Since I spent thousands of hours and dollars upgrading my home I can sell it for $415,000, $25,000 more than I purchased it and I could buy the other home for $390,000. How much money would I be left with? Consider these costs:
Realtor fees of $8,000 - $16,000. Assuming I went with a traditional realtor I would pay fees up to $16,000, some to go to the selling agent that I’d work with and some to go the buying agent. Did you know that when you’re buying, your realtor is making as much as the selling realtor? If I went with a company like 2% Realty I could cut those fees in half at least.
Legal fees of $1,000 - $2,000. When buying and selling a home you’re transferring a huge sum from one bank to another and title of a property from one person to another. Lawyers and notaries help “convey” this sale in the matter of minutes through their very refined processes and make a mint. It’s possible to minimize this, but not much when you need a mortgage.
Bank fees of $500 - $2,500. This is what I was told I would pay to cut my mortgage short of its due date (only 200 days away!). Be careful when you’re getting a mortgage to review the penalties for breaking the mortgage. You might not think about ‘breaking’ a mortgage but what if you wanted to sell your home before your mortgage term ends? Fees may also come into play when you need bridge financing, aka when your home sells after your new home is purchased.
Moving expenses $500 - $2,000. You have a great deal of control over moving expenses, unless the home you want to buy currently has tenants (which was an issue in my case). This could mean temporary housing and temporary storage on top of moving trucks, movers, cleaners and miscellaneous change of address expenses.
Land Transfer tax $6,000. The tax is charged at a rate of 1% for the first $200,000 and 2% for the portion of the fair market value that is greater than $200,000. This might be ignored by first time home buyers when the house is under $475,000 the fee is $0, but once you buy your second house the fee applies! It was a huge barrier to making the switch in my situation.
How much was I looking at? If I sold my home and bought the other one for $25,000 less then I would lose $1,000 - $3,500!
Years of home improvement and care, not to mention inflation, all gone. Consider this math a basic lesson in the perils of prematurely buying a home without considering when and why you’ll be selling.