What Are the Typical Costs for Selling a Home?
Hoping to sell your current property? The average US home sold for $374,900 last year, which is a nice chunk of change to put toward your next move!
Of course, many first-time sellers don’t realize that there’s a host of common expenses that eat away at this sales price. The average home seller costs will vary from state to state and from property to property, but these significant fees should never come as a surprise.
If you’re putting your property on the market, here’s what you need to know about the common expenses of selling a home.
What Is the Cost of Selling a Home?
The cost of selling a home will vary based on the property’s sale price. However, in general, you can expect to spend around 10% of the price on various commissions and fees. This means if your home is priced along lines of the national average mentioned above, you can expect to subtract $37,490 from your total earnings.
It’s worth noting, of course, that certain expenses are actually negotiable or even optional costs, so you may spend more or less than the average homeowner when selling your property.
Let’s break down the typical commissions and fees you’ll be facing with your sale.
Staging, Upgrades, and Repairs
These costs are always optional, and the amounts will vary from seller to seller.
However, homes with recent repairs and upgrades as well as better curb appeal and interior staging tend to sell better than those without. Often, these homes will also sell with a higher price tag!
The details in pricing will depend on what you need to invest in: major home upgrades may cost thousands of dollars, while hiring someone to mow your lawn and do some simple pruning may cost just $100.
Real Estate Agent Commission
One of the largest costs you’ll have to pay is the commission fee for your real estate agent. This fee varies from agent to agent, but you can expect it to hover at around 5-6% of the home’s sale price. More often than not, the seller is responsible for paying the commission fee for both their own agent and the buyer’s agent.
Note that this can sometimes be a negotiable cost. Agents may be willing to lower their fees in certain situations, and you can also find discount brokerages that offer flat rates or reduced fees.
If you go the For Sale By Owner route, of course, you can avoid this commission fee entirely! This is also true when you sell to a cash buyer, an option that can also help you avoid many of the other fees on this list. If you’re interested, check it out here.
A Real Estate Attorney
Hiring a lawyer is always a smart idea during any complex real estate transaction, and the seller is often responsible for hiring one for the closing. A lawyer can help by drafting all necessary documents associated with the transaction, and they may also be able to help with title insurance.
There are a few different taxes you may need to pay during your sale.
First, you may or may not be subject to income taxes when selling your home. This will depend on the total sales price of the home, though you may be able to lower your costs if you’ve owned the home for two or more years and lived in it for at least two years out of the past five years.
You may also need to pay prorated property taxes up to the home’s closing date. After this date, the buyer is responsible for their share of the property taxes. However, if you’ve already paid property taxes for the year, don’t worry: the buyer will have to reimburse you at the closing.
In some states, you’ll also have to pay a separate transfer tax, which is a fee incurred whenever real estate changes hands.
Title insurance is a non-negotiable fee that many first-time sellers forget, but it’s an important method of protecting the buyer and lender—and the seller usually pays. Title insurance policies defends against potential ownership claims and the associated legal fees.
Homeowner Association Fees
Like property taxes, it’s common to split these costs with your buyer. Often, you’ll pay a prorated fee based on the date of the closing, and the buyer will pay for the rest of the month.
In addition to the host of fees and commissions above, it’s worth noting one last optional cost: seller concessions.
In some cases, such as when you want to sell fast or when you’re negotiating in a buyer’s market, you might need to agree to pick up more of the closing costs than usual. This might mean, for example, paying a full month or even a year of property taxes instead of a prorated amount.
Another common concession happens when sellers agree to pay for any necessary repairs that a home inspector has pointed out.
Last, but not least, you’ll have to pay off your home’s mortgage. You can use the money you earn from your sale to do so, but you might also need to add prorated interest. In some cases, you’ll also pay a prepayment penalty, so be sure to check with your lender for details.
Count on These Home Selling Costs
It’s easy to start anticipating a hefty profit from the sale of your home, especially if you’ve put a significant amount of work into it. However, factoring in the common home selling costs above can ensure that you aren’t surprised when the final figure hits your bank account. Make sure to consider which optional and negotiable fees you really need to pay, and plan your next move accordingly!
Need more helpful tips for getting more out of every transaction? Be sure to check out our other content for additional advice.