Aside from paying off your existing mortgage, there are several costs associated with selling your home. Most are required, and others are strongly recommended. All in all, expect to allocate around 10% of the listing price towards selling costs.
Required Costs
1. Real estate commissions - Real estate agents might accept a lower commission if the home is expected to sell quickly or if the current housing market is strong. Just make sure you have their agreement in writing. In most cases, however, you should be prepared to pay realtors 5-6% of the asking price. You can try to avoid paying commission by listing the home as “for-sale-by-owner” but then you will need to assume all the duties and responsibilities of a real estate agent (including buyer negotiations, legal contracts, and reaching out to prospective buyers).
2. Taxes - Property taxes, depending on the location, could be 0.01% to 2% of your home’s sales price. And if you expect to make a profit of more than $250,000 (or $500,000 for married couples) you may also need to pay a capital gains tax, which will depend on your state and local regulations.
3. Title insurance - This is to protect the buyer in case there’s any problem with the property prior to their purchase. So unlike regular insurance, where you are covered in case of future incidents, title insurance covers the property against damage that occurred in the past due to the actions of its previous owners. This protects both the buyer and the seller (i.e. you) from paying for past damages, and is well worth the average cost of $1,000.
4. Structural repairs - You want to make it as easy as possible for someone to buy your property. Be sure to fix any structural issues (like a damaged roof, faulty wiring, broken porch, or bad plumbing) before the buyer’s home inspector refuses to close the deal. Consider paying for a pre-sale home inspection (which typically cost around $400) to check for any structural or mechanical problems.
Optional Costs
These are not strictly required, but investing in these can help increase the value of your property.
1. Cosmetic repairs - Refreshing the home’s exterior or replacing old appliances, for instance, can significantly raise the perceived value of your home. And major upgrades, like a remodeled kitchen and bathroom, can significantly raise the actual listing price and help to differentiate your home from other properties on the market.
2. Utilities - You may want to continue paying for water and electricity even if you plan to move out before the home is sold. It can be difficult to entice buyers without being able to turn on any lights or faucets.
3. Home staging - To really up the perceived value of your home, you might want to hire a home staging service. Stagers will create an interior design scheme that better showcases your home’s assets while minimizing its worst attributes. Some services can also provide you with photography to use in marketing materials. Home staging can cost anywhere from a few hundred dollars to a few thousand depending on the size of your home. But keep in mind that most staging services offer partial staging, and can stage only 1-2 rooms for a discounted price.
Just like buying a new home or taking out a mortgage, selling a home is a major undertaking. For more information on the costs of selling and buying a home, reach out to BQ Mortgage agent and check out our other library posts.