legal disclosures, and buyer agent commission. When selling a house by yourself, you will need to market and stage your home. This includes taking professional photographs of the interior of your home, listing your home on online listing services, and setting up slots for open houses. You will also need to price your home at a fair market value by performing a comparative market analysis of the nearby real estate transactions in your neighbourhood. You should also consider offering the buyer agent a commission and signing an agreement stating the percentage fee or you run the risk of buyer agents not showing the home to prospective buyers. Finally, any hazards, nuisance, or risks associated with your property need to be legally disclosed to the buyer before closing.
As there are many considerations involved with For Sale by Owner, we recommend that you hire a real estate agentunless you have experience with real estate transactions. Your agent will professionally stage and market your home, and they will have access to a large network of potential buyers. Real estate agents are also experienced negotiators in pricing and they are familiar with the closing process. Finally, your seller agent will have insurance against errors and mistake omissions for legal disclosures.