Friday, December 13, 2019 / by Dixie Simon
There is good news.
We talked in Part One about the costs before selling your home; however, most of your costs at closing will be paid out of the sale proceeds. The bad news is that you'll be saying goodbye to some big dollars.
1. Real estate agent commissions. If you decide to work with a real estate agent rather than do FSBO (for sale by owner), you will likely be paying the entire 5% - 6% commission split between the buyer's agents Brokerage and the Sellers agents Brokerage. Although working with an agent doesn’t cost you anything upfront, the commissions you pay at closing will be one of your most significant expenses. (A great realtor is worth their weight in every penny and will yield you a more significant bottom line)
2. There are other closing costs or credits to the property buyer. You might have agreed, based on local tradition or buyer negotiation, to pay some of the standard costs associated with closing the deal. These might include fees for the escrow company, the mortgage and home appraisal, recording and transfer of the property, homeowners' and title insurance, and more. If your local real estate market is sluggish, buyers might often ask you to pay all or a hefty portion of the closing costs, which typically add up to 2% to 5% of the selling price.
3. Transfer tax. Your city or state might require you to pay transfer taxes, as a small percentage of the sale price.
4. Property taxes. If your state collects property tax, and you haven't yet paid them for that year, there will be a prorated share of what the buyer will eventually owe.
5. Home warranty for the buyer. Whether because the buyer requests it or to make the buyer feel secure about the home purchase, many sellers buy a home warranty on the buyer's behalf. A home warranty is a service contract that covers repairs to appliances and certain systems within the house for the first year of ownership. It will cost approximately $500.
6. Capital gains tax. If you earn less than $250,000 on your home sale (or $500,000 if you're married and filing jointly), don't worry. You won't owe a thing in the way of capital gains taxes. But if you earn more than that, you'll need to look further into the matter. Once you've subtracted things like the costs of preparing the property for sale from the supposed gains, you might not owe the tax after all.
7. Moving costs. Asking your friends with pickup trucks to help can save you some dough, but will take a lot more time. Sometimes it's worth paying for the deluxe treatment, where the company packs your boxes for you, transports them to the new location, and unpacks at the other end.
Contrary to popular (or blind optimism) understanding, selling a house isn’t cheap—there’s a cost of selling a house, and it’s more than many people might expect. Most expenses related to homeownership, including home remodeling costs, tend to be high. And while following a home selling checklist can make the process easier, it can’t always make it cheaper.
In the end analysis, there’s no real way to avoid some home-selling costs —and you thought the steps to buying a house were frustrating.
If you would like to find out more about selling your house, feel free to contact me anytime.
I am Happy to Help
Dixie Simon with Haven Real Estate Group