If you are looking at selling a house, then you will realise it’s a daunting prospect with various pitfalls and you may be wanting to know who pays for what in the selling process.
This is our step-by-step guide to give you this information and will highlight whether the buyer or seller is responsible for picking up the bill for various issues.
There’s no doubt that selling a property can be a stressful and complicated process and along with the obvious fees, there are hidden charges that can quickly add up.
Indeed, one survey has highlighted that more than one in four of those who sold a home found the process was more costly than they had budgeted for.
First step when selling a house
The first step when selling a house is to tell your mortgage lender that you are planning to do so and find out how much is outstanding on your mortgage and whether the lender has any early redemption penalties. This penalty will be paid by the house seller.
The next step is to find a traditional or online estate agent who will have either fixed fees or a package for selling your home. The house seller will be responsible for these fees.
It’s also important to undertake research on choosing an estate agent and you will need to ask how quickly they can sell a property and whether they achieve the asking price.
Before you find an estate agent and arrange viewings, you really should prepare your home for sale and you may need to spend money redecorating and fixing items that need repairing.
The selling a house process
For those who need a checklist when selling a house process, this is what you need:
- Work out your finances and tell your mortgage lender that you are looking to sell up.
- Find out how much your property is worth from an estate agent.
- Choose an estate agent to handle marketing and arrange viewings. Remember that using a traditional estate agent will cost between 0.75% and 3% of the property’s selling price plus VAT. Online agents will have a fixed fee package. The seller pays the agent.
- Decide how much you are selling your home for along with wriggle room should a buyer try to negotiate a discount, usually between 5% and 10% of the selling price.
- Prepare your home by redecorating or carrying out repairs. The bill can add up.
- You’ll need to hire a conveyancer or solicitor – and decide whether you want the nearest, cheapest or the best rated. The seller will be paying their fees and the solicitor will do the liaising with the buyer’s solicitor and deal with the contract.
- Complete the relevant questionnaires and forms, so the buyer has all the relevant information.
- Conduct viewings
- Accept an offer.
You will then need to work towards exchanging contracts and decide whether fixtures and fittings will be included and how much will be paid for them.
While this explains the house selling process, there will be other questions that need and answering.
How much tax will I pay when I sell my house?
For many vendors, the question of ‘How much tax will I pay when I sell my house?’ will be an important one. Thankfully, apart from stamp duty (see below), the only other tax a home seller needs to be aware of is capital gains tax (CGT).
However, CGT is only applicable – usually – for those who own a second home since tax authorities believe that you may have bought it as an asset with the intention of making a profit, and this profit should be taxed when the property is sold.
If you are liable for CGT, then it’s advisable to get specialist tax advice because the amount you pay will depend on your income.
For those who have one home and have lived in it as their main residence for the entire time they’ve owned it, without letting part of it out or using it for business purposes, then you did not buy your home to make a gain – and will not be eligible for CGT.
There’s a helpful HMRC page on their website about CGT liabilities with more information.
Who pays stamp duty? Buyer or seller?
As mentioned, currently it’s the buyer who will pay the stamp duty on a property but both the Conservatives and Labour Party have floated plans to switch this to the home seller.
One advantage of this is to help first-time buyers to avoid paying the tax and help those families wanting to buy larger properties.
There’s no doubt that stamp duty can be a major outlay and will be paid by the buyer’s solicitor to HM Revenue and Customs.
Should the property be worth less than £125,000, and unless it’s a second home, then no stamp duty is due (for first-time buyers, the threshold is £300,000). The amount that will be levied will depend on the price and where the property is as there are different stamp duty rates in Wales and Scotland than in England and Northern Ireland.
If you are buying a property worth more than £250,000, but less than £925,000, then currently the stamp duty is 5% in England and Northern Ireland, while in Scotland, the duty is 5% on properties up to £350,000 and rises to 10% on properties worth between £350,000 and £750,000.
In Wales, there is a 5% rate for properties worth between £250,000 and £400,000.
When selling property, who pays for the survey?
Since a property survey will benefit the buyer, it’s for them to pay for it.
There are different types of survey, ranging from a condition report, which is a basic survey and usually the cheapest, to a homebuyer report which will highlight structural issues such as damp or subsidence. A building survey offers a more detailed report, so the buyer can identify easily the property’s issues.
However, there is a sound argument for a property seller to also invest in a full survey before they put their house on the market so they can deal with any potential issues and be aware of any problems that a potential buyer may negotiate the price on.
When selling property, who pays the closing costs?
When selling a property, there will be a final bill to pay which includes a range of fees including the estate agent’s commission and some people may know these as ‘closing costs’.
Essentially, these are the bills that need to be paid for the property transaction to be completed fully. The estate agent is paid by the seller and they will also need to pay their solicitor or conveyancer and pay off their mortgage before they can exchange contracts.
There are other costs as well that sellers need to appreciate, including:
The energy performance certificate (EPC)
By law, your property must have an energy performance certificate when you sell it and you will be paying this bill. They will cost between £60 and £120 and will offer a certificate of how energy-efficient the property is.
Depending on whether you are carrying out the removal of your belongings yourself or using a firm, then you’ll need to budget that depends on the size of the property but you should expect a bill of between £300 and £900. Removal firms may negotiate on fees if you book well in advance.
These are usually forgotten and you’ll have bills for gas, electricity and water to pay. If you are used to paying estimated bills, be prepared for a larger actual bill landing on your doormat.
What home buyers pay for
While this article makes clear what the house seller will need to pay for, we should make clear what home buyers are liable for to which includes:
- Stamp duty
As explained earlier, there are various rates and thresholds to consider.
A crucial process to ensure the legal process is completed properly. The costs will range from £500-£1,500 and you may face extra costs for disbursements, which will include paying for local searches, which could add another £250-£500 to the bill. Solicitors can be even more expensive.
Having a professional survey of the building’s condition and construction is worth the expense which can range from £400 to more than £1,000, depending on the survey you request.
The mortgage lender will also need a valuation survey carried out which is to see whether the property is worth at least what your mortgage application is for. Expect a bill of around £200.
- Mortgage fees
Both buyers and sellers will have mortgage arrangement fees to pay which will average around £1,000 but may cost 1% of the mortgage value. Expect mortgage broker fees should you use one, too.
Knowing who pays what when selling a house
While selling and buying property can be a daunting undertaking, knowing who pays what when selling a house makes this easier. And while the process is expensive, you should never lose sight of the fact that you can and probably should negotiate fees at every opportunity.
This means that when sourcing a traditional estate agent, ask if they will charge less and conveyancing fees can also be negotiated.
By making these small efforts, the substantial costs when it comes to selling a property will be reduced and any extra money saved can be used for your new home.