Costs Associated With Selling Your Home
Although selling your home can be profitable, selling also costs money. To help you avoid surprises and budget for these expenses, below we’ve outlined 10 common costs of selling your home.
Repairs
First things first, before officially putting your house on the market, you must ensure that everything in the house is in working order and looks presentable for potential buyers. The level of investment will vary depending on how much TLC the home needs. The buyer will also send a home inspector to evaluate the house and may request that you make additional fixes. Factor in these costs as well. You can also be proactive and hire a home inspector yourself (usually costs a few hundred dollars) so you’ll know exactly what repairs to make.
Upgrades
Repairs are to ensure that everything works. Upgrades are to make the space look more enticing to buyers and also add more value. Get the most bang for your buck by sticking to small upgrades that make a big statement—think a fresh coat of paint, shiny new hardware and fixtures, and sprucing up the landscaping. If you’re not sure what upgrades are worth the time and investment, check with a trusted local real estate agent. They’ll be able to help pinpoint what upgrades would help your home sell faster.
Marketing costs
Getting potential buyers to notice your house also costs money. Costs include professional photography, flyers, for sale signs for outside the home, open house supplies, and fees associated with listing the property on the MLM. If you’re working with a real estate agent, they’ll likely cover these marketing costs, but if you’re selling on your own, you’ll have to factor these into your selling budget.
Real estate commission/service fee
As the seller, you will pay the commission for your real estate agent – the Listing Agent – out of the proceeds of the sale. You may also choose to provide a commission to the Buyer’s Agent, but that is optional. Thankfully, you don’t have to pay this upfront but rather during closing.
Cleaning, decluttering and staging
Part of making your home look in tiptop shape is also giving it a good deep clean, clearing out any clutter that makes it look less desirable, and staging the furniture and decor to make it more appealing. Potential buyers love to see spaces that are spacious, clutter-free, and well decorated because it allows them to envision living there. You can do the cleaning, decluttering, and staging yourself, saving you money, but it takes up time and energy. Or, you can outsource the tasks to professionals. Prices will range, but each typically run a few hundred dollars per service.
Your time and energy
Whether you decide to do a lot of the selling tasks yourself or hire other people to help, the home selling process will still require you to invest a significant amount of your time and energy. This may take you away from other responsibilities in your life, so ensure you factor that into your selling costs as well.
Moving costs
Once you finally close the sale on your house, it’s time to pack up and move, and that can cost dollars too. Costs can include hiring movers, packing materials, and furniture for your new home. If you haven’t yet purchased a new home, you may also need to find temporary housing and storage for that gap of time.
Closing costs
Buyers incur closing costs, and sellers do too. Sellers usually pay on average 1-3% of the home’s total selling price in closing costs. These costs can cover attorney fees, escrow fees, property taxes, title transfer taxes, title insurance, HOA fees, and fees associated with paying off your current mortgage early.
Seller concessions
Buyers may also request that you cover some costs, such as inspection fees, appraisal fees, and home warranty to sweeten the deal for them further and make them more likely to buy. Buyers do this as a bargaining tool or to offset some of their costs. The number of concessions allowed depends on the loan and downpayment and can range from 3-9 % of the selling price.
Taxes
Selling your house also means you’ll potentially have to pay capital gains taxes, which taxes you on the net profit of your house sale. There are exemptions. For example, if you’re single and lived in the house as your primary residence for at least two of the last five years, you don’t have to pay capital gains taxes on $250,000 of the net profits. If the home wasn’t your primary residence or if you made more profit, you’ll pay capital gains taxes, which vary between 0-20%, plus the potential Net Investment Income, plus depreciation capture — depending on the amount and your tax filing status. If you’d like more information or if you’re looking for a way to defer your capital gains taxes, connect with us to learn about 1031 exchange strategies.
