- before you start counting the money you will make from the sale, there are a few hidden costs in selling your property
Selling a home can be a headache – but it is a good problem to have. However, before you start counting the money you will make from the sale, there are a few hidden costs in selling your property.
Aside from considering whether to make repairs and renovations to the home before selling it, you should also consider the cost of selling that property.
You can’t sell a property on your own. You will need to engage professionals – and that will cost money.
Real estate agent commissionPerhaps the most important people to engage when putting your home up for sale are real estate agents.
A real estate agent will help you price and market your property, arrange for viewing and bookings, and negotiate with prospective buyers on your behalf. In return, they earn a commission of typically 2% – 3% of the property’s selling price, which is subject to 6% service tax.
Get the most out of your money by engaging the right property agent. Find out how you can do thathere
Legal feesOnce you have found a buyer, next comes the legal matters which will require the expertise of a lawyer. When you and the buyer have come to an agreement, the buyer will pay you a non-refundable deposit (also known as booking fee) amounting to 2% of the property’s selling price.
This is when a lawyer comes into the picture. The lawyer will be tasked with drafting the Letter of Offer and then the Sale and Purchase Agreement (SAP Agreement).
For the services rendered, the lawyer will charge you a legal fee which is calculated based on the property’s selling price. For example:
Using the example above, the total legal fees payable amounts to:
REAL PROPERTY GAINS TAX (RPGT)
This is where the bulk of the cost. Real Property Gains Tax (RPGT) is a tax imposed by the government when you dispose of a property within five years from the date of purchase. With that said, RPGT is not applicable if you have held the property six years or more.
RPGT is charged only on net gains, meaning the sum after deducting the original purchase price of the property, cost of renovations done to the property, and other costs such as legal cost. In other words the net gain you made from the sale.
With effect from Budget 2014, RPGT rates have increased to curb the activity of local and foreign property flippers. The new RPGT rates are as follows:
However, RPGT can be exempted for one unit of residential property per Malaysian citizen or permanent resident, or if the disposal of property is between parent and child, husband and wife, and grandparents and grandchildren.
The table below illustrates the net profit you will gain from the sale of your property after taking into account all the aforementioned costs.
For information on howRPGT affects property investors, gohere
While the calculations above show an estimate of the cost you can potentially incur in a sale of property in Malaysia, it is not exhaustive.