Gross or net?
Published: Oct 28, 2013
When selling properties, the terms "gross" and "net" come up constantly, and there seems to be great confusion when people are trying to figure out the difference between one or the other.
Our real estate industry prices and appraisals are based on gross amounts. This means that included in the sale price quoted to you are expenses to be deducted which include six percent real estate commission, half of the applicable government stamp duty and your legal fees.
A net price is the final amount a seller will put in his or her pocket after the closing costs mentioned above are deducted from the gross price.
For example, a seller who decides to list their condo with a licensed BREA agent for $250,000 gross will end up receiving $216,250 net after all the closing costs are deducted, usually calculated at 13.5 percent for homes and condos and 17.5 percent for land priced above $100,000.
In many cases, when a for sale by owner property is advertised in the newspaper, the price will be quoted on a net basis, which means owners will usually advertise their properties expecting the buyer to pay 100 percent of the closing costs.
Depending on the property and price, the closing costs could amount to 25 percent of the sale price. For example, a parcel of land being advertised by the owner for $150,000 net will at the end of the day cost the buyer $187,500.
So, the next time you decide to buy directly from an owner, make sure you immediately clarify if the price they are quoting you is based on a net or gross figure.
• Carmen Massoni is president of Bahama Islands Realty and has 18 years of experience in the real estate profession in The Bahamas. She has been the recipient of many international awards recognizing her as a top producer amongst her peers. If you have any questions or need real estate advice, call 322-7770 or email Carmen@BahamaIslandsRealty.com.