Thinking about your finances when selling
You’ll need to budget for a number of costs when you’re planning to sell your property, especially if you are buying another property at the same time.
Summary of important things to know
Bridging finance is helpful if you are buying a new home before selling your current property, but be aware of the cost and risks.
The real estate agent’s commission is usually paid from the purchase deposit the buyer pays when you sign the sale and purchase agreement.
The remaining price is paid on settlement day, usually to your lawyer or conveyancer who will arrange settlement.
You need to check with IRD if there is any tax to pay on the sale of your property.
There are additional costs such as legal fees, advertising and moving expenses to budget for when selling.
Considering bridging finance
Bridging loans are helpful if you are buying a new property before selling your current home. You will usually pay for the interest only until your current property is sold, but in effect, you need to budget to pay for two home loans over this period. This is a risk if your current home takes a while to sell, and if your current home sells for less than expected, you could be left with a larger home loan to repay than you had planned for.
Depending on the method of sale, the buyer will usually pay a deposit when the agreement is signed (in a tender, the buyer provides a cheque for the deposit amount when they make the offer).
The deposit is usually about 10% of the total price they are offering and is held in a trust account. The agent usually takes their commission fee out of this amount and the remainder goes to you.
You can read more about the agent's commission here.
Receiving payment for your property
Your lawyer or conveyancer will work with the buyer’s lawyer or conveyancer and your bank (if you have a home loan) to manage payment on settlement day. This is the day that the remainder of the purchase price will be paid by the buyer.
If you have paid rates or body corporate fees in advance, these will be also be included in the buyer’s payment.
Read more about receiving the deposit here.
Residential property sales do not usually include GST, but there are exceptions if you or the buyer is GST registered. Before committing to any property deal involving GST, we recommend you talk to a tax professional.
You will need to pay GST on the agent’s commission. This should be included in the agency agreement.
If you're selling a property, you may need to pay tax on any profit you make. The bright-line property rule means you may have to pay tax when you buy and sell a residential property within two, five or 10 years, depending on when the property was acquired unless an exception applies (for example, if it is your main home). You can find out if this rule applies in your situation on the IRD website.
Visit the IRD website for information about paying tax when you sell a property.
Budget for the additional costs of selling
Selling property comes with additional costs you may need to budget for:
- Any renovations and other costs to prepare your property for sale.
- Advertising costs to sell your property, which is usually paid upfront when you sign an agency agreement.
- Building inspection reports, including a council LIM report and a building inspection report if you are providing these for buyers.
- Lawyer's or conveyancer's fees. These may be deducted from the final settlement before it is paid to you.
- Moving costs, including reconnecting services.
Read more about preparing your property for sale here.