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What are the main costs when selling a property?

By Guest Blogger on in Selling

What are the main costs when selling a property?

By Holly Barry, Contributor

It’s fair to say that for most of us, a house or flat is likely to be the most valuable asset we ever own. If, over time, you’re able to invest in your property, modernising or refurbishing it, or adding an extension, you’re likely to see a substantial increase in the value of your property.

Although it’s appealing to think of the appreciation in value, and of the cash you could release from a property sale, things aren’t as simple as just handing over the keys on completion day in return for a profit. The sale of a property will inevitably incur certain costs, and these will influence the level of profit you make from the transaction. It pays to have a clear idea of just what these costs are, how much they’re likely to be and what documents you need to have ready.

Taxation

Unless you’re selling your main home, your property will be treated as an asset and its sale will attract Capital Gains Tax. The tax is defined as ‘the difference between what you paid for an asset and what you received when you sell it’. A Capital Gains Tax liability arises when you dispose of an asset, regardless of whether that disposal is by sale, giving it away as a gift, swapping it, or even if you receive compensation for it in the event of major damage to it.

The current rates for Capital Gains Tax are as follows:

  • If you’re selling a residential property: 18 per cent for a basic rate taxpayer and 28 per cent for a higher rate taxpayer.
  • For trustees or personal representatives of someone who has died: 20 per cent for assets excluding residential property and 28 per cent for disposals of residential property.

There are also some annual tax-free allowances to take into consideration. Currently, the Annual Exempt Amount is set at £11,100 for individuals. Personal representatives, trustees for the disabled and for other trustees, it’s set at £5,550. Capital Gains Tax is only payable if your gains are over this threshold.

Building Works

When you put your property up for sale, your estate agent may suggest you carry out certain work to make your property saleable. For example, buyers are unlikely to queue up to view a house that has obvious subsidence issues, or that has a broken window or a seriously overgrown front garden.

To stand the best chance of selling your property quickly and for the highest price achievable, you’ll need to find reputable tradespeople to carry out any remedial works such as these. While it might be tempting to ignore these issues and simply put the property on the market, fixing serious issues is a vital step, as you’ll have to hand over necessary certificates to prove that you’re not trying to sell your property with known defects or structural problems.

When you’ve made the decision to sell, and you’ve done some research on what similar properties in your area are selling for, it can be tempting to try to sidestep the costs involved in selling to maximise the return on your investment. There are things that you can do yourself to present your property in the best possible light, and to keep costs to a minimum, but it’s likely that with any significant building works or specialist repairs, you’ll need to source expert help to get the work done. Cutting corners could prove costly, and potentially dangerous, so it’s worth doing things properly. If your property has appreciated significantly in value, you’re likely to generate a profit that far exceeds the costs you incur in selling it.

Estate Agents Fees

As a nation, we have a love-hate relationship with estate agents. We often question if they offer good value for money, or if we’d rather market our property ourselves. For the majority of people, the nitty gritty of marketing a property successfully is beyond our abilities. Of course, estate agents do charge a fee for their services, but for that fee, they will take care of advertising your property, circulating details to interested buyers, accompanying potential buyers to viewings, negotiating a sale price and following up on paperwork as the sale progresses. To conserve your money as best as possible, it’s important to research and compare estate agent fees so you know you’re being provided with the best deal.

Estate agent fees can vary significantly depending on the value of your property, the area you live in and the level of service included. It’s worth weighing up if you’re happy to pay a fee based on a percentage of the sale price, or if you’d prefer an agreement that involves a fixed fee.