Suppose you bought your house for $100,000. If you sell it for $150,000, do you really think you've made $50,000 profit? Think again! Before you even start the selling process, you've got some expenses to consider.
Repairs and improvements: Repairs can prevent devaluation of your home; the right improvements can increase the selling price or decrease taxes if you make a profit.
Advertising and promotion: If you sell your house yourself, you'll need to spread the word. For a fee, web sites will put pictures of your house on the Internet; you'll want to place conventional ads in local newspapers and neighborhood flyers, as well. A flat-fee MLS listing will reach buyers through real estate agents. Of course, you'll need for-sale signs. Staging an open house or two will help (don't forget the invitations, signs, coffee and doughnuts . . . ).
Prepayment penalty: Oh, yes! Even when you give them all the money and pay off your mortgage on the home you're selling, they may charge you a "prepayment" penalty!
Moving costs: Well, you could just leave it all behind and start fresh. But that's rather pricey, too.
All this is before you get down to transacting the actual sale. Fees vary, depending on your location, but whether you pay or the buyer does may be decided by negotiation. In general, though, here's what you can expect:
Professional home inspection provides a report of the physical condition of the house. Buyers usually have their own inspection done, as well.
Pest-control inspection by a specialist, who prepares a report of the presence or absence of wood-destroying pests, such as termites, carpenter ants, and powderpost beetles, and documents any damage they may have caused.
Other inspections may determine whether the home is structurally sound or contains any environmental hazards (asbestos, lead-based paint, radon, or mold).
Homeowner's insurance protects the property owner from losses due to fire, theft, or other catastrophes. Mortgage lenders usually require such insurance, since the property itself is their security against the loan. Specialty insurance protects against such risks as flooding and earthquake damage that aren't covered by conventional homeowner's insurance.
Closing-agent fee: The closing agent (a real estate attorney, a title company, or an escrow company) makes sure all documents and money related to the sale are properly handled, notarized, and disbursed.
Other closing costs include attorney fees. Estimate 1 percent to 1.5 percent of the selling price. (For a $100,000 home, that would be $1,000 to $1,500.) Closing costs also include:
- Title search to uncover the history of ownership of the property and any liens, encumbrances, encroachments or easements it may have.
- Title insurance to protect the lender and property owner from claims against the ownership of the property that were not disclosed in the title-search report.
- Survey to identify the physical boundaries and characteristics of the property, including any structures, wells, fences, and utility easements.
- Recording fees paid to the government recorder's office that maintains the official public records of property ownership.
Prorated property taxes and service fees, such as trash collection.
Transfer tax is imposed by some government authorities when a property changes ownership. Sometimes referred to as "doc stamps" because of the postage-like stamps that are affixed to a document to indicate payment of the tax.
Buyer's mortgage-loan fees, in most states, are traditionally paid by the seller. Estimate 1 percent to 1.5 percent of the loan amount. (On a $90,000 mortgage, figure $900 to $1,350.)
Real estate brokerage commission can easily be your biggest expense; it's usually a percentage of the selling price.
- If you list your home with a real estate agent, expect to pay between 6 percent and 7 percent of the selling price ($6,000 to $7,000 for a $100,000 home).
- If you sell the house yourself, but you accept the offer of a buyer brought to you by a real estate agent, you will probably have to pay half the fee, or 3 percent to 3.5 percent of the selling price ($3,000 to $3,500 on a $100,000 home).
Although you can limit your selling costs by stipulating in the sales contract the maximum amount you will pay toward the buyer's mortgage costs and other closing fees, your agreement with the real estate brokerage is a separate contract.
Of course, you can advertise the home yourself, and find a buyer yourself, and pay nothing to real estate agents. But, as you can see, selling your home is still an expensive undertaking. If you haven't got any cash to spare, and you need to sell your home quickly, you should consider private home sales.
In or near Columbus, The Columbus House Buyer can pay cash for your house, as is: no costly repairs, no hassles, no brokers, no selling fees. Ask us for a quote.