Your home is most likely the biggest and most profitable investment you will ever make. It takes money to make it, as the old saying goes. Maximizing your investment’s value will require you to put some sweat equity as well as literal cash equity into it before it hits market.
Surcharges, fees and taxes can also be a surprise to home sellers. The average selling price of a house is , which is just above $15,000. It can make the difference between a stress-free, satisfying selling experience and one that is frustratingly draining.
When people hear the term “costs to sell your home”, the first thing they think of is the real estate agent commission. A real estate commission is typically 6% of the final sales price. What is the practical value of that commission? According to Zillow, the median home value in America is $229,000. The commission for selling a home at this price would be $13,740. This is a significant amount.
What happens to the 6% seller payout and where does it go? The commission is split between the buyer’s agent and the listing agent, with each taking home 3%. You want to incentivize them to sell the house for the highest possible price by fixing your agent’s compensation to that final sale price. They will make more if you pay them more.
Is it possible? In general, yes. Agent-assisted home sales sell faster and for more money than non-agent-assisted. NAR’s analysis shows that the median home sale value for agent-assisted sales is $250,000. However, the median home sale value for FSBO listings (for sale by owners) is only $190,000. While the real estate commission is one the largest costs in selling your home, it can also bring you the most value.
Closing costs can be described as a broad term that covers many smaller costs. They include the owner’s title fee, half the escrow fee (the buyer splits it), prorated utility costs and document preparation fees.
What is their value? They can vary from one state to the next and from one city to another. It is difficult to know. Closing costs are generally 1% to 2% of the home’s selling price.
You might think that you can just put all your stuff in boxes that you get at the grocery store and then drive it to your new home in your car. You’ll likely find yourself in a difficult situation when you have to sell your house.
There are many options for hiring movers. You can choose from one truck or a full-service interstate shipping firm. You can expect to pay anywhere from a few hundred to several thousand depending on the level of service you choose.
Let’s face it, few sellers will be surprised by moving costs or real estate commissions. The expenses below are less obvious, which can make it more difficult to cover.
Your home is probably where you’ve lived for many years. You may even find its imperfections endearing, just like a beloved t-shirt or your significant other over the years. Strangers will probably not see this. If your house is put up for sale, the shabby hardwood floors and oddly-painted walls will be liabilities. Any experienced real estate professional will tell you to make renovations before you go on your first showing.
It will cost you based on whether your house needs a new coat of paint or a new roof. You can expect to spend several hundred dollars on pre-sale renovations, but almost every house would benefit from a makeover.
Curb appeal refers to how potential buyers see your home as soon as they step out of their cars or drive up your driveway. The curb appeal of your house is as important as the home itself. Your property should be meticulously landscaped before it is listed. This includes trimming the lawn, trimming hedges, pruning trees and even planting flowers.
The size and maintenance requirements of your lawn will determine how much it costs. A manicured lawn is as good as a new kitchen for a home’s sale.
Staging is all about how your home looks inside and out. Landscape is about how your property is presented to the outside world. Staging can be anything from clearing out your shelves to purchasing a new dining table set.
Staging is, at its core, about presenting your home in the best possible light. Sometimes literally. It is important to let as much natural light as possible into your home. This means that you should remove heavy drapes and other window coverings. Visual clutter can be distracting and even cause anxiety. Therefore, you will need to remove all family photos and collectible plates and store them. You may have to dispose of any old or damaged furniture and buy new ones.
An agent can help you with staging. You can also hire professional home stagers to prepare your home for open house. Sellers should expect to spend between $100 and $400 on staging their homes. Professional home stagers will charge a fee around the four-figure range. In 2018, the median staging cost was $400.
It’s a fact that prospective buyers have already seen photos online before they set foot in your home. It is therefore important to include high-quality photos in your home listing. It is not easy to take a flattering, good-looking photo, as any Instagram user will tell you.
Unambiguous means listings with high-quality photos sell quicker than listings with poor photos. Listings with more photos are also more popular. Although professional photographers are not cheap, they can be a great investment.
Capital gains taxes may be due to the federal government if your home sells at a higher price than what you paid for it. This can be a significant amount of money. A 20% cut of capital gains profits wouldn’t cause a tax professional to raise eyebrows.
Many home sellers can exempt profits up to 25% (or half million for married couples filing jointly) and from tax liability. This exemption is subject to two conditions. The home must have been your primary residence for at least two of the five previous years. You also cannot have used capital gains exempt on any other home sale within the past two years.
This list shows that not all expenses can be reduced.
Taxes are not easy to lower. The following taxes are non-negotiable: property taxes, title fees, transfer taxes. Capital gains taxes are exempted from tax, but restrictions apply to how often this exemption can be used. Sellers who are facing a large capital gain tax bill might consider delaying the sale of their home to take advantage this exemption.
However, there are some expenses that can be reduced. You can save money on staging, landscaping, or renovations, especially if your family and friends are willing to paint, mow and buff. Even moving can be affordable if you don’t consider sweat and time.
This brings us to the real-estate commission. Although there are many low-cost agents, sellers need to remember that they often get less service for the same amount of money. You may save $13,000 by not using an agency, but your home will sell for $40,000 less if you use an agent.
There are increasing numbers of companies that offer a complete service selling experience for a flat rate. Full disclosure: We are one of them. These companies enable sellers to work with top agents in their market and receive all the benefits of their expertise for a fraction of the normal price. You might wonder why a top agent would sell a house for a flat fee when they could make 6% on another property? The agent is getting high-quality referral leads, which means that they spend less time hustling. It’s a win-win situation. Flat-fee realty companies are the best option for home sellers looking to reduce their costs, as the 6% commission is often the biggest single cost in selling a house.