Did you know that selling a home can be costly due to the several costs? Many people think the burden only falls on the buyer, which isn’t the case. Some sellers face a rough time when encountering a series of expenses they weren’t aware of.
Selling a house is not a walk in the park. Hopefully, you’ve understood the plate of expenses that lies before you as a seller before selling your property. Involving a real estate agent alongside an attorney will help you navigate the process more smoothly and effectively.
Here is a rundown highlighting the expenses to anticipate when selling a home, alongside some negotiable or manageable costs.
1. Renovation and Repairs
One prominent expense involved in selling a house is the cost of renovation and repairs. These are done as part of preparing your home for sale, including painting with the best colours, washing the windows thoroughly to enhance the first impression, and fixing any faulty areas to impress potential buyers.
It’s no secret that no one wishes to buy a defective house. While repair and renovation could take up close to 4% of the entire cost, this is one of the best techniques to get your home to sell faster than you thought.
2. Home Inspection
Many sellers invest in home inspection to impress potential buyers or discover any underlying problems before the house showing. This process could consume at least 2% of the house-selling cost, involving a thorough professional inspection of your property.
Potential cash house buyers would be highly impressed to view a house alongside a clean inspection sheet. Sometimes, the buyer may request an assessment of the property for more confidence before purchase, but it’s a better idea to do so before they request.
3. Various Taxes
There are various types of taxes incurred when selling a house, including property, capital gains, and transfer taxes. Capital gains taxes occur in two categories, long or short-term, depending on how long one has held the house under sale. The tax, usually 20% of the total selling price, applies to any profits.
On the other side, transfer taxes occur during the transfer of title deeds from one party to another to ascertain that every debt or obligation owed to the property has been honoured. Property taxes are paid in advance toward the closing date. Therefore, if the seller hadn’t honoured their property taxes for the year, they might be compelled to do so before the sale closes.
4. Buyer’s Title Insurance
The buyer’s title insurance is another significant expense incurred when selling a house. Various companies provide title insurance to the buyers to shield them from any claims or liens on the acquired property.
The sellers often cover this expense to assure potential buyers that their property is legit enough. However, some buyers may wish to obtain title insurance independently, saving the seller from that expense.
5. Real Estate Commissions
Due to the high competition, sellers use real estate agents to stage, list, market and finally sell their properties to potential buyers. These agents are paid through commission fees, usually 5%-6% of the total selling price.
So, one must consider this expense when evaluating their house’s selling price. The commission fees are then divided among the buyer’s and seller’s agents and paid upon closing the sale.
6. Mortgage Payoffs
It’s not absurd to wish to sell your house before completing your mortgage loan. However, in this case, you must honour the mortgage before selling your house. If you have an underlying home loan, consider it in the total selling price. Otherwise, you might not complete the sale.
Some sellers offer their properties cheaply, agreeing the potential buyer will clear the existing loan. Nonetheless, this might not be the best move because many buyers are often dissatisfied with this idea.
7. Attorney Fees
The process of selling a house is quite critical and may require the intervention of an attorney for higher safety. If you involve an attorney in your house-selling process, you must add their fees to your calculations.
Attorney fees may take 1% of the selling expenses but protect sellers from fraudulent buyers and other legal processes. Furthermore, involving an attorney in your house-selling process saves you from additional costs that you’d incur due to inadequate knowledge. Just ensure you go for a qualified and experienced one.
8. Other Closing Costs
The expenses of selling a house differ from one seller to another. Besides the primary costs, such as real estate commission fees and taxes, the others may not apply to all sellers.
Other charges you might incur as a seller before closing your property include neighbourhood fees (if you’re in an active home association), title search, escrow fees, and other statutory payments. It’s essential to understand which closing costs exist upon selling your house, depending on your location or other factors.