You’re headed off to your next big adventure, and you’re more than ready to pocket a significant chunk of change with your home sale.
However, talk to anyone who has recently sold their home, and you’ll hear it over and over again: the costs associated with selling a home can really add up, and in ways that might surprise you. Fees, taxes, and other costs can eat into the profits you make on your home, so it’s a good idea to keep them in mind as you prepare to sell.
So how much does it cost to sell a house? Below, we’ve listed some of the most common fees you’ll need to prepare for, as well as ways to reduce some of them with a little advance planning to calculate the net worth of your house. Read on to learn more.
Changes for Curb Appeal and Home Condition
Before you put your home up for sale, you’ll likely invest in a few things to enhance curb appeal and raise the house’s overall value. Depending on the changes, this strategy can earn you significant profits on the home’s sale—but it doesn’t change the fact that you’ll need to shell out for the updates on the front end.
Home Staging
When a prospective buyer walks into your home for the first time, you want them to see the house at its best. Ideally, your buyer will be able to envision themselves in the inviting space you’ve created.
That’s where home staging comes in. A professional stager can cost you $2,000 or more, though you can always save money through the do-it-yourself route.
Whatever you decide, the investment typically pays off in the long run: staging both only increases a home’s sale value and helps a home sell faster.
Landscaping
Your curb appeal is your home’s first impression, so a little landscaping goes a long way. Investing in greenery and flowering plants, as well as a landscaping service to rake and tidy the area before buyers pass through it, can help increase your home’s value—at a cost.
Utilities
If you no longer live in your home, or if you plan to move out of it before selling, you’ll still want to pay for utilities. Otherwise, homes without lights and air conditioning may prove difficult to show to prospective buyers.
Miscellaneous Changes
Painting has been shown to increase your property value, especially if done in the right colors. Clean windows can increase the amount of sunlight entering your home and make the interior more inviting. Smart or energy-efficient appliances and light fixtures add extra appeal.
Every small change you make to your home can increase resale value, meaning you’ll recoup the cost of some of the other fees on this list.
Home Inspection
A home inspection will run you around $300-400. A home inspector will come to check the major elements of your home: your plumbing, electrical systems, HVAC system, foundation, and roof.
These inspections are optional, however—so why pay for them? And who pays?
Often, the buyer will pay for a home inspection to ensure that their investment doesn’t turn out to be a money pit. However, if not, it’s still prudent for the seller to get one. A home inspection allows you to identify major issues and improve them ahead of time, which in turn means that those repairs don’t affect the closing process or cause potential buyers to back out or alter their offers.
Talk to your real estate agent to see if they’d recommend a home inspection, and remember that (depending on your state laws) you’ll be required to disclose anything the inspection reveals to the buyer as well.
Home Repairs and Renovations
More than likely, you’ll need to invest in further changes following your home inspection. If your inspector finds significant issues, such as plumbing problems or roof damage, you’ll have to repair them before closing the deal. However, these repairs are well worth the hassle, as a home’s condition (paired with price) is one of the key factors affecting how long a house sits on the market.
Homeowners should expect to invest in at least one repair or renovation, as a majority of sellers make at least one improvement before selling the home.
Realtor Commission Fees
For most sellers, this will be one of the biggest costs of selling a home, as it’s usually around 5% of the sale price of your home. It’s not a small chunk of change—$12,000 off the median US home price of $200,000 and significantly more for luxury homes. These fees are split between the seller’s and the buyer’s agent, and the seller bears the cost of it.
The only way to avoid commission fees is to list the home as “for sale by owner” (FSBO). Doing this means taking up the responsibilities of the real estate agent, which includes showing the house to buyers, negotiating the sale, and handling the transfer of the title.
However, there’s a reason the number of FSBO hit an all-time low in 2018. Doing this means losing the expertise your real estate agent brings to the negotiation table—and it might mean leaving money on the table as well. FSBO homes sell for much lower than their counterparts, a median of $200,000 compared to $280,000.
Closing Costs
Transfer Taxes
Whenever you’re transferring a piece of real estate to someone else, transfer taxes apply. The amount varies depending on where you pay, and the tax will be assessed at a city, council, and/or municipal level. Several states require no transfer tax at all.
Non-residents may be subject to specific transfer taxes, adding an extra layer of expense. Additionally, sellers may need to navigate the FIRPTA withholding process, which ensures that taxes are paid on the gains from the sale of real estate by foreign persons. Failure to comply with this requirement can lead to significant penalties, so it’s essential to consult with a tax professional when selling.
Mortgage Payoff
If you currently have a mortgage on your home, paying off the mortgage will be another one of your closing costs. You’ll use the proceeds of your home sale toward the remaining loan balance, keeping whatever’s left over to put toward a down payment on your next home. However, you might see a deficit if the payoff amount doesn’t include prorated interest.
Assorted Closing Costs
As part of the negotiating process, the buyer might ask you to pay other assorted fees—especially if you’re selling your home in a buyer’s market. These additional fees might include things like attorney fees, property taxes, escrow fees, or even homeowners association fees. Depending on how many of them you’re asked to pay, these fees can add up to 1-4% of the sale price.
Capital Gains Tax
This cost to sell a house is often overlooked—at least until tax season. If you sell your home for more than you’ve paid for it, it’s what’s known as a capital gain, and it needs to be reported to the IRS. You may qualify for tax breaks, however, especially if the house was your primary home for two of the last five years.
Property Tax
Property taxes are another important payment to remember, as they’re usually paid in advance. If you haven’t already paid this year’s taxes, you should expect to pay any taxes that apply from the beginning of the year to the date of closing. Future property taxes after that date are the buyer’s responsibility.
Lowering the Costs Associated With Selling a Home
As we’ve mentioned, real estate commissions will probably be the biggest fee you’ll see. However, commission fees are negotiable, particularly if the housing market is strong, the price of the home is high, or the agents expect the home to sell quickly. Note, of course, that many agents consider these commissions non-negotiable, so you should be prepared to accept their refusal.
Home repairs and staging are two of the easiest ways a seller can make a dent in the costs associated with selling a home, mostly because these things vary greatly in price. Homeowners with a flair for interior design can easily transform their houses into beautiful showcases without reaching out to a professional. A seller with a DIY background can take care of less intensive home repairs or renovations to enhance curb appeal without shelling out for an expert.
Your Home Sale Transaction Cost
So, how much does it cost to sell your home?
It’s probably obvious that the costs associated with selling a home can vary wildly depending on the home and the strategies the seller uses.
If you’re trying to calculate the cost of your home sale transaction, try asking your real estate agent for tips. With their specific advice, you may be able to play with the numbers to see if there are any fees you might be able to scale down. Good luck!
