When a buyer and seller eventually agree to the terms of a property sale, it can be heartbreaking for the buyer and often costly for the seller, if the buyer's application for a home loan is declined.
A lesser known but very important service of a real estate agent can be to assist with qualifying potential homebuyers on behalf of the seller. The assessment of a homebuyer's capacity to afford a property is not always easy, and ultimately any property sale cannot be assured of proceeding until settlement of the transaction occurs.
A good licensed real estate agent can detect, at an early point, any signs that a sale may not proceed. If the problems are of a non-financial nature the agent may be in a position to help the buyer, but if it's about finance there is very little an agent can do to resurrect the sale. Following this, the seller is faced with re-listing the property.
Buyers who are upgrading (not first home buyers), should roughly allow for an extra 5 per cent on the purchase price of a property to cover transaction costs. With the median price of a home in Perth today now around $445,000, the transaction costs associated with the purchase of such a property would be about $20,000.
The biggest ingoing cost to the upgrade purchaser is State Government stamp duty of approximately $15,000 on a median priced home. Other transaction costs payable by the buyer in this example include transfer of title fee, settlement agent's fee, various bank and mortgage registration fees, adjustment of rates and taxes and property insurance. Along with removal costs, gas, water and electricity connection fees and mortgage insurance you can be looking at around $4,000.
If you are a first home buyer and eligible for the Commonwealth First Home Owners Boost $14,000 or $21,000 (depending on your circumstances), then you need to factor this into your budget. You will likely need around $2,000 or $3,000 to help pay for incidental costs that accompany the transaction.
First home buyers are exempt from State Government stamp duty for homes valued under $500,000. Most first home buyers tend to purchase in the $350,000 range or below, so this tax relief is a huge help.
Property investors can offset some of their property transaction costs against tax liabilities associated with their investments. Costs incurred in purchasing an investment property are generally not allowed as income tax deductions. However, these costs may be taken into account for calculation of Capital Gains Tax after the sale of a property down the track. It very important therefore that investors maintain careful records of all expenses related their property purchase.
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