How Much Do You Keep When You Sell Your House?

Selling your house or investment property is one of the biggest financial decisions you may ever make. But when all is said and done, how much profit actually makes it to your bank account? The answer isn’t straightforward—it all depends on the various costs you incur during the sale process. Below, we break down the four major expenses that can significantly reduce your net profit and offer some insights on how to keep more of your hard-earned money.

The 4 Major Costs That Affect Your Proceeds

1. Agent Commissions & Marketing Fees

When engaging a real estate agent, commissions typically range from 2% to 3% (plus GST) of the final sale price. For example, on a $500,000 property, you might pay around $10,000 plus GST. But that’s not all—agents also charge extra for marketing your property. Depending on where you live, advertising expenses can vary widely—from about $4,000 to upwards of $10,000 for premium listings in sought-after suburbs.

Example: For a $500,000 home with combined agent commissions and marketing costs, you might end up retaining roughly $486,000.

2. Legal Fees

The sale of a property involves considerable paperwork and legal procedures. Hiring a conveyancer or property solicitor to manage documents such as the Section 32 Statement and the Contract of Sale is essential to avoid legal complications. Legal fees can vary, but generally, you should expect to pay between $600 and $1500. In our example, if the legal fees come to around $1,650 (including disbursements), your net proceeds would decrease further to approximately $483,300.

3. Paying Off Your Mortgage

If your property isn’t owned outright, the outstanding balance on your mortgage must be paid off using the sale proceeds. Additionally, if you decide to settle your mortgage early, you might incur a break fee. Suppose you owe $150,000 on your home; after paying off your mortgage, you would be left with about $333,350 from the original $500,000 sale price.

4. Capital Gains Tax (CGT)

Capital Gains Tax is another critical factor, especially for investment properties or if you purchased your property after 1985. CGT is calculated on the difference between the purchase price (including improvements) and the sale price. If you sell your property within 12 months of purchase, you may face the full amount of the gain. However, owning the property for longer than 12 months can offer a 50% discount on the taxable gain. Since numerous factors determine the actual CGT payable, it’s wise to consult with an accountant for a personalized estimate.

Maximizing Your Net Profit

While certain costs—like mortgage repayment and CGT—are largely unavoidable, you can significantly reduce expenses associated with agent commissions and marketing by considering an independent selling approach. By managing the sale process yourself or choosing a fixed-fee advertising service, you can save thousands of dollars. For instance, selling your property independently could potentially boost your retained profit from $333,350 to well over $344,350, depending on your marketing expenses.

Understanding these expenses in detail will help you set a realistic asking price and accurately forecast your net profit, empowering you to make informed decisions throughout the selling process.