Many people list their homes for sale with dreams of pocketing huge amounts of profit when it’s all over. And while you can make some good money from the sale of your house, it’s important to remember that selling can be expensive! If you’re considering putting your property on the market, it’s likely you’ve already mulled over some of the expenses. However, there can be hidden costs associated with selling a home, the amount that you spend just to get the sale to closing could be higher than you initially imagined.
The average cost of selling a house tends to range somewhere between 10 and 12% of the final sale price. To make sure that you have a more accurate idea of the cash you can pocket when all is said and done, it’s wise to prepare a comprehensive breakdown of the average cost of selling a house.
Real Estate Agent Commission
Agents fees are almost always going to be your most significant expense. In case you were wondering how much does a realtor make on a sale, the answer is that realtors typically charge around 6% of the sale price to sell your house. If you decide to put your home up for sale by owner, you may be able to cut that amount in half, since you will only need to cover the buyer’s agent fees. By eliminating agent fees, the cost of selling a house by owner can be significantly smaller. However, bear in mind that houses for sale by owner tend to fetch less than those that utilize a realtor, so make sure to do your research and find out if it’s worth the extra hassle.
Unless your home is in pristine condition, you should expect to splash some cash on getting it ready to sell. Depending on the starting condition of your house before you list, the amount you will spend will vary. Make sure that the interior and exterior are in good shape, clean, and tidy. It’s a good idea to stage the home as though it’s a show home, and you might want to consider hiring a gardener or landscaper if you have outdoor space. Although you might have reservations about forking out money on a home you’re not planning on living in, the extra expenses will usually pay off in the end. A good presentation will attract more buyers and can fetch you a higher sales price.
Repairs and Maintenance
Remember, once you land a buyer, there’s going to be a home inspection. So, if there are any repairs or maintenance needed, it’s best to get them taken care of before you put the house up for sale. If you leave repairs alone and wait for them to be discovered during the inspection, you could end up paying more. Once again, the cost of repairs will vary depending on the condition of your house before you put it on the market. If you want to be sure of any work that needs to be done, it may be worth spending about $500 on an inspection of your own. This will allow you to uncover any necessary repairs before a potential buyer performs their own inspection.
Mortgage Pay Off
Do your due diligence as a buyer and find out from your lender exactly how much you owe on your mortgage, so you can accurately calculate your profit when all is said and done. This is especially important if you are buying a new house, as it will allow you to budget what you can afford to spend correctly. Sometimes, the amount you see on your statement isn’t a good representation of what you actually owe, so it’s best to contact your lender to avoid any nasty surprises.
In many cases, a buyer may ask for a concession from the seller to help cover some of the costs of purchasing the home. While it may seem strange for the seller to help foot the buyer’s bill, offering a seller concession can help ensure the sale goes all the way to closing. Typically, the seller’s concessions can be about 2% of the sales price of the house.
Closing costs include a variety of different fees that are necessary to close the sale. They include things like transfer taxes, attorney fees, recording fees, and title fees. They’re paid by both buyers and sellers, but the seller’s closing costs tend to be a bit smaller, somewhere in the range of 1% to 3% of the sales price of the home.
Capital Gains Tax
Don’t forget, if you sell your home for more than what you paid, you could be responsible for paying capital gains tax. The good news is that sellers are allowed to exclude up to $250,000 of profit, or $500,000 if married filing jointly. If the amount you pocketed from the sale of your home exceeds these limitations, don’t forget that you are required to pay taxes!
All in all, the amount that you spend to sell your home can vary. What you pay can depend on a number of things, ranging from the condition of the house before you list it to whether or not you are working with an agent. On average, you should expect to spend about 10% of the final sale price of your home. If you want to budget more accurately, you can use a seller’s net sheet to break down your expenses and gain a clearer picture of both your revenue and expenses.
If you decide to go the for sale by owner route, you’ll save on the highest closing cost, which is the real estate agent commission. You’ll still have to pay other closing costs as well as some additional costs associated with marketing the property like professional photos. Overall, the cost to sell a house by owner is much lower as even if you list with a FSBO company to get on your local MLS you’ll only pay a few hundred bucks. Even better, Zillow for sale by owner fees are non-existent as it’s free to list a FSBO home on their platform. That being said, they may try to introduce potential buyers to an agent, so be prepared to pay the buyer’s agent commission if you find a purchaser via Zillow.