Clarifying Costs For Owners Selling A Property
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 - Legal Fees, Agency Fees
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’.
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.
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.
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.
Very few sellers pay to market their property. Macau prices have been rising so quickly over the past three years that there has been no need to spend money promoting a property, it will sell anyway.
However, in a buyers market, the market that we have just 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, newsletters, flyers and other methods.
- Keeping a tenant happy
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% of the sale price in year one, and 10% 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
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.
The calculation and fees can be advised by the bank, and look out for an early termination penalty if the property is sold within the first three years of ownership.
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.
- Legal & Tax Costs
- Mortgage Loan Release Fees
- Agency Fees
That concludes our series to outline the fees paid during property transactions. A copy of this article can be seen on the Macau Daily Times website or downloaded from the JML Property website.