While selling a house can be an exciting time, it can also be overwhelming, particularly if you are a first-time seller. Here is where we try to help you by providing you with some information that can prove beneficial to you as a seller. When we tried to find out what it is that sellers most wanted to know about, we found that the most commonly asked question was ‘when selling a house what are the costs?’ We will break down the answer and list all the costs you can possibly incur. This can help you feel better prepared to take on the challenge of selling your home.
Below, we detail all the expenses that you, as a seller, might have to make. These costs range from those that can’t be avoided to those that only the more extravagant seller would consider budgeting for.
To start getting your house ready for sale, you can begin by getting it cleaned. Clean carpets and floors can be instrumental in uplifting the overall look of your interiors. You can hire a professional cleaner to do the job. However, if you are on a tight budget then you can rent a carpet cleaner, which can come as cheap as $50, and do the job yourself
. The second important step is to get general house cleaning done. Again, you can hire professionals to do the job, costing around $150, but if you have the time and energy then you can avoid the extra expense by taking on the task yourself.
This is a strictly optional expense, particularly since it can cost $400 and more. However, those who have the budget for it, should seriously consider getting a home inspection done. It involves a professional assessment of your home, helping you identify major structural or other issues, which if discovered later, can really hurt your chances of getting a good deal. Most buyers will have the house inspected before making the final offer. If their inspector finds serious faults, they can either ask you to foot the bill of repairing the damaged feature or they can demand a significant reduction in your asking price. If you have your house assessed, you can identify these problems beforehand and fix them. This will give you the best chance of getting the most out of your sale.
If you cannot afford to have an inspection done, then inspect your home the best you can- you can find helpful checklists as guides online- and identify any major issues that might need fixing.
Repairs and Maintenance
If you have had a home inspection done and some major issues have been discovered, then those are the first repairs you need to get done and the cost incurred will depend on the issue detected. After this, you might look at minor repairs, which might involve fixing up small things around the house such as creaking door hinges, broken bulbs or leaking faucets.
You might also want to spend on painting the interiors of the house. New paint, particularly in a neutral color, can give a great first impression of the house to prospective buyers. Painting your house exteriors can give the facade of your house a face-lift, which might not be a bad idea. That is one of the first views of the house prospective buyers get, whether they are looking at pictures in listings or visiting the house for inspection.
At the end of the day, beyond the necessary repairs, which ensure your house is functional, how much you spend on sprucing it up is entirely up to you and your budget.
When Selling A House What Are The Costs? This Video Breaks Down 5 Major Costs when Selling Your Home
If you wish to get the best possible price for your house and are willing and able to spend to get that result, then renovation might just be the expense for you. Consult your real estate agent and find out which renovations deliver the most value to you as a seller. Most agents are likely to tell you that the kitchen is a key area of interest for buyers. So if you can spend your money anywhere to upgrade, then the kitchen might be the best place in terms of adding value to your house..
However, if you are operating on a more modest budget, then know that renovation doesn’t necessarily mean installing a whole new kitchen. It could simply be making a couple of changes that can give it a modern, crisp look. You could invest in upgrading the cabinets or getting a new stove and still manage to get great results at the time of sale.
The outside of the house is perhaps the first thing a buyer will see when they come for an inspection. Therefore, do not underestimate the importance of a well-designed and well-kept lawn. At its most basic, landscaping can involve simple things such as adding more plants and flowers, weeding, pruning the hedges and trimming the grass. This can cost somewhere around $200. However, those who really want to ‘wow’ their prospective buyers can go all out, adding new flower beds, planting trees and modifying the layout of their lawn to match current trends.
Staging is when you have the house furnished by a professional for inspection purposes. It aims to help buyers see exactly how each space can look, when furnished. The right staging can help attract a diverse group of buyers . A professional will always strive to stage the house in a way that highlights its best features and minimizes the visual impact of its weaknesses. This service costs on average around $1200 but it can cost a lot more, depending on the level of service you want. However, it is a worthy investment. Homes that have used staging have been known to attract more buyers and have been sold in shorter periods of time.
This might seem rather mundane but the reality is it would be very difficult to sell your house to buyers if you did not have electricity and water. So, even if you are not living in the property, you need to continue paying the bills until you seal the deal.
The Real Estate Agent Commission
This is considered to be the biggest expense incurred when selling your property. Realtors charge on average 5% to 6% of the sale price. However, it is important to know that they carry out a range of services for you. If you hire a real estate agent then he is responsible for marketing, showing the property to prospective buyers, negotiating on all the terms, hiring a lawyer and ensuring transfer of title. Most sellers choose to hire an agent, not only for their services but also because they bring with them their expertise, knowledge and connections, all of which can play an instrumental role in getting you the best deal.
You could choose to become your own agent and carry out all the duties yourself. This can help you save some of the cost However, you should know that the commission you pay to your agent is split between him and the buyer’s agent. This means that even if you don’t hire an agent for yourself, you might still be paying 2% to 3% commission to your buyer’s agent, Secondly, if you are new to this market, then taking on such a demanding role can be overwhelming. This option might save on the expenses but, due to your lack of expertise, it can cost you in terms of profit earned..
Closing Costs And Other Expenses
While closing costs are predominantly buyers’ expense, as a seller, you should be prepared to foot a portion of that expense. It is usually expected that you pay a certain portion of it as a means of sweetening the deal for the buyer.
Some typical closing costs are property taxes, transfer taxes, homeowner’s association fee and title insurance. You may also be asked to pay the escrow fee or the brokerage fee. This is a key area of negotiation between a seller and a buyer. If you have a good agent, he can negotiate a good deal for you where you are able to keep your share of closing costs to a bare minimum. Also, how effectively you can negotiate will also depend on market conditions. If it is a buyer’s market, then you might have to foot a greater portion of the costs to close the deal. If it is a seller’s market, then you have the upper hand and you can use it to drive down your share of expenses.
Once the sale has been made, a portion of the sales proceeds will be used to pay off your mortgage. Contact your lender and find out all the terms and conditions of your loan. You may need to pay prepayment penalty on your mortgage, as some lenders have such conditions attached to their loans. Also, you might actually have to pay more than what is shown because that figure would not include prorated interest accrued on the total balance.
There are a couple of taxes that you, as a seller, should be aware of. Firstly, there is the property tax. Your prorated share of property tax should be paid till the closing date of your deal, with the money put in escrow. Interestingly, property tax is paid in advance. This means you might have made the payment for the whole year and as a seller you might be eligible for a rebate at the closing. At the time of closing the deal, the buyer will pay you the amount he would have had to pay till the end of year.
The second tax you need to be mindful of is capital gains tax. If you sell your house for more than what you bought it for then it is viewed as capital gains and you are required to pay tax on it. The good thing is that you might be eligible for a tax break. If the house you sold was your primary home for two out of the past five years and you have not availed this tax break in the sale of another home in the past two years then you can exclude up to $ 250,000 of profit per individual from the tax. This means that married couples filing jointly get exemption on profit of up to $500,000.
‘When selling a house, what are the costs?’ When you are asking such a question, you are focused on all the expenses involved in the actual process of making the sale. However, the truth is that there are some costs you incur which are not directly related to the process but are inextricably connected to it. They are the costs you experience as you transition from the home you sell to the one you buy. It is best to be mindful of them so you are prepared for those circumstances. The costs are listed below..
How much you spend on moving depends on a number of things such as how far you are moving, how much stuff you have and whether you are hiring professional movers or making the move yourself.
Home Transition Cost
There is a transition period between living in your current home and moving to your new home. It might be that you may have found a new home and not made the sale of your current property yet. In this case you will be incurring costs such as utility bills and homeowner insurance from both properties and these would be called overlapping costs. It also might happen that you make the sale but haven’t found a new place yet, in which case you have to account for the cost you will incur for temporarily living in a rental property.
‘When selling a house what are the costs?’ That is the question we set out to answer and hopefully we have answered it to your satisfaction, addressing all your doubts and concerns. The list of the costs of can seem rather long and daunting. However, it is important to remember that, while some expenses, such as taxes, realtor commission, closing costs and moving and transition costs are mostly unavoidable, there are many expenses on the list that are optional and their scale is subject to your resources and requirements. Your costs will also be affected by the market conditions in which you sell your property; is it a seller’s market or a buyer’s market at the time?
All in all, as a seller, it is important to know of all the possible costs you may incur in the process of selling your house so you are not surprised by anything at the time. This information can be one small step towards helping you be better-prepared for the monumental task of selling your home to its highest potential.