How Much Does It Cost to Sell a House? Get the Facts Here!
Are you thinking of selling your home? If so, congratulations! Whether you're ready to start the process now or just starting to consider a potential sale, it's important to understand all the costs involved in making this major life event a reality.
Selling a house includes certain upfront and ongoing expenses that many homeowners are unaware of when considering putting their property on the market. In this blog post, we'll walk through some basics about selling a home – from how listing agents work and get paid for their services to other closing costs associated with home sales.
By understanding these details upfront, you can save time and money during one of life's most complex transactions. Here's what you need to know about how much it will cost to sell your house.
When selling your home, net proceeds could be reduced by certain unavoidable expenses. Examples of these non-negotiable fees include:
Even if you are preparing to relocate before selling your home, it is still important that you continue paying for water and energy bills. Without air conditioning, heating, or lighting in the home, it can be difficult to show potential buyers around, which could have a detrimental effect on the marketability of your property. Moreover, an unlit or unheated building can suffer damage due to extreme weather conditions making it more costly and complicated to sell.
By examining your current bills, you can estimate what it will cost monthly to keep the utilities running until a new owner moves in. Understandably, since you won't be residing there, your usage will likely go down; however, you can still take certain measures to lower your utility expenses as much as practicable. Simple adjustments such as using energy-efficient light bulbs and unplugging any unnecessary appliances can help reduce costs significantly.
Enhancing your listing and increasing your chances of getting a high offer can be done by having professional photos taken of the home.
Many real estate agents offer professional photography as part of their services. However, if your agent does not provide this service, you may still want to consider investing in a professional photographer. While the cost may be a few hundred dollars, it could result in more potential buyers being interested in your property and even higher offers. Professional photography can make all the difference when marketing and selling your home.
The proceeds from the sale of your home will be allocated to satisfy and pay off your mortgage completely. However, the amount specified in your mortgage statement as being due for full payoff is likely to be slightly lower than the actual amount that you owe. This discrepancy is usually caused by additional fees that have been accrued since the time of your last monthly payment.
You'll likely need to include the prorated accrued interest when calculating your total balance. Furthermore, you may be charged a fee if your mortgage contains a prepayment penalty, so it is important to review your loan documents and check with your lender to determine whether or not this applies to your situation.
Although buyers usually pay for many closing costs in a real estate transaction, sellers should not relax -- there can still be closing costs they must cover. Even in seller's markets over the last few years, it has been known that sellers may be asked to pay some of the fees belonging to the buyer. Therefore it is not unusual for buyers and sellers alike to be expected to pay certain closing costs to finalize a successful property sale.
Some of the expenses associated with selling a home may include Homeowner's Association (HOA) fees, the cost of a pre-listing inspection, recording and settlement fees, and title insurance. Additionally, you can expect to be asked to pay an escrow fee for services undertaken to facilitate the sale of your property, a brokerage fee for services rendered by your real estate agent or broker, and finally, a courier fee that covers any costs relating to the delivery of documents related to the sale.
In addition to the closing costs associated with buying a home, if you have enlisted the help of a real estate attorney to assist with navigating and negotiating the contract, then you will need to pay for their services at the time of closing. When purchasing your home, factoring this cost into your budget is important.
Capital Gains Taxes
Considering the potential implications of selling your home on your taxes is important. If you sell a house for more than what you originally purchased, this is commonly known as a capital gain and must be reported on your federal tax return if its value surpasses a pre-defined limit. It is, therefore, essential to thoroughly research the taxation ramifications before proceeding with the sale of your home.
The encouraging news is that numerous homeowners can exempt up to $250,000 of profit ($500,000 for married couples filing jointly) from their taxes, provided they haven't utilized the tax respite on another home sale in the past two years. This is an incredibly valuable opportunity that can save substantial money and time when selling a house.
You may be able to take advantage of this tax break if your primary residence has been lived in for at least two of the past five years. Even if it has been used as a rental property, you could still be eligible — speak to a tax advisor for more information.
Sellers must be aware of the responsibility for annual property taxes, typically paid in advance. At the time of closing, the seller should pay escrow fees of their property tax applicable up to the closing date, with this payment placed into an escrow account. This ensures that both parties involved in the sale have accounted for all relevant taxes.
In closing, if taxes for the year have been paid already, buyers may issue a reimbursement to the seller for those taxes applied after the said date - thus resulting in a rebate.
Property taxes may not account for the full taxation you must pay when selling your home. Depending on the jurisdiction in which you reside, sellers typically pay real estate transfer taxes; these are fees imposed by local governments whenever the title of a property is transferred from one owner to another.
Transfer tax amounts can differ greatly depending on the locality or region that you reside in. Generally, these taxes are a small proportion of the home's sale price, less than one percent. However, for those living in certain states, mansion taxes may also be imposed on exceptionally pricey properties that sell for seven figures or more – an additional fee on top of the transfer tax rate.
If you're selling your house and relocating, you'll need to find a way to move all your belongings- which can be expensive. Depending on the amount and type of items that need to be transported, Home Advisor estimates the cost of moving will range between $911 and $2,514. If you've got multiple rooms full of furniture or your new home is far from where you currently live, it could cost considerably more than this estimated figure.
Suppose you are considering making a move yourself to save money. In that case, being honest about whether you can manage all the heavy lifting involved is important. While it may seem cost-effective in the short term, if you struggle with physical labor, it could cost more in the long run as you might need to invest in a post-move massage and take some time off work for recovery.
While some costs associated with selling a house are unavoidable, other optional expenses may be beneficial in helping to ensure a successful sale. Such additional outlays may yield an increased return on your investment and play an important role in facilitating the completion of the transaction.
Staging their home, though not mandatory, has been seen to result in a higher sale price by most sellers.
Staging can be simple, such as tidying up your house and adding some decorative touches to give it a cozy feel. Alternatively, you could hire a professional stager to make your home look its best to attract potential buyers. Using their expertise and creative eye, they can transform the space into a showstopper that will leave viewers in awe.
Staging a home for sale can vary in cost, falling from hundreds to thousands of dollars. Though it may be an additional expense, many experts agree the money is well worth it.
Buyers occasionally ask for concessions from the seller, meaning you are willing to help cover the buyer's closing costs. This may include contributing to your sales price towards appraisal fees, title insurance, and origination fees. It is not uncommon for sellers to be asked to fund all or part of these costs to facilitate a sale.
Although accepting it is unnecessary, seller concessions can be advantageous if you are in a buyer's market. If this is the case, these concessions might make all the difference in successfully closing a deal. On the other hand, if your area is a seller's market, these concessions may not be as beneficial.
Suppose the buyer's home inspection reveals major problems, such as a deteriorated roof or significant plumbing leaks. In that case, you may be obligated to foot the bill for repairs to complete the transaction or provide monetary compensation to cover the cost of repairs.
Pre-Sale Home Inspection
Some sellers may shell out around $340 (Home Advisor data) on a pre-listing inspection. This inspection can provide them with beneficial information before selling the property. By opting for this service, they try to avoid any potential problems a potential buyer could uncover during their inspection process. This gives the seller time and resources to make necessary repairs or adjustments before selling the property.
It is important to consult with your real estate professional and determine if it would be beneficial to have a pre-sale home inspection done. Remember that should the inspection uncover any material deficiencies; you may be legally obligated to inform the buyer of this information. Therefore, it is imperative to consider all angles before deciding whether or not a pre-sale home inspection is appropriate for your situation.
Aside from paying for a home inspection, some sellers invest in home warranty policies. These policies cover appliances and systems within the property, making it more desirable to potential buyers. Based on Home Advisor, the cost of this protection varies greatly—ranging from $222 up to $1,850. Thus, investing in a home warranty policy can be an invaluable resource for buyers and sellers alike.
The Cost Of Selling A House: A Rundown
To understand the current math of selling a house, let us consider an example of a property purchased for $300,000 four years ago. Every housing situation is different and needs to be thoroughly analyzed; however, this provides a great starting point.
When you initially made a down payment of 5 percent, $15,000, on the property, your loan was for an amount of $285,000. Over time and with diligent payments, you have reduced the balance to $250,000. However, due to a booming real estate market in your area, the same property is now selling at an estimated $365,000 - meaning that it has appreciated by an impressive total of $115,000. But out of this appreciation amount, how much will be yours? This remains uncertain as it depends on various factors, such as taxes and other associated costs.
Reducing The Cost Of Selling A House
If you're looking to cut costs when selling your house, there are several ways. One option is to attempt to sell the property yourself to avoid the additional expense of real estate agent commissions. While this can be a cost-effective strategy, it's important to remember that it could impact your ability to get a good home sale price.
It is possible to sell your home without enlisting the help of a real estate agent, but you may be missing out on more potential profit. Without an agent to use competition in the market and negotiate for you, all other options should be weighed carefully. One option to consider is selling to an iBuyer. If you use a buyer's agent, consider employing a discount broker with a reduced commission rate. You must ensure they are certified and have experience dealing with buyers and sellers in your local housing market.
Take a careful look at the optional costs associated with selling your home. It may be possible to avoid investing in any large renovations or staging; all that may be necessary is adding some attractive features to the exterior of your house, known as "curb appeal." If the condition of your house is satisfactory, you could find a significant number of potential buyers who would be happy to purchase it just as it stands.
Ultimately, the cost of selling a house depends largely on various aspects, such as the condition of the home and its location. The costs can add up quickly, but by following a few simple guidelines, you can keep your total fees to a minimum.
For example, shop for contractors and realtors—find someone to give you a good deal. Additionally, never pay more than necessary for repairs or inspections. Finally, use open communication when dealing with all parties involved in the sale of your home so that everyone is on the same page and all tasks are completed properly and efficiently.
Selling your house doesn't have to be daunting; understanding how much it will cost you before committing to any contracts can ensure you come out unscathed financially.