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Monday, April 23, 2018

Selling a property and buying another of the same price range cost a lot of money

Post to SinFongChanRE.Wixsite.com on 23/4/2018 11:56 PM
Commenting on “Selling a property and buying another of the same price range cost a lot of money”

I received a phone call this afternoon from a former real estate client. For years I have been giving her free advice - not only did I insist that she must proceed with the purchase of a property around the ibis Hotel near City of Monash building two decades ago (when the hotel was not even around), but I also stood firm that she should NOT purchase an overpriced property around the same area about 5 years ago.

If I had not known her for over 2 decades, I would not have given free advice that is likely to help her save over 1 million dollars in expenses today - her husband’s intention to sell a property and then buy something of similar price bracket.

The agent that lured this person's husband into signing the Authority to Sell was not ethical enough to give him an honest advice. The agent advised the vendor that he could get a better return by keeping the sale money in the bank, until such time he found something suitable. What the agent did not mention was that interest earned is taxable.

The property in question is in prime location and will continue to experience growth. It is nonsensical to say that the bank interest earned gives a better return than having the property left unsold.

It is important to note that when you sell a property which is not your primary residence, the profit is subject to capital gains tax. 50% of the profit is added to your assessible income.

The agent will take a good cut as a commission. In this depressed market, an agent may not be as greedy as before, knowing that if they don't take a smaller commission, they may even close shop tomorrow because the number of property listings is getting scarce.

The third cost is marketing expenses ranging from a few thousand to tens of thousand of dollars. Then there are the legal fees, preparation of documents, etc.

Other expenses include tidying up the property and compound to attract buyers.

To buy a property of similar price bracket, the stamp duty is about 5.5%, plus expenses in checking out the soundness of the property and legal fees if needed. The property may require certain maintenance before you can move in or lease it out.

I hope this person is not going to make such a silly move. I do feel really good, even though I get no financial gain for this.

I have done another good deed!

Thank you for reading.