Here's an assessment of the various kinds of costs your might incur, with some thought starters for each. Beyond this list, you’re going to have to ask yourself how your specific circumstances apply to your home sale.
Pre-sale improvement, maintenance and face lift costs
Think of these as projects that you and your agent feel are either absolutely necessary (think of that hole in the wall that your son created…) or are worth doing to get a nice return. The range of costs here is really infinite, but ask yourself the following questions to help you budget this:
- First, are there any structural improvements that you think absolutely have to be made? What work is the home inspection process going to surface as an issue, and what do you (and your agent) think this will do to your selling price? These types of projects can be expensive and take time, but may well earn you a higher sale price in excess of your investment on them.
- Next, what "low-hanging fruit" remodeling and improvements could you do that would give you a positive return? These are the projects that are going to take some real work but put that instant smile on a prospective buyer’s face. Bathroom & kitchen remodels are great examples of this.
- What cosmetic improvement could you make and either do yourself or at a low cost? Painting is a good example of this. Some minor landscaping projects may also fall in this category.
- Finally you may consider what’s called “staging,” where you pay to have a professional company come in and set up your home (furniture, etc) so it shows with its best foot forward.
Bottom line? This category of costs could run from hundreds of dollars to hundreds of thousands of dollars – depending on your home and situation. Be realistic about what you need and what makes sense.
What actual transactional costs do you as the seller bear as you sell your home? Unlike the pre-sale improvement costs which are likely to come out of your pocket before the sale, the good news about many of these costs is that most of them will simply be deducted from the proceeds of your sale.
- Real estate agent commissions & fees - This process will typically be handled by whoever handles your closing and is usually anywhere from 5-7% of the sale price. This might be split between a buy side agent and a sell side agent. The checks will actually go to the real estate brokerage where the agents work. There are also all sorts of alternate models to this (flat fee, discount, etc) which could result in a lower cost here.
- Inspections – typically the seller will have to pay for what’s often called “pest inspection” which will provide a report that is disclosed to prospective buyers about your home.
- The buyer may also create additional costs for you by asking you fix problems uncovered in the pest report or their own home inspection.
- Closing costs – these are typically mostly paid by the buyer. However there may be some costs (e.g . title search) that will come out of your sale proceeds,
We can’t forget about these can we? There are many different tax scenarios depending on where you live, how long you’ve owned your home, etc.
This is an area best spoken to an accountant about. However, you should know that the Taxpayer Relief Act of 1997 allows married couples who sell their primary home to keep up to $500,000 in profits tax-free (single-filers can keep up to $250,000). If the sale exceeds that amount, capital gains taxes will be owed.
In addition, there are some types of closing costs that may be tax deductible.
So what’s the bottom line?
Your costs are going to depend on your circumstances, but if you use the above information as a guideline to start forecasting the likely cost of selling your home, you’ll be in a much stronger place than if you let it sneak up on you.
For Questions Contact Martha