If you want to sell your home, your timing couldn’t be better. It’s a sellers’ market, which means more buyers than inventory. This often translates into multiple offers and bids well above the asking price.
However, don’t assume that the difference between what you owe on the home and what you sell it for is pure profit. There are many different fees that will cut into that profit. If you want to learn more about what to expect, read on for a breakdown of the cost to sell a home.
Chances are your home isn’t sale-ready today. If you’re like most people, you’ve got some small repairs that you’ve been meaning to make, broken items that need to be replaced, paint that needs freshening up, etc.
It’s likely that your home could use some sprucing up, both inside and outside. You might want to consider a fresh coat of paint, cleaning up the landscaping, and repairing or replacing anything that is in disrepair. Even if it is a sellers’ market, you want to get top dollar for your home, so don’t overlook these things.
It’s hard to estimate the cost of home repairs, as it depends on the state of your home. There also may be things that the buyers ask you to fix after they’ve had an inspection. And, in some cases, buyers who are getting mortgages through certain government agencies (such as the FHA) may not be able to purchase the home unless you make the requested repairs.
Selling a house is a lot of work and if you want to avoid the cost of staging and the work required to get your home ready, you could always choose to sell to a cash home buying company, like URB Chicago.
When prospective buyers look at your home, you want them to envision themselves living there, not your family. This means that when staging your home, you should remove photos, monogrammed items, or anything that is too personal. Create a space that prospective buyers can imagine their furniture, their pictures, and their family in.
You might want to consider hiring a professional staging company to come in and de-personalize your home for you and decorate it or you can choose to do it yourself. The cost varies, but a professional stager is anywhere from a few hundred to a few thousand dollars, depending on the size of your home and how much it needs.
This is money well spent, though, as realtors report that there is a 1-10% increase in the home value after staging.
Real Estate Agent Commission
The commission paid to the buyers’ and sellers’ agents is likely going to be the largest fee you pay when selling your home. The commission amount varies based on where you live, but you can expect to pay about 5-6% of the home’s sale price. This commission is typically split between the two agents.
For example, if you sell your home for $300,000 with a 6% agent commission, each agent will get $9,000. This amount is paid by the seller of the home, not the buyer.
Commissions can be negotiable, so it is worth asking your agent if they are willing to lower their commission. Make sure what you agree on is spelled out in writing.
If you have a mortgage on your home, this will have to be paid off from the proceeds of your sale. Don’t just rely on the amount listed on your mortgage statement, though. The payoff amount is likely different based on interest rates and where you are in the month.
The closing company will typically order a mortgage payoff statement or ask you to do so to determine the exact amount of the payoff. This money will be paid directly to the mortgage company, not to you.
Closing fees encompass a variety of different things, such as:
- Utility bills (will be pro-rated for the amount of time you lived in the home that month)
- Title insurance
- Transfer tax
- Attorney fees
- Courier fees
- Recording fees
The good news is that the closing costs are typically lower for sellers and are usually about 1-3% of the home’s sale price. Before closing, you will receive a breakdown of all of these charges. Many of them are negotiable, so speak with your agent about them.
Property taxes are usually paid in advance and the home seller will be responsible for a prorated share of the taxes. For example, if the seller lived in the home from January to September, they will owe a larger share of property taxes as they were in the home for 9 months of the year.
If you have already paid your taxes for the year, though, you might actually get a rebate at closing rather than owing money towards property taxes. This money comes from the buyer, who is reimbursing you for the taxes paid that apply after the closing date.
This amount depends on your share of the taxes and how much your property taxes are.
Capital Gains Taxes
Capital gains taxes do not apply in every situation. If you sell your home and make more than $250,000 in profit, you will have to pay taxes on anything above that amount. This is higher for married couples, at $500,000. These are considered capital gains and you’ll have to report them on your taxes.
The Average Cost to Sell a Home Varies
It’s hard to determine an average cost to sell a home, as there are so many variables. If you want a rough estimate, plan to spend about 10% of your home’s purchase price on the various fees and items associated with selling. Your agent can help you understand the fees you may pay, so be sure to speak with them and get a closing statement before you go to the closing.
If you found these home selling tips helpful, we have even more valuable information on buying and selling homes. Check them out before you go.