Real Estate Matters | The Cost Of Selling: Clarifying costs for owners selling a property
Juliet Risdon
In many ways, selling a property is a lot easier than buying one. After all, the assumed risk is on the part of the person acquiring the property and the bank that is lending money against that property.
Selling costs can be broken down into 3 different areas;
Property Costs – Improvements and furnishing, negative cash-flow
Promotion Costs – Advertising and showing the apartment
Administration Costs – Bank fees, legal fees, agency fees
Property Costs
When selling an apartment, it’s a good idea to make it as attractive as possible or you may find yourself discounting the price due to ‘the work required to bring it up to standard’.
1. Improvements
Sellers want to get the best price for a property. Whilst pricing in Macau is generally done on a sq ft basis, the condition of the apartment will often determine the speed and level of the offers received.
Two apartments may look the same from the outside, but the more attractive one inside will sell quicker and for a higher amount, all things being equal.
2. Furnishing
Furnishing is usually a forgotten cost, and like any cost, the lower the better.
When an apartment is put up for sale, it is a good idea to make a full inventory list of everything that you don’t mind leaving inside, and then stating how much the items will cost new.
If the buyer wants the furniture, they can then purchase from you at price discounted from new. This saves the buyer money and re-coupes part of your cost.
Alternatively, you will be wise to insist that furniture and other unwanted items be removed from the property before completion, since the removal will take both time and money. That old TV that the seller has kindly offered to leave is not a benefit when you have to pay and organize people to come and remove it.
Promotion Costs
1. Keeping a tenant happy
If you have a tenanted property for sale, it may be difficult to get into the property for viewings.
One ‘promotion’ cost is a potential incentive for the tenant to open the door and allow prospects to see inside. For example, two weeks rent if they allow people to view the property by appointment, and subsequently the apartment is sold.
2. Marketing
Very few sellers pay to market their property.
In the past, Macau prices rose so quickly that there was no need to spend money promoting a property, it sold anyway.
However, in a buyers market, the market that we have entered into now, promoting a property is important.
The agency should be able to give you a cost to market the property through web promotions, social media, newsletters, flyers and other methods.
Administration Costs
1. Legal & Tax Costs
Legal costs are minimal when selling a property. Lawyers usually charge administration and translation fees which are split between buyers and sellers, and these do not normally exceed MOP 5,000.
If a property is being sold within two years of its purchase, there is a special sales tax to pay that at present is 20 percent of the sale price in year one, and 10 percent of the price in year two.
As these fees are updated regularly, do consult with your lawyer ahead of the transaction to get a full breakdown of the fees
2. Mortgage Loan Release Fees
The release of the mortgage loan can be costly, depending on the size of the loan and the period that it has left to run.
Look out for an early termination penalty if the property is sold within the first three years. A penalty for early termination of the loan can be as much as 3 percent of the amount borrowed. After the initial three years there is a usually a nominal administration fee for early termination.
There is also the ‘Registration of the mortgage release’ a standard calculation that can be advised by the lawyer. This registration of mortgage release must also be notarized, and thus the process will also attract a notary fee that can be advised by the lawyers office.
Agency Fees
Agency fees vary from country to country. In Macau, the standard agency fee is equivalent to between one & two percent of the sales price depending on the contractual agreement between the agency and the seller, and the obligations of the agency.
A copy of this article can be seen on the Macau Daily Times website or downloaded from the JML Property website.
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Juliet Risdon is a Director of JML Property and a property investor.
Having been established in 1994, JML Property offers investment property & homes. It specializes in managing properties for owners and investors, and providing attractive and comfortable homes for tenants.
www.JMLProperty.com
info@JMLProperty.com
