Monday, December 9, 2019 / by Kylene Emery
Hopefully, you’re making money from your home sale. But there are also some costs that go into listing and selling your home. Here are some of the costs home sellers can expect:
Real Estate Agent Commissions
Real estate commissions are something every home seller needs to budget for. Commission for all realtors involved generally comes from the seller. Typically, the seller pays 3% to both the listing agent and the buyer’s agent, totaling 6% in commissions of the final sale price.
The median sale price in Renton right now is $436,700. If you pay a full 6% commission on a such a home, you’ll pay $26,202 to the realtors involved in the sale. In order to maximize your margins, consider partnering with a full-service, low-commission agent, instead.
Renovations and Repairs
Although it makes sense that most sellers don’t want to put too much money into a home they’re leaving, there are some repairs and renovations to consider. Most sellers make at least a few small repairs before putting their homes on the market.
Some quick fixes, like repainting walls in bright, neutral colors, can have a significant return on investment for sellers. Other smaller things to focus on include landscaping, touching up trim, and improving your house’s is curb appeal.
Sellers generally pay around $1,000 to have interior walls painted. Things like carpet cleaning and general cleaning cost around $150 a piece. These small items can add up when you’re paying out of pocket, but they can also make the difference between a buyer putting in an offer and moving on.
For other sellers, bigger fixes may make sense. Sellers are looking for homes with stable foundations, working HVAC systems, and no pest problems. In markets like Washington, buyers are also looking for environmentally friendly homes with LEED certification.
Generally, sellers should expect to pay a minimum of $2,500 and spend some time on pre-listing improvements. You should also plan for additional repairs requested by your buyer after the home inspection. According to Zillow, the national average total for home preparation and moving costs is $6,570.
Staging your house properly is an important part of selling your home. The right kind of staging will help prospective buyers picture themselves in your house.
Paying a professional to stage your house may be worth the money in the long run. Staged homes have been proven to sell faster and for more money. A professional stager knows how to make potential buyers feel at home and put the home in its best light.
On average, staging can cost $150 to $600 for the initial design consultation fee and another $500 to $600 per room in the house per month. However, it's estimated that a properly staged home can get you an additional $6,000 to $10,000 at the final sale.
You may have to pay capital gains taxes and transfer taxes when you sell your home, but if you’re selling your principal residence, you’re likely exempt from capital gains tax.
Capital gains are the difference between your selling price and the cost basis, which is how much you initially paid for the home plus any improvement or remodeling costs. If your capital gains are less than $250,000 (or $500,000 if you’re married and filing jointly), you’ve owned and lived in the home for at least two years, and you didn’t exclude capital gains tax on the sale of another property in the last two years, you won’t need to pay capital gains tax.
Transfer tax is another type of tax you may be liable for when selling your home. Transfer taxes are assessed at the state and local level and are the cost you pay to legally transfer the title from one party to another.
In Washington state, sellers are required to pay the transfer tax, or REET (although some buyers and sellers negotiate this cost in their purchase agreements).
The REET in Washington State is 1.28% of the property’s value, but many local jurisdictions also impose their own additional transfer tax in addition to the REET. The additional tax is usually between 0.25% and 0.50%, although there are also a few exceptions where the additional tax is much more substantial. San Juan County, for example, imposes a local transfer tax of 2.78%.
Both the buyer and the seller have costs associated with closing on a home. While the buyer has several smaller fees to pay, the seller usually ends up paying the bulk of the charges. In a buyer’s market, a seller may end up paying some of the buyer’s closing costs. Closing costs are often part of the negotiation process, especially if the buyer doesn’t have much cash on hand.
The general rule is that closing costs are between 2% and 4% of the final sale price. For a median Washington home worth $385,900, closing costs will probably amount to somewhere in the range of $7,718 and $15,436. For this reason, it’s important to work with an agent who is an expert negotiator to minimize your responsibility for these additional costs.
If you have any questions, or want to talk through your particular situation, please feel free to reach out!