Prepare your wallet for these home-selling costs
It’s no secret that buying a house is a pricey endeavor, but selling your home carries its costs, too. Before putting your house on the market, ensure that you’re financially prepared to cover everything from closing costs to the home staging bill.
Although you might stand to profit from the sale of your home, here are the costs that will get tacked on to your bill by closing day.
Real estate agents are an invaluable part of the home-selling process, but their commission adds up quickly. The real estate agent commission is typically between 5% and 6% of the sale price, and it’s split between the buyer’s agent and the seller’s agent.
The commission percentage varies by location, but it represents one of the highest costs you’ll face as a seller—aside from the mortgage for your new house, of course. However, an experienced realtor earns their commission check by securing a buyer for your home as quickly as possible.
If there are major issues with your home, it will come up in the home inspection report—and buyers have every right to say no to the purchase when they do. As the seller, you may have to invest in home repairs or upgrades in order to sell your home at your desired price. If you don’t, you could lose out on higher-priced offers.
It might pay off to hire a home inspector before putting your home on the market to pinpoint potential issues. If so, you can manage the repairs or discount the home price.
A home inspection costs $340 on average according to HomeAdvisor, though it could be well worth the investment.
A home appraisal will give you a clear picture of the value of your home. A professional home appraiser will inspect your home to estimate its current market value in comparison with other recently sold homes in the area.
You can expect to pay between $313 and $420 for a home appraisal, depending on the size of the home and your location. This valuation is essential for setting your home’s asking price, ensuring that you don’t lose out on thousands of dollars thanks to low-ball offers or price it too high and leave your home lingering on the market.
Feel free to blame this expense on popular home improvement shows, but many buyers expect to tour staged homes similar to those seen on TV. But home staging gets results—more than 30% of seller’s agents report that home staging decreased the amount of time homes spent on the market.
You can hire a professional to stage the space with rented furniture and decor, which costs an average of $1,460. However, you can cut costs by only staging a few key rooms, such as the kitchen and living room, or stage it yourself using neutral and inviting decor pieces.
Depending on the timeline for selling your home, you might be paying double payments for a bit. If you bought a new home before the sale closes on your old one, you may need to cover transition costs during the overlap period, including utilities, taxes, interest, and insurance. For example, it’s hard to show a dark, cold home in the winter, so you’ll need to keep heat and electricity on for showings.
Ideally, one of the benefits of selling your home is being able to (finally) pay off your mortgage. Any outstanding balance on your mortgage is due on your home sale day, meaning that the payoff amount is subtracted directly from your home sale price. Contact your lender to determine how much money and interest you owe on your mortgage.
Aside from property taxes, you might have to worry about paying a capital gains tax. If you make a profit on the sale of your home, Uncle Sam will want his cut. However, if you’ve lived in your primary residence for the past two years, you’ll typically be able to deduct up to $250,000 (or $500,000 as a married couple) in a joint tax filing. Consult a tax professional to determine whether your sale qualifies you for the capital gains tax.
There are closing costs on both sides of the real estate transaction. As the seller, you will likely be on the hook for attorney fees, transfer taxes, escrow fees, title insurance, and HOA fees. Don’t forget about property taxes—you’re still responsible for those, too. In total, closing costs and fees cost about 1% to 3% of the home sale price.
Some of these fees will likely get wrapped into the closing costs, but there could be some room for negotiation. However, in a buyer’s market with more inventory than demand, a buyer might ask you to cover some of the closing costs as part of your negotiations. A real estate agent or a real estate attorney can help you navigate the closing process more smoothly.
