Buying and Selling a House - Who Pays for What?

Buying or selling a home is expensive. You'll pay some costs whether you're buying, selling, or doing both at the same time. For instance both sides have to pay for a conveyancer, and whether you're moving in or out, you'll have to pay for removals unless you really do live out of a suitcase.

But other costs are only paid by one side. Let's take a look at who pays for what.

The Cost of Selling

If you're selling a home, you need to budget for marketing costs. Unless you go for a sale by owner, you'll be paying an agent's commission, and you'll also need to pay for marketing costs such as advertising, a sign board, and photography. You'll have a slightly different mix of costs if you sell by auction, but you'll still need a marketing campaign to ensure you get enough bidders to ensure a good price for your home.

You'll also need to pay for some regulatory stuff, such as an energy performance certificate. And you'll need to pay your legal costs, plus, if you have a mortgage, a discharge fee and, possibly, early redemption penalties. Your mortgage also needs to be paid off, of course, and if the property is not your primary residence, you may have to pay capital gains tax on any profit–so you may get relatively little cash out of the sale.

Any pre-sale styling or home staging will need to be paid for, as well as home cleaning before putting the property on the market.  

Of course both sides pay legal costs. And there are some costs that the buyer has to pay. As well as their own legal costs, buyers need to commission pest and building inspections as well as search costs. There may also be fees to be paid on securing finance.  

The Cost of Buying

It may sound as if the buyer gets off relatively lightly, as there are no agent commissions or marketing costs to pay. But in fact, there's one cost that the buyer has to pay that the seller won't have to worry about, and it's quite a big one—stamp duty.

Stamp duty is set by each state, and it can be quite complex, with different rates depending on whether you're a home owner or an investor. First time buyers often get a break, and foreign purchasers are penalised in some states. For instance in NSW, first home buyers pay nothing on properties up to $650,000, and a reduced rate up to $800,000. In some states, rates for first time home buyers may be different depending on whether they are buying an existing home or a newly built property. A useful calculator can be found here; it can help work out the stamp duty payable for an individual property.

Of course, if like many people you're selling one house in order to buy another, bad news—you'll end up paying stamp duty on your new house as well as all the sales costs on the one you're leaving.

Buyers also need to budget for the cost of re-connecting or transferring services such as phone, internet and electricity. They'll also need to pay for insurance from the day they take over ownership of the property.

Costs That Have to be split

Some costs have to be split between buyer and seller. For instance, the seller is liable for council and utility rates up to the date of the sale, after which the buyer becomes liable. Because the sale is extremely unlikely to happen on day one of a new quarter, part of the conveyancing process involves divvying up the buyers' and sellers' contributions. That goes for strata levies as well, if they're applicable.  

The effect can be difficult to predict. If the vendor has already paid council rates up to the end of the quarter and the transaction completes in the last week of the quarter, the buyer is only liable for a week's rates. But if the transaction completes in the first week of that quarter, the buyer will have to reimburse most of the payment the vendor has already made. It's best to keep a little contingency money aside just in case.

Most of us find moving home stressful, and losing track of your finances makes things worse. So make sure you've budgeted properly for all the costs involved, and that no one springs any surprises on you in the process.

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