Selling your house can cost you plenty Suppose you bought your house for $100,000. If you sell it for $150,000, think you’ll make a $50,000 profit? Think again. Before you even start the selling process, you’ve got expenses to consider.
Repairs and improvements: Repairs can prevent devaluation of your home, and the right improvements can increase the selling price or decrease taxes if you make a profit.
Advertising and promotion: If you sell your house yourself, you’ll need to spread the word. For a fee, website owners will put pictures of your house on the internet. You may want to place conventional ads in local newspapers and distribute flyers around the neighborhood. A flat-fee MLS listing will reach buyers through real estate agents. Of course, you’ll need “For Sale” signs. Staging an open house or two will also help (don’t forget the invitations, signs, coffee, and doughnuts).
Prepayment penalty: Even when you pay off the entire mortgage balance on the home you’re selling, the mortgage holder may charge you a “prepayment” penalty.
Moving costs: You could sell or donate everything and start fresh, to avoid what could be hefty moving costs. But that can be rather pricey.
On top of all this are the costs relating to the actual sale of the property. Fees vary, depending on your location. Whether you or the buyer pays may be decided by negotiation. In general, though, here’s what you can expect:
Professional house inspection provides you with a report of the physical condition of the house. Buyers usually have their own inspection performed as well.
Pest-control inspection by a specialist who prepares a report on the presence or absence of wood-destroying pests such as termites, carpenter ants, and powderpost beetles. Included in the report is documentation of any damage they may have caused.
Other inspections may determine whether the home is structurally sound or contains any environmental hazards (e.g., asbestos, lead-based paint, radon, or mold).
Homeowner’s insurance protects the property owner from losses due to fire, theft, or other catastrophes. Mortgage lenders usually require such insurance, since the property itself is their security against the loan. Specialty insurance protects against such risks as flooding and earthquake damage that aren’t covered by conventional homeowner’s insurance.
Closing agent fee: The closing agent (a real estate attorney, title company, or escrow company) makes sure all documents and money related to the sale are properly handled, notarized, and disbursed.
Other closing costs include attorney fees. Estimate 1%-1.5% of the selling price. (For a $100,000 home, that will come to $1,000-$1,500.) Closing costs also include:
Prorated property taxes and service fees, such as trash collection.
Transfer tax is imposed by some government authorities when a property changes ownership. They’re sometimes referred to as “doc stamps” because of the postage-like stamps that are affixed to a document to indicate payment of the tax.
Buyer’s mortgage loan fees in most states are traditionally paid by the seller. They’re estimated at 1%-1.5% of the loan amount. (On a $90,000 mortgage, figure it’ll come to $900-$1,350.)
The real estate brokerage commission – usually a percentage of the selling price – can easily be your biggest expense.
Although you can limit your selling costs by stipulating in the sales contract the maximum amount you’ll pay toward the buyer’s mortgage costs and other closing fees, your agreement with the real estate brokerage is a separate contract.
Of course, you can advertise the home and find a buyer yourself, and pay nothing to real estate agents. But as you can see, selling your home is still an expensive and detailed undertaking.
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