How much does it cost to sell a home?

On the surface, selling a home seems pretty straightforward, and sellers ultimately hope to come out ahead once the sale is finalized. What a lot of people are surprised to find out, however, is that there are numerous costs associated with selling a home.

Sellers will incur different costs depending on factors such as the state in which they live, the size and condition of their home, and the real estate agent they work with. In this blog post, we’ll take a look at some of those costs and help you understand what you can expect to spend when you’re ready to sell your home.

Commission fees 

On average, real estate agents typically charge 6 percent of the final sale price. This percentage pays the real estate agents involved in the sale for their time and effort; the commission fee is split between the selling and buying agency. Many people depend on real estate agents to take care of the sale process when selling a home, but there is no obligation for a seller to hire one. With that being said, selling a home without a real estate agent can be a long and convoluted process. Although you may be able to avoid paying commission, you will be responsible for taking care of other expenses upfront, such as MLS listing fees, professional photography, real estate attorney fees, yard signs, promotional materials, and more. 

Mortgage payoff penalties 

When selling a house with a mortgage attached, the seller must be aware of whether or not they are subject to a penalty for paying off the loan. The majority of mortgages come with a prepayment penalty, which means that if you pay off the existing loan before it is due to be paid off, you must pay a fee. Since lenders use this money for their business and administrative costs, they do not want you taking out equity from your home without paying them back. 

If you are selling your home, there are several reasons why paying off the loan may be necessary. There are alternatives to cashing out—such as refinancing your existing mortgages into one at current interest rates—but if you want to sell, it is important that you know who to talk to about what needs to happen with your mortgage.

Capital gains taxes

When you sell your home, the profit or loss on the sale is considered a capital gain. This means it is taxed at different rates than normal income. A capital gain occurs when you sell something for more than you paid for it. Depending on how long you’ve owned your home, you may have to pay taxes on any profits earned from its sale.

Capital gains are either short-term or long-term, depending on how long you owned the property. Short-term capital gains are taxed at your current tax rate if you owned the property for one year or less before selling it.  No matter what your income is, you would pay a percentage of capital gains tax on the profit; the percentage could vary depending on whether this was a principal residence or not. It also falls into your standard income tax rate, or tax bracket. 

Long-term capital gains taxes are different from short-term; if you profit from the sale of a home you’ve owned for longer than a year, that profit can be subject to long-term capital gains tax. The tax rate can be as much as 20 percent in some cases, but will vary based on other factors, such as tax-filing status. Because everyone’s situation can differ significantly, it’s recommended to speak with a professional — such as a real estate agent, attorney, or accountant — about what your capital gains tax rate could potentially be.

Closing costs

Typically, it is the buyers who pay for closing costs, but there are some situations where the sellers may also pay closing costs. This could vary based on state laws or could be something the two parties negotiate together. For example, motivated sellers may offer to pay for some (or all) of the closing costs as an incentive, especially if their home has been on the market for a while. 

Closing costs can range from a few hundred dollars to several thousand dollars, and cover things like title insurance, appraisal fees, and attorney fees. Closing costs can be divided into two categories: non-recurring and recurring. Non-recurring closing costs are paid once when they are incurred. These include recording fees, transfer taxes, surveys, and inspections. Recurring closing costs are paid at closing also, but may be included in the monthly payment for a period of time post-closing (e.g., annual homeowners’ insurance premiums). These costs can vary greatly based on location, property type, and local market factors. 

Repair costs

If your home needs repairs before it can be put on the market, you’ll need to budget for those. Some of these repairs can be minor, but if they are needed and something that will likely turn up in the home inspection anyhow, it’s important to take care of them before any prospective buyers notice them. While they may seem like costly repairs at first, it is still important to be financially prepared for these repairs, as they can quickly add up.

There are also the major repairs to be financially prepared for, too. Most homebuyers won’t want to undertake expensive and big repair projects as soon as they buy a new home; in other scenarios, a mortgage company may not agree to finance a home purchase if significant, expensive repairs are needed. 

A leaky roof is one of  the most common things that might need to be repaired. Many people are surprised to find out that the roof may not last as long as they thought, which is why it’s important to have a qualified roofer come out and give an estimate on your roof before you put the house on the market. In some situations, you may even need to completely replace your roof before putting it on the market.

A cracked foundation is also one of the most common repairs that need to be made before selling a house. A crack in the foundation could mean that there are bigger problems beneath it. A general home inspector will not be able to tell if there are larger problems in the basement, which is why it’s important to hire a foundation specialist.

There can be other serious issues that need attention that may not necessarily be structural, albeit still costly to fix. For instance, anytime the house smells like smoke, you will need to get rid of it. It is important that your house smells fresh and clean. Be sure that all of the carpets, drapes and furniture are washed before putting your house on the market. When your home smells fresh and clean, a buyer will be more willing to spend  time in your house and get a better feel of it. If you have fresh, clean air coming into the house through open windows and vents, this will also give the buyer the impression of a healthy space. If the smoke smell is severe enough, you may need to fumigate, which can easily run into the thousands.

Moving and storage

Moving can be a rather costly process, as you may already know. The preparation itself can be pricey on its own, especially if you are packing up a lot of things. Boxes and other moving materials can quickly add up, but getting the right moving supplies can help protect your belongings during a move.

Another major cost of moving is transportation costs. If you are moving locally, these may be no more than the price of your gas and the wear-and-tear on your vehicle. On longer moves, however, where many belongings must be loaded onto a truck or perhaps even several trucks, it will become necessary to hire a professional moving company. These companies have different ways of charging you for their services, and may include a flat fee based on how many items you have and the distance between locations. In other cases, such as with local moves, they may charge an hourly rate. 

Storage costs 

Some people prefer to move out of their home before listing it. If you haven’t found your next home yet, you may need to live in temporary housing, such as a short-term apartment or hotel room, and store most of your belongings. In other cases, homeowners often sell their house before they’ve found and closed on their next home. In this situation, they’ll need to move to temporary housing to bridge the gap while they search for their new home. 

The cost of moving and storing typically depends on several factors, including where you’ll be storing everything and how much space you’ll need. You’ll want to do inventory on your belongings to determine what’s worth keeping and what’s worth selling or giving away. Remember that the more things you have, the longer it will take to move them out, into storage, and back to your new home. It will also mean needing additional storage space. In some cases, it’s simply not worth hanging on to certain things, since you’ll be paying to move and store them.

Another cost consideration: No matter how careful you are with moving your belongings into storage, there’s always a chance something could be lost or damaged.

Additional home security 

There is one unexpected expense that many homeowners will face when putting their home on the market: home security. Many sellers will invest in extra security measures like alarm systems and surveillance systems to protect their property during showings. 

While this kind of security is not expensive — cameras can be purchased for less than $200 — some sellers are apprehensive about adding these small costs to their overall expenses when putting their homes on the market.

Contact Honest Home Solutions

Selling a home can be costly, but there are ways to avoid some of the extra expenses. One way to do this is by working with Honest Home Solutions. We buy homes quickly and without all of the traditional costs associated with selling a home. If you’re interested in learning more about our process or want to get an estimate on how much we would pay for your home, please contact us today.

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