Due to the scarcity of homes for sale in some markets, the sellers have some advantages but the transactions may set them back thousands of dollars. The costs, such as real estate agent’s commissions and others, could end up consuming at least ten percent of the sale price of the house. However, some of these costs vary depending on the market. That said, the seller should be prepared to bear all or some of the expenses incurred while selling a house.
When you sell also will make a big difference to how much you can sell your house for, and how much extra you’ll have to cover all these expenses. At the moment, things are quite uncertain and many people are concerned we might head into a recession. If you’d like to learn more about selling during a recession, you can: See this article on maximizing your homes selling price during a recession.
Below are some of the house selling costs:
Real estate agents’ commission
The realtor’s commission fee accounts for the biggest expense that a house seller incurs. It is usually 5 to 6% of the sale price. The seller’s real estate agent shares the commission with the buyer’s agent. For the majority of the cases, the realtors’ commission is paid by the seller.
Home sellers could negotiate for a lower commission and the real estate agents may accept more economical rates. But for them to take a lower rate, they must expect the house to sell quickly, or the price of the property is comparatively high, or the local market is very favourable or strong.
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Since you are not in the business of selling homes but you want to sell your house as fast as possible once the realtor erects the “for sale” sign, you may have to incur some house preparation costs. These costs include minor repairs, essential cosmetic work like painting, de-cluttering, staging, and depersonalizing the house. At times, some upgrades of the kitchen and lavatories may be necessary to raise the value of the house. You should also be prepared for repairs that the buyers’ home inspector may ask for like fixing bad plumbing, leaking roofs, and so on. As a seller, you may also engage a home inspector to help you identify structural problems or the need for significant repairs. This is to avoid buyers asking for repairs to be done or for a price reduction.
If you acquired your house on mortgage, a part of the sale amount would go into settling the mortgage payoff. The mortgage balance on your balance will be less than what you owe the lender, so plan well. You will have to add the prorated interests to the balance, and where there is a prepayment penalty, you will have to foot it.
If you intend to vacate your house before you sell it, you will need to continue paying for electricity, water, and other utilities. It would be hard to sell the home without lighting and air conditioning, so make provisions for these costs.
The closing costs are usually the buyer’s burden, but if you are selling in a buyers’ market (a market with many homes for sale), you could have to pay for them. Some of these costs include attorney’s fees, homeowner’s association fees, transfer taxes, property taxes, and others. Fortunately, the seller does not have to bear all these costs and they can negotiate with the buyer on settling them.
Capital gains tax
When you make a profit on the sale of your house, you need to report it in your federal tax returns. However, you could avoid the tax or a part of it since eligible homeowners can legally deduct a portion of the profit from the sale of their home. You must meet the necessary conditions to benefit from this provision.
There you have the main costs of selling a house. The realtor’s commission is the biggest of these costs and you can reduce it by negotiating with the agents. You can also interview several agents to get the best deal. Home sellers need to be aware of the costs involved in selling their homes to be prepared to bring down the closing costs as well as any sale-related costs.