What Does it Really Cost to Sell a House?
You would be amazed at the costs associated with the sale of a home and this cost to sell a house involves more than just the realtor’s hefty commission. The realtor’s commission is typically in the 5 to 6% range. That is, 5 to 6% of the final sale price of the property. The average value of a home in 2011 stood at $242,000. Five percent of that is a whopping $12,100. Now not all of that finds its way into the realtor’s bank account since the realtor has expenses too. The focus of this piece is what additional costs you, the homeowner, can expect to face.
Cost of Repairs
Next to the realtor’s commission, the cost of getting your home ready to sell may be the second largest expense you incur. All those things you have been putting off, you are going to have to do now. We are willing to live with certain flaws in our home. Yes, it needs a paint job, but that can wait until next year. Sure, the water heater is on the blink, but if you hit it just so when it acts up it is fine for a couple of weeks. Look, I get it! It is your home. Some things you can live with, but the fact is potential buyers will not. You had better plan to pony up and spend what is necessary to make your house the most popular girl at the dance.
The Escrow or Title Insurance Company prepares all the necessary paperwork associated with the sale of your property. They are disinterested third parties acting on the behalf of buyer and seller to ensure that the transaction is concluded in the manner agreed to and in conformance to all applicable local and state laws. The escrow office is where the sale is finalized. This is where the signing party takes place. The escrow office receives the money from the buyer. The escrow company pays off your mortgage and any other liens on the property, ensuring clear title to the buyer. Whatever remains is yours, and they make sure you get your proceeds of sale. Escrow fees vary from state to state and company to company, but a reasonable “rule-of-thumb” is 1.5% of the actual selling price. That would be about $3000.00 for a $200,000 dollar home.
In this depressed housing market, plan on paying some percentage of your buyers closing costs. Negotiating who pays what, and how much, has been a longstanding practice in the business. Since we are not exactly in a seller’s market now, you may have to agree to pay a larger percentage of your buyer’s share than was previously the case. Just remember, whatever costs you agree to pay comes out of your check as part of the cost to sell a house.
This is similar to errors and omissions coverage. Title insurance protects the buyer and seller against losses that might be incurred because of title defects that surface post sale. A variety of issues may occur. Human error, such as overlooking a lien and failing to clear it, forged documents, unknown or undiscovered heirs, and flawed legal descriptions are a few examples. Figure 0.5% of the final selling price as a guide for the cost of this coverage. Premiums vary widely among states.
Recording and Document Fees
Document and recording fees vary widely among jurisdictions, but they are generally not high in cost.
Unpaid Utility Bills and Assessments
Unpaid assessments and utilities, if any, are usually paid by the seller or shared on a pro-rated basis. Again, these do not typically represent a major component of the cost to sell a house.
Some states have an excise tax, and some states do not, so comments on this expense cannot be terribly specific. Does your state have an excise tax on the sale of residential real estate? Property taxes, most states have this tax, are usually pro-rated, which means the seller will pay taxes incurred through the date the seller has occupied the property since the last assessment was paid. Happily, there is unlikely to be any federal tax the sale of your home. Currently, an individual can exclude up to $250,000 in capital providing the taxpayer has owned and lived in the property as the primary residence for two of the past five years. That doubles to $500,000 if you are married. That is certainly good news for the cost to sell a house!
How much did it cost you to sell your house? Were there any costs that you did not expect?