Some people actually believe they will be “getting” what they sell their house for and are shocked at closing by the number on their side of the HUD-1 (ask any closing attorney). Warning – there are tremendous costs to sell!
What costs will you incur when you sell?
- To begin with, you will not get your asking price. A five percent to ten percent discount should be expected from any offer. So, if you list your home for $200,000 an offer of $180,000 should not be a surprise.
- Don’t forget to deduct real estate commission from your proceeds. I’m always amazed by the number of sellers who know about this cost but don’t deduct it mentally from what they will receive at closing. Real estate commission is a true expense if you have your house listed with a real estate agent and/or if an agent brings a buyer to you. The commission you’ve agreed to pay will be deducted from your side of the settlement statement.
- Inspections. Every home inspector will find needed repairs (that’s what they’re paid to do) and most sellers have no idea how much those repairs are going to cost. Typically, buyers want all that stuff repaired. Won’t you when you’re buying?
- Pest inspections for insects such as termites, powder post beetles, ants, etc.
- Home Shield Warranty. A service contract that covers the repair or replacement of some of the most frequently occurring breakdowns of certain home system components, i.e. heating and air conditioner units and appliances. The service contract is good for one year and buyers expect this to be provided by the seller.
- Then there are recording fees, attorney fees, sometimes a survey, transfer tax (varies by state, even county), document prep fees, title insurance, courier fees, etc. These fees typically amount to three percent to five percent of the selling price of your home.
A quick formula we use for determining costs to sell is:
- Start with your asking price
- Be realistic and expect your offer to be seven percent lower; subtract seven percent
- Take your selling price and subtract six percent for the real estate agent commission
- Deduct another three percent for closing costs
- Finally, subtract four percent for the necessary repairs
Can you sell for the price you come up with using this formula? If not, can you put off selling your home? If you need to move now, is renting this house out something you can consider? What are your options?
Our company buys several properties each month and we warn sellers that, when listing the house for $100,000, your real number at closing is closer to $80,000.
What’s been your experience with the costs to sell your home?
