Canadian Money Forum banner
Cancel

break-even selling price

8069 Views 15 Replies 9 Participants Last post by  Jane, 
J
I'm currently selling my house and trying to come up my break-even price tag so that I know how low I can go...not sure what should be included in my calculation besides agent commission and lawyer fee. help please?
Reply
Save
Like
1 - 16 of 16 Posts
FrugalTrader
Jane said:
I'm currently selling my house and trying to come up my break-even price tag so that I know how low I can go...not sure what should be included in my calculation besides agent commission and lawyer fee. help please?
Click to expand...
How about the repairs/upgrades you have done to the house? Land transfer tax?
Reply
Save
Like
A
It also depends on your circumstances, and if you are what they call a "motivated seller". Do you have another house purchased already? If so, when will you start having to pay TWO mortgages instead of one? In that case, each month that passes by without you selling your home may mean an extra mortgage payment. If a quick sale is important to your bottom line, then pricing accordingly is a factor.

You also should be looking at comparable homes in your area. In today's market, it really doesn't matter if you paid $350K for your home and put another $50K into the house in improvements...if comparable homes in that area are moving for $250K, then that is what you'll have to price your home at to sell.
Reply
Save
Like
G
Alexandra said:
In today's market, it really doesn't matter if you paid $350K for your home and put another $50K into the house in improvements...if comparable homes in that area are moving for $250K, then that is what you'll have to price your home at to sell.
Click to expand...
+1
Reply
Save
Like
J
thank you for the tips.
The reason I need know my break-even point is because I will have an idea how much I can lower my price without giving another serious thought!
no I haven't started looking for another place because I know it's buyer's market today. I do not want to get into 2 mortgage trouble.

<<How about the repairs/upgrades you have done to the house? Land transfer tax?>>
FT, do you know if there's land transfer tax in mississauga for property under $500,000? and is the buyer who normally pay it or seller?
Reply
Save
Like
T
If you are serious about selling and not just testing the market you should be aware that the market determines your selling price - you don't. It does not matter what your "break even" figure is. If the market says your selling price is lower than what you would think is ideal - the market will also be letting you pay less for your next property too:)
Reply
Save
Like
D
takingprofits said:
If you are serious about selling and not just testing the market you should be aware that the market determines your selling price - you don't. It does not matter what your "break even" figure is. If the market says your selling price is lower than what you would think is ideal - the market will also be letting you pay less for your next property too:)
Click to expand...

Exactly. There is a range of prices for every type of property in an area. If you have a relatively standard home (i.e., in the burbs), its value will be determined by comparable sales in the neighbourhood. The eventual buyers don't care how much you have put into it or what your break-even point is. They won't fork over an extra $1,000 to help you come out even. I certainly wouldn't take break-even price as a consideration. I suggest you look at how much comparable homes are selling for, and get a couple of real estate agents to give you an appraisal of approximate resale value. This will give you an idea, and then help you decide if you wish to go ahead and sell.
Reply
Save
Like
E
Jane said:
I'm currently selling my house and trying to come up my break-even price tag so that I know how low I can go...not sure what should be included in my calculation besides agent commission and lawyer fee. help please?
Click to expand...
Break even

A) take the original purchase price + all of the closing costs (home inspector, mortgage fee set-up, legal fees, moving costs) associated with it to get to the full accurate purchase price

Then add to this

B) During the time you have owned the current property, calculate and add in all of the interest payments made + property taxes + maintenace through the years that you have owned it

C) Add A + B gives you the ball park cost of what the property has cost you in total. You can ignore property taxes & maintenance costs if you wish

Then you need to add in the R.E agent fees (4%, 5% or 6% of the selling price) + legal fees $500-$1000 for closing costs + moving costs + misc

D) Adding A + B + C = to get to what you should be selling the house for to get to a true break even

Hope this helps
See less See more
Reply
Save
Like
L
ethos1 said:
Break even

A) take the original purchase price + all of the closing costs (home inspector, mortgage fee set-up, legal fees, moving costs) associated with it to get to the full accurate purchase price

Then add to this

B) During the time you have owned the current property, calculate and add in all of the interest payments made + property taxes + maintenace through the years that you have owned it

C) Add A + B gives you the ball park cost of what the property has cost you in total. You can ignore property taxes & maintenance costs if you wish

Then you need to add in the R.E agent fees (4%, 5% or 6% of the selling price) + legal fees $500-$1000 for closing costs + moving costs + misc

D) Adding A + B + C = to get to what you should be selling the house for to get to a true break even

Hope this helps
Click to expand...
thats one way, the other way is to get three quotes from 3 different realtors.
Reply
Save
Like
E
lazy cdn said:
thats one way, the other way is to get three quotes from 3 different realtors.
Click to expand...
Agree, but as we all know RE agents will promise you everything just to get the listing

On MLS 3% is about as low as it ever gets - 4%, then you're doing very good

Co-op agents from the same office (different listing agent and selling agent), you may be able to get 3%, otherwise 4% is about the lowest I have seen from different agents/brokers on the sale

It is important to remember that agents need to split the commission between them and their broker - so when the property is sold and its done by different agents from different brokers, then in all likelyhood 5% is the best that you can do ... unless of course someone is willing to give

Then you have ReMax, the no-budge 6% guys
Reply
Save
Like
S
A) take the original purchase price + all of the closing costs (home inspector, mortgage fee set-up, legal fees, moving costs) associated with it to get to the full accurate purchase price

Then add to this

B) During the time you have owned the current property, calculate and add in all of the interest payments made + property taxes + maintenace through the years that you have owned it

C) Add A + B gives you the ball park cost of what the property has cost you in total. You can ignore property taxes & maintenance costs if you wish
Click to expand...
I disagree about including the items in part B, with the exception of maintenance that actually has added value to the house (ie, if the roof had 1-2 years left and you put a new roof on that now has a 15 year life, I'd include that). The reason being that if you include your finance and living costs, the "break even" figure you arrive at will never be acheivable. If someone buys an identical house for cash, and you get a 0% down subprime mortgage, your house is not worth more than the other because you paid huge interest and they didn't.
Reply
Save
Like
E
stephenheath said:
I disagree about including the items in part B, with the exception of maintenance that actually has added value to the house (ie, if the roof had 1-2 years left and you put a new roof on that now has a 15 year life, I'd include that). The reason being that if you include your finance and living costs, the "break even" figure you arrive at will never be acheivable. If someone buys an identical house for cash, and you get a 0% down subprime mortgage, your house is not worth more than the other because you paid huge interest and they didn't.
Click to expand...
in context, I covered that in (C), however the true cost of money must include interest payments, because that is the out of pocket money

Agree though that unless house prices went up significantly or that someone was in their house paid off for a very long time, you'd never get a break even
Reply
Save
Like
S
however the true cost of money must include interest payments, because that is the out of pocket money
Click to expand...
Except I think this is a case where the blending of "house as investment" and "house as shelter" get blended together.

If we were talking about a stock, your break even price would be the initial purchase prices, plus fees, plus financing costs, plus any taxes payable resulting from the sale (ie, capital gains) minus dividends received.

In this case, the house is providing dividends, but because they are non-cash, you are not factoring them into your break-even figure. Therefore, if we are including financing costs as part of the purchase price, we must also factor in the savings from not paying rent elsewhere, which brings the breakeven price much closer to the original purchase price.
Reply
Save
Like
J
Just an update that I just sold my house yesterday:). It was sold for 92% of original listing price, and I barely break even if I count all my house upgrades.
Reply
Save
Like
E
Jane said:
Just an update that I just sold my house yesterday:). It was sold for 92% of original listing price, and I barely break even if I count all my house upgrades.
Click to expand...
congratulations

I assume that you mean bought price + improvements = selling price?

Did you factor in any other costs such as the agents commissions and the closing costs when you first bought the home, such as the mortgage set up fees and the legal costs?

How long did you own the property?
Reply
Save
Like
J
my calculation is very simple:
Sold price - current Mortgage amount - initial down payment - commission & lawyer fee(buy and sell) - house upgrades/additions - land transfer tax(when buy)
I was happy the number is not negative.
I know the fact that I had this house for less than 4 years and it was not a bargain price then, and with today's house market, there's no way I would make anything from it. I could had minus more items on my calculation such as moving expense, property taxes, then my number will definely come out negative. Learn some valuable lessons about real estate agent though: http://janes2ndopinion.blogspot.com/2009/04/dealing-with-real-estate-agent-when.html
I would had lost $5000 if I followed my agent's offer strategie!!
Reply
Save
Like
1 - 16 of 16 Posts
This is an older thread, you may not receive a response, and could be reviving an old thread. Please consider creating a new thread.
Canadian Money Forum
A forum community dedicated to Canadian personal finance enthusiasts. Come join the discussion about investing, stock portfolios, equities, frugality, real estate, market trading, taxation, retirement, and more!
Full Forum Listing
Explore Our Forums
Investing Off Topic Lounge General Personal Finance Talk Individual Stocks/Equities Real Estate
Top