Even the most practical home seller might find him or herself daydreaming about turning a profit on the family home. It sure would be nice, especially if you’re planning on buying a new home in a new city. For first time sellers, the listing price can inspire far more hopeful thinking than reality will allow. There are two main categories of costs associated with selling your home: agent commissions and closing costs. You may face additional costs depending on your agreement with your buyer. Below, you can find more specific information on exactly what makes up these costs and if you have any options for avoiding them.
Expect to pay about 6% of the purchase price of your home as a commission to the listing agent. At the time of sale, they share this money with the buyer’s agent. Agents do a great deal of work on your behalf: taking pictures, creating listings, marketing your home and arranging the logistics of the deal. Agents aren’t paid a salary and the commission on the sale of the home is their sole source of income.
Many sellers question the necessity of an agent, hoping to pocket the commission themselves. If you don’t have experience selling a home, you are unlikely to actually save money on a “for sale by owner” route. First, you’ll still have to pay the buyer’s agent a commission, about 3%. Second, you’ll be responsible for all of the costs associated with marketing a home, such as the cost to place an ad or to make photocopies. You will also have to put in the hours of legwork your agent would have completed for you. When it comes to negotiating, there are a variety of reasons why you may get a better deal for your house if you use an agent rather than representing yourself. Putting in your own time might save you money, but the majority of people selling their homes will have more success using an agent instead.
There are a variety of small fees to be paid at the time of closing, collectively called closing costs. These fees include outstanding property taxes, homeowner’s association dues, pro-rated utility payments, escrow-related costs, fees associated with paying off your mortgage, title insurance, and even attorney fees. Altogether, the seller’s side of the closing costs are an average of 2% of the property purchase price. The more simple your deal, the less possibility of fees and expenses at closing. Property taxes, utility payments, and dues all represent costs that you would have had anyway. A case could be made that these shouldn’t be included as a “cost” to sell your home, but the money to pay for them is lumped into everything else. Some closing costs are unavoidable.
Other Possible Costs
Together, agent fees and closing costs average about 8% of the purchase price or $8,000 on a $100,000 home. Depending on your agreement with the buyer, you may be responsible for other costs as well, or concessions. Concessions are allowances that you grant your buyer. Two common forms are concessions on property repairs and concessions on buyer’s side closing costs. If you offer to cover some of the costs to change something on the property or to help make it easier for your buyer to sign the paperwork, you may be able to sell your home faster or for more money. While it’s your right to sell the home as is and refuse concessions, they can be used as a bargaining chip to get more of the deal in your favor.
As you can see, it is not free to sell a house. If you don’t have much equity in your house or if you think you’ll struggle to get fair market value for it, now may not be the best time to sell. Keeping a realistic idea of what it costs to sell your home can save you from heartbreak and financial woes if you had counted on receiving more money. Now that you have an idea of what it might cost to sell your home, you may have a different strategy for setting your asking price.