Happy New Year!
We’ve officially entered a new decade and for many families, it’s the time to start planning for the future. Your New Year’s Resolutions might be health-related or business-related, but many of you are thinking it’s time to make the move into a new home. The only thing standing in your way is your current home. Even if you’re in a great neighborhood and you’re not concerned about the length of time your home will be on the market, you might find yourself wondering: how MUCH does it cost to sell a house?
There are several factors to consider prior to estimating an answer to that question. And it’s important to keep in mind that not everyone will have the same experience or undergo the same expenses with the sale of their home. Just because your neighbor sold their house in less than a week or your cousin was able to sell their home without extensive home repairs or staging doesn’t mean that you will share a similar experience. Each home is unique - just like your family is unique. But by the end of this article, you will have a general estimate of what it will cost you to sell your home.
The six main factors that contribute to your overall out of pocket expenses that we’re going to discuss are:
Preparations/Home Repairs
Staging
Monthly Carrying Costs
Commissions
Closing Fees
Taxes
We’ll go over these individually and then add them all together at the end of the article - giving you the average numbers needed to calculate how much out of pocket expenses you can expect when it’s all said and done.
Preparations/Home Repairs
No house is perfect. And the majority of the time we don’t expect them to be. Setting aside the arguments over whether or not you should paint neutral colors or just allow individuals to see the potential of your home during showings, let’s be honest: there are a few areas of your home that you probably want to work on prior to listing your house on the market.
But where should you focus your attention? What updates are really necessary to entice buyers to be interested in your home?
According to Realtor.com, you should be focusing on projects that will give you the most return for your investment. A few examples that have shown to often add considerable value to your home are walls and floors, your front door, your outdated roof and/or siding, and your kitchen.
If you’ve gone through a real estate agent to list your home, then they will have some great advice on what updates will give you the most bang for your buck. If you’ve chosen to sell your home without the aid of a realtor, then you may consider consulting a general contractor. They’ll be able to give you any problem areas that may present themselves during an inspection or final walk-through that might give potential buyers cause for concern.
But even if your house is in perfect condition, take a look at the areas that are going to leave a lasting impression, such as your kitchen and your front door. The door is the first and last thing people will see as they walk through your home - so upgrading to a steel door in a pleasing color is an easy win for you. Painting your walls in a neutral color (a quick Google search will tell you what the best colors of the year are) is also a way to spruce up your house without accruing too much expense.
Staging
If you have already vacated the house you’re selling, then hiring a professional stager may be the right move for you. They can help your home look warm and inviting, as well as giving potential buyers an idea of what the home looks like when it is lived in.
However, if you are living in the home while trying to sell it, then staging is something you might consider doing on your own. Start by decluttering your home and removing as much storage as you can. You may need to rent out a storage space for this depending on how much you have. Ultimately the goal is to depersonalize your home as much as possible. You want the people who come to look at your home to be able to picture themselves living there, and that can be difficult if you have family photos hanging throughout the home.
Monthly Carrying Costs
This category plays a much larger part if you have already moved out of the home you’re trying to sell. If you’re still living in your home, then you expect to continue to pay your mortgage, homeowner’s insurance, etc. The only extra might be if you’ve hired a professional stager or if you’ve had to rent out a storage unit to help declutter your home.
For those of you who are trying to sell a vacant home, your Carrying Costs will have a much larger weight for you, especially if your house sits on the market for an extended period of time. You’ll have to pay to keep utilities going (no one likes to walk through a dark house they can’t really see), continue to pay homeowner’s insurance (which may increase due to the house being vacant), along with your mortgage and any home association fees the property may come with.
If you’re in this situation, selling your home as quickly as possible will lower these costs, but you should definitely keep in mind how much extra you’re spending each month your house sits on the market.
Commission
If you are not choosing the “for sale by owner” route, then you’ve signed an agreement with a real estate agent which awards them a commission: a percentage of your sale price, you could expect to see somewhere between 5% and 7%. This is subject to your negotiations with them, but you can expect to reach an agreement somewhere within that range. Depending on the final sale price of your home, this could end up being your highest cost for selling your home.
In addition, keep in mind that often times the seller finds themselves paying the buyer’s closing costs as well, which will include their realtor’s commission. Keeping an eye on all these numbers will ensure that you have no surprises on closing day.
Closing Fees
This will vary from state to state, but typically include fees to the title company (yes, they will absolutely charge you per piece of paper they have to print), your year to date homeowner’s insurance owed, etc. For a complete list, you should speak with your realtor as they’ll be familiar with the proceedings.
In most states, you’ll also be required to pay for a home inspection prior to closing day so that your buyers can ensure they’re not in for any surprises upon taking possession of the property. And if that inspection turns up any signs of termite damage or other potential problems, you might be looking at additional last-minute expenses.
As a side note here, in very rare cases, you may find that you’re so upside down in your own home that you’d end up paying money on closing day just to sell your home. If this is the situation you find yourself in, please get in touch with us. We specialize in buying houses from people who are looking for a quick and painless sale and we will provide you with a fair cash offer within 24 hours of hearing from you. Click here to fill out the necessary information to find out if this is an option for you.
Taxes
Besides your personal property tax, can you expect to pay taxes on any profit made from selling your home? As long as you made under $250,000 (or $500,000 for couples filing jointly), it should be exempt from Federal Income Tax. But that doesn’t mean that you won’t owe local taxes, which may be included in your Closing Costs.
For additional detailed tax information for the sale of your home, check out this article from TurboTax.
What does all of this mean?
Well, in April of 2019, Zillow estimated that when selling your home, you can expect to pay an average of $20,851, mostly because of your realtor commissions and state and federal taxes.
Does this mean that’s exactly what you can expect to pay? No, of course not. This is all based on the cost of your home, any home improvements you make prior to listing your home, or any problems that arise during an inspection and final walkthrough. I’ve seen a hot water heater break down on the day of the final walkthrough, forcing my seller to replace it prior to closing day. Bad timing for the seller, but good timing for the buyer.
While it’s impossible to foresee everything, by utilizing the above list of categories, average commission rates, and closing cost estimates from your realtor, you should be able to put together a number that is pretty close to what you will pay on closing day.
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