9 Things That Can Boost the Cost of Selling a House
With housing prices generally up around the country, many homeowners could cash in a sizable profit by selling their homes. However, before you start looking forward to spending that money, you need to account for a number of things that could cut into your profit.
Identifying all the things that can contribute to the cost of selling a house can not only prepare you for how much profit you may have to give up, but it can also help you take steps to minimize those costs.
9 Costs of Selling a House
It is impossible to give a generalized estimate of the total cost of selling a house because the specifics vary so much from situation to situation, but here are nine things to look out for so you can start making a list of how much these costs might add up to in your situation:
- Pre-Sale Inspection. This need not be as extensive as the type of inspection that buyers must get before they can have a mortgage on the house approved, but it might be a good idea to invest a few hundred dollars in having a qualified home inspector look your property over and identify issues that might raise concerns with potential buyers. Getting problem areas fixed up front can save you money in the long run by preventing potential sales from falling through.
- Spruce-up Costs. It is difficult to get the cost of extensive renovations to be fully reflected in the subsequent sales price of a home, but it is well worth it to take care of any minor repairs, put on some fresh paint where necessary, and certainly give the house a thorough cleaning.
- Realtor Commission. This is a big hit – often as much as 6 percent of the final sale price, and though the seller’s agent might split the commission with the buyer’s agent, typically the seller foots the whole bill for this commission. Be aware that you can negotiate these commissions, especially for higher-priced properties. With that being said, settling for a less able agent might cost you much more in the long run than what you would save by finding one who would accept a sub-standard commission.
- Share of Closing Costs. These are typically paid primarily by the buyer, but this is negotiable and if you are selling in a buyer’s market there might be pressure to make concessions like chipping in for the buyer’s closing costs. When you first list your house, find out from your real estate agent what local conditions are like and what concessions you might have to make.
- Mortgage Settlement Costs. Be aware that beyond the remaining balance on your mortgage, there may be some accrued interest that has to be paid. Also, your mortgage may have a pre-payment penalty which has to be paid if you sell the home, especially if the loan is only a few years old. Take a close look at this, because the difference between the proceeds of a sale and what it costs to settle the mortgage often plays a central role in the seller’s subsequent financial plans.
- Pro-Rated Property Taxes. An out-of-pocket cost you might not see coming is the pro-rated amount of any unpaid local property taxes. This may be based on the fraction of the year that has elapsed since you were last charged such taxes.
- Capital gains tax. If the house you are selling is not your primary residence, or if the realized gain on the sale exceeds certain amounts (currently $250,000 for an individual taxpayer and $500,000 for joint filers), you may owe capital gain taxes as a result of the sale.
- Moving Costs. Whether you are hiring full-service movers or renting a truck and packing yourself, there are going to be some costs involved in moving. When getting advance estimates, be sure you account for everything, including labor, packing materials and the distance being traveled.
- Timing Costs. It can be very tricky to line up the sale of your home with the availability of your next residence. If there is going to be a gap between when you sell your current home and when you will be able to move into the new one, this is likely to cost you in rent for a temporary residence and possibly storage for excess possessions.
All of the above potential costs should be taken seriously, but they should not deter you from selling your home when the right time comes or cause you to delay. Just as there are costs to selling a home, there can also be costs to putting it off – the expense of financing and maintaining an unnecessarily large house, for example, or the extra property taxes you might pay while waiting to sell.
In other words, if you put off selling a home out of concern for the costs, those costs will probably still be there when you do finally sell, only you may have incurred a lot of additional costs in the interim. The better approach is to identify the various components of the cost of selling a home and do what you can to minimize those costs.