In today’s economy, it can be tough to hear that you might need to bring money to the table when selling your home. Even if you sell for roughly the same price you paid, there are numerous additional costs involved in selling a home that can significantly reduce your bottom line. Unfortunately, this means you might walk away with less money than you originally invested. It’s a heartbreaking situation, but it happens all too frequently. For this reason, it’s crucial to factor in all the other costs when considering whether or not to sell. If you do need to bring money to the table, can you afford it? All things considered, how much does it actually cost to sell your house?
Real Estate Agent Fees
Without a doubt, the single most expensive cost involved in selling your home is the real estate agent’s fees. Love them or hate them, real estate agents provide valuable services, but those services do not come cheap. Agents base their fees on a commission structure, which depends on the sale price of your home. The commission can vary from one agent to another, but it typically ranges from 5% to 7%. For example, if you sell your home for $200,000 and the agent charges 7%, they would receive $14,000. This means that your actual net sale price is reduced to $186,000—before any other fees or expenses are taken into account.
You may consider cutting out the real estate agent in an attempt to save thousands of dollars. More and more homeowners are looking at ways to avoid using a real estate agent. However, selling your home without an agent presents numerous additional challenges. While it may seem like you’re saving money, mistakes could end up costing you even more.
There are also agents who charge a lower commission, such as 2% or even 1%. If you’re thinking about using one of these low-cost agents, be sure to investigate what services are included in the fee. Does the agent offer the same marketing and support as one who charges a 7% commission? The answer is likely no.
The Closing Costs
Closing costs, as an umbrella term, can include the real estate agent’s fees as well as many other expenses that accumulate during the selling process. These costs can vary with each transaction, but typically you should expect to pay between 1% and 3% of the sale price for closing costs (excluding the agent’s fees). For instance, if closing costs amount to 2% on a $200,000 home, you’ll be paying $4,000. Add this to the $14,000 already paid to the real estate agent, and you’re down to $182,000.
What Do Closing Costs Include?
Because buying and selling a home is a legal process, you’ll need to hire a lawyer or a notary to handle the legal aspects. If you’re buying another home as well, the fee will be even higher, as the lawyer will also handle the purchase side of the transaction. Their fee typically covers services such as registering the mortgage, conducting a title search on the new property, calculating payouts when the mortgage is settled, and ensuring that the appropriate parties receive their funds. You’ll also be charged administrative fees for services such as wire transfers, postage, faxing, and photocopying. The majority of the fee is generally allocated to document preparation.
Taxes can also add up, though they vary by state and are typically calculated as a percentage of the sale price. This is a government fee, similar to a sales tax, but different from property taxes. If you’re behind on property taxes, any outstanding amounts must be paid out of the sale price. If your property taxes are current and you’re not purchasing another home, you’ll likely receive a pro-rated refund for the portion of property taxes you’ve already paid for the year.
If you’re selling your home before the end of your mortgage term, you may face a prepayment penalty and a mortgage discharge fee, which can total thousands of dollars, depending on the terms of your mortgage.
The Home Inspection
It’s rare for a home seller to pay for the home inspection, though some real estate agents recommend arranging an inspection upfront to share with potential buyers. Regardless of who pays for the inspection, you may receive a list of concerns or issues the buyer wants addressed before the sale goes through. The scope of these repairs depends on the condition of the house—it could be as minor as fixing a few small issues, or as significant as replacing a roof. These repairs could cost you thousands of dollars as well.
Help with Closing Costs
After all the fees and expenses, the last thing you want to hear from the buyer is a request for help with their closing costs. However, this is a common request, particularly in a market where every dollar counts. The buyer might ask for a few thousand dollars to cover their own closing costs.
Let’s break it down: for a $200,000 sale, we’ve already subtracted $14,000 for the real estate agent’s fee and $4,000 for closing costs. Now, subtract another $2,000 for buyer-requested repairs and an additional $3,000 to cover the buyer’s closing costs. After all of this, you’re left with $177,000—having paid out $23,000 (or 11.5% of the sale price) just to sell your home.
