Buying a House

How Much Does it Cost to Sell Your House?

In today’s economy it’s tough to hear that you may have to end up bringing money to the table when selling your home. Even if you’re selling for about the same price as what you paid, there are numerous other costs involved in selling homes that are going to end up reducing your bottom line, and may mean that you walk away with less money than you put in. It’s a heartbreaking situation, but unfortunately it happens frequently. For this reason, you really do need to factor in all the other costs concerned when considering whether or not to sell. And if you will have to bring money to the table, can you afford to do so? Everything else aside, when all is said and done, how much does it cost to sell your house?

Real Estate Agent Fees

Without doubt the single most expensive cost involved in selling your home is real estate agent fees. Love them or hate them, real estate agents provide a very valuable service, but that service does not come cheap. Agents base their fee on a commission structure and what they receive depends upon what you sell your home for. The commission can vary from one agent to another but typically the rates are somewhere between 5 and 7%. So to put this into context, if you agreed to sell your home for $200,000, at 7% the agent would receive $14,000. So already what you’re actually getting for your home has been reduced to $186,000, and that’s before any other fees or expenses have been taken off.

Now we could start talking about the alternatives – more and more homeowners are looking at ways of cutting out the real estate agent in an attempt to save thousands of dollars. Selling your home without an agent presents numerous additional challenges though, and while it may seem that you’re saving money, mistakes could end up costing you more.
There are also agents who work for a far lower commission – 2 or even 1%. But if you’re considering using one of these low cost real estate agents be sure to check what you’re getting for the fee. Does it include the same marketing as an agent who charges 7% for example – it’s doubtful.

The Closing Costs

Closing costs as an umbrella term can include the real estate agent’s fees but they also include the many other costs that accumulate while going through the process of selling your home, and they will vary with each transaction. Typically you’re told to allow for between 1 and 3% of the sale price to go towards closing costs (other than the realtor’s), so again to put this into context – if closing costs amounted to 2% on a $200,000 home you would be paying out $4,000. Add this to the $14,000 you’ve already paid to the real estate agent and we’re down to $182,000.

But what do closing costs include?

Because buying and selling a home is a legal process you will need to hire a lawyer or a notary to deal with the legal side of things. If you are buying as well as selling, the fee will be even higher as the lawyer will need to deal with the purchase side of things too. Their fee will include such things as registering the mortgage, doing a title search on the new property, calculating who receives what when the mortgage is paid out, and making sure the correct parties receive their money. You also need to add in administrative costs that lawyers charge such as wire fees, postage, faxing, and photocopying. The main portion of their fee will go toward document preparation.

Taxes can also amount to a lot, though these vary with each state, and are based on a percentage of the sale price. This is an amount of money that goes to the government, like a sales tax, but be aware that this is different to property taxes. If you are behind on paying your property tax any outstanding amounts will need to be paid out of the sale price. If you’re up-to-date with your property taxes and are not buying a new home at this time, it’s likely you’ll get a pro-rated amount of property taxes back from the buyer since you would normally have paid for a whole year up front.

If you’re selling your home before the end of your mortgage term you may have to pay a penalty to the bank as well as a mortgage discharge fee. These can amount to thousands of dollars depending on your terms.

The Home Inspection

It’s rare that a home seller would pay for a home inspection, though some real estate agents recommend you have an inspection done upfront that can be shared with any interested buyers. Regardless of who pays for the home inspection you, as the seller, may be given a list of concerns or problems that the buyer has found and would like to have fixed before the sale goes ahead. Obviously the extent of this depends on the house – it could be just a few very minor things that you could fix yourself, or the home may need a new roof. So these repairs could amount to thousands of dollars too.

Help with Closing Costs

After all the other fees and expenses the last thing you want to hear from the buyer is that they would like help with their closing costs, but this is a common request. In this market where every dollar counts, a buyer may ask for a couple of thousand in order to help them pay their own closing costs.

Taking our $200,000 sale price we’ve already subtracted $14,000 for the real estate agent, and another $4,000 for closing costs. Take off another $2,000 for buyer requested repairs, and then an additional $3,000 to pay the buyer’s closing costs and we’re down to $177,000, and that’s without any mortgage fees thrown in – you’ve paid out $23,000 – 11.5% of the sale price – to sell your home.

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