Many people think that most of the expenses incurred during a property transaction are buyer’s responsibility, which is partly true. However, it doesn’t mean that homeowners or property sellers don’t have any expenses to bear. In fact, selling a property is an overwhelming process, involving several costs. While most of the sellers generally focus on the potential profit, they often overlook the expenses that come with the selling process.
Understanding these costs upfront can help you plan better and avoid unwanted surprises. Let’s delve into the key expenses you’ll encounter when selling a property and how to manage them effectively.
List of All the Expenses Involved While Selling a Property
- Repair and Remodelling Charges
When prospective buyers begin searching for a suitable residential property, particularly in a high-end locality, they are often presented with an abundance of choices and numerous options to consider. To stand out among other properties in the area and gain a competitive advantage during the sale process, sellers may need to undertake necessary repairs or renovations. It is important to note that first impressions hold significant value.
A visually appealing property is more likely to attract a higher price. Even if extensive renovations are not pursued, addressing essential repairs, such as fixing plumbing or electrical fixtures, is crucial to enhance the property’s appeal and make it more sale-worthy.
- Brokerage Fee
Hiring a real estate agent can immensely simplify the challenging task of selling a property. However, this comes at a cost. In India, brokers typically charge a commission ranging from 1% to 2% of the property’s sale price. This fee covers their services, which may include marketing, negotiating with buyers, and handling all the necessary paperwork.
For instance, if your residential property is sold for ₹50 lakh, you could end up paying anywhere between ₹50,000 to ₹1 lakh as commission. While this may seem steep, a good agent can ensure your property sells faster and at a better price, making it a worthwhile investment.
- Legal and Documentation Charges
Selling a property requires complex legal work. You will need to provide documents such as the title deed, sale agreement, encumbrance certificate, and more. Ensuring these documents are accurate and up-to-date often requires the help of a legal expert.
Legal consultation fees can vary depending on the complexity of your case but generally range from ₹5,000 to ₹20,000. If any of your documents are missing or need rectification, you may have to bear additional costs for obtaining certified copies or resolving disputes.
- Advertising and Marketing
In order to attract a large number of potential buyers, you will need to invest in advertising. There are several real estate portals where you can market your residential property. Besides this, you can also try paid promotions on social media or advertise in local newspapers. These efforts will not only enhance your property’s appeal but also speed up the selling process.
- Capital Gains Tax
The capital gains tax is imposed upon the financial gains derived from selling a property. The imposition of this tax depends upon how long the profits were held before reinvested in another real estate property or capital gains bonds. In case the property is sold for ₹90 lakh and the actual cost incurred while purchasing the property was ₹30 lakh, then the amount of profit gained is ₹60 lakh. When calculating capital gains, sellers should consider a holding period, as well as benefits by indexation.
- Foreclosure Charges
If you have taken any home loan against your property, you’ll need to settle the outstanding balance before transferring the ownership. Some banks or financial institutions may charge prepayment penalties, particularly for loans with fixed interest rates. These penalties typically range from 2% to 5% of the outstanding loan amount. Make sure to check the terms of your loan agreement to avoid hidden charges.
- Miscellaneous Expenses
There are several smaller but essential costs that often go unnoticed while selling a property such as:
- Utility Bill Clearance: All pending utility bills must be cleared before the sale, which may include electricity, water, and property taxes.
- Movers and Packers: If you’re vacating the property, don’t forget to check for moving costs, which vary based on distance and volume.
