If you have equity in your home and decided to put it on the market expecting a profit when the sale is final, there are a few not-so-obvious expenses you may not have considered. Costs of selling a house include everything from seller paid closing costs and real estate commissions, to holdover costs, repair costs, home staging costs, and even sometimes capital gains tax! In fact, all in most home sellers receive about 10% less than the actual profit.
But, if you understand each of these potential expenses, you can take steps to minimize, eliminate or at least budget for the full cost of selling a home. If you’ve purchased a home before, you may be vaguely familiar with closing costs. Lots of little fees and taxes add up to your final closing costs amount. But, closing costs for a seller look a lot different than they do for a buyer — and are typically a lot higher.
Most of a buyer’s closing costs are associated with their loan, so it makes sense they would fit the bill for those fees. Other costs — like title insurance and escrow — are split between buyer and seller. A buyer typically pays 2% to 4% in closing costs.
If you need real estate consulting, call Team Zotti at RE/MAX All Pro if you have questions that we can answer about selling homes in the Antelope Valley!
As a seller in California, you’ll usually pay the full amount for transfer tax — the cost to legally transfer the home’s title into the new owner’s name. Since most California property tax is paid “in arrears” — meaning you’re actually paying last year’s taxes this year — you’ll likely pay the prorated amount to the buyer to cover the bill when it comes due.
There may be additional closing costs listed in your Settlement Statement, so make sure to review it carefully. Altogether, the taxes and fees mentioned so far usually amount to around 2% to 4% of the sale price for a seller.
Not technically included in your closing costs but equally important to note are holdover costs. Unless you’re able to seamlessly match the date you move out of your old home and into the new, you’ll probably end up overlapping bills like your mortgage payment, home insurance, utility bills, or property tax.
Cost of real estate agent commissions
Also included in your seller’s closing costs are real estate commissions. Unless you’ve specifically negotiated something different, the seller pays both the listing agent commission (your agent) and the buyer’s agent commission.
Usually, you’ll pay around 6% of the final sale price to your listing agent, and they split it evenly with the buyer’s agent — resulting in both receiving 3% in commissions for their service.
If you’re looking to bring these down a bit, an easy way is to work with a flat-fee agent. These may still be experienced agents from major brokerages, but they agree to a lower commission due to the volume of leads they receive and number deals they are able to close. You’ll still get most or all of the same services a traditional agent would provide but at a discount. These agents may even be more savvy with technology, including virtual tours — more important now than ever before as the COVID-19 pandemic continues.
If you’re a DIYer and have some knowledge of the real estate market, you can also list your home as a for-sale-by-owner (FSBO). It’s important to understand the pros and cons of doing so, one of which is that FSBOs typically sell for less, on average, than those listed with an agent. Plus — while you may avoid the listing agent’s commissions — buyers will still expect you to pay 3% to their buyer’s agent. You may not save as much as you think.
Home staging cost
If you’re buying a home, would you be more excited about touring a meticulously clean and polished home or one with boxes and junk everywhere? If you chose the former, you’re like most buyers. While staging a home can cost anywhere from a few hundred to thousands of dollars, it usually helps the home sell faster and brings a higher price — 88% faster and for 20% more than non-staged homes to be exact.
Home staging isn’t just about popping in a nice vase of fresh flowers and a cute coffee table. Lots of time and energy goes into staging your home — starting with decluttering and cleaning and then with possible rearranging your furniture to help buyers imagine themselves living there. And while hiring a professional to deep clean (around $200 to $400), clean your carpets ($300 or more), or stage your home may be a bit of an upfront cost, it usually pays off in a much higher purchase price and more serious buyers.
If you have pets, take extra care to remove any evidence of them. Professional cleaning of carpets can help get out the animal smell, and vacuuming couches makes sure there is no visible hair. You’ll also want to board them while potential buyers are touring your home.
Home repair costs
The cost of repairs needed to get your home sale-ready varies a lot depending on how well you have maintained your home over the years. Plan for a few thousand dollars in home repairs — more if you’ve deferred major maintenance.
There are two types of repair costs when selling your home. The first are those you make prior to putting your home on the market. Your agent can help determine which projects to attack based on which may result in a higher selling price or be deal breakers for potential buyers. For example, standout paint colors generally put off buyers, so your agent may suggest repainting your orange kitchen to a more neutral color.
If your roof, HVAC system, or other big-ticket items are especially dated, your home may be more attractive to buyers if you replace them prior to listing. While it may cost you $5,000 or more, it can actually generate more than that in the form of a higher offer.
Inevitably, when you accept a buyer’s offer and they have the home inspected, they’ll request at least some repairs. While you can always negotiate or flat out refuse the requests, it’s best to work with the buyer so the deal doesn’t fall through. Again, the dollar amount of these repairs varies greatly based on the age and upkeep of the home.
Capital gains tax
Don’t forget about taxes! Capital gains are the net profit from the sale — your final selling price minus closing costs, the cost of any improvements you’ve made while living there, and the amount you originally paid for the property. Capital gains tax is paid as a percentage of this amount and can be another cost of selling a home.
There is good news — the IRS has a tax-free gain exclusion. If you’ve been living in the home at least two of the last five years, you qualify for at least some relief. And if it’s been your primary residence during that entire five years, your final profit falls below $250,000 ($500,000 if you’re married), and you haven’t claimed the exclusion in the last two years, you won’t have to pay any capital gains tax.
Don’t be surprised by hidden costs of selling a home
Call Team Zotti to avoid getting caught off-guard by the fees for selling a house. If you understand them upfront, you’ll be much better equipped to pay for any of the upfront fees you need and won’t be shocked when you receive the final check after handing of the keys of the home to its new owner.
We’re here for you every step of the way!
Contact (661) 622-3476
Irene Mendoza dre lic 01330750
Philip Zotti dre lic 01882060