4 Home Selling Costs You Need To Know

by Justin Weinger

When you envision selling your house, you imagine how much money you can walk away with after closing a deal. You might invest in some upgrades that raise your property value in hopes of a decent profit. While there are many practical costs to consider, selling your house also costs thousands of dollars in fees and other legal transactions that you need to be aware of.

Real Estate Agent Fees

Real estate agent fees and commission costs are typically the most expensive aspect associated with a sale. Real estate agents do not typically collect a salary. Instead, their income is based solely on the commissions they receive from renting and selling. The commission varies depending on the price of the property, its worth, the property type, and how long it's expected to take to sell.

 For example, commissions for land listings can be around 10%, whereas residential sales commissions are usually between 4-7%. As you interview potential agents, ask about their rates and what they provide in exchange for that percentage. Hiring an agent who charges 6% and works hard to sell your home for top dollar can be more profitable (and less work) than looking for the cheapest option.

Repairs and Cosmetic Work

If your home needs any minor repairs, like a leaky faucet or loose doorknob, you may want to have it fixed prior to showing to potential buyers. You'd be surprised at how even the simplest things can deter a sale. You may also want to hire a professional cleaning company and landscaper, as well as touch up the paint before you list the property. It's best to have a sparkling clean home free from clutter with crisp, white walls. This helps buyers more easily envision the house as their own.  The cost may vary depending on the extent of repairs, so you may want to begin preparing the home a year in advance just to finance these modifications.

Mortgage Payment

You'll have to use the proceeds of your final sale to pay off the remainder of your mortgage. There may also be prorated interest rates added to the final amount, as well as a penalty associated with paying off your mortgage early. You can call your lender ahead of time and ask about the estimated total cost of selling your home and enquire about any additional fees.

Taxes and Closing Costs

There are numerous closing costs associated with property sales that the buyer may ask you to cover. For starters, the homeowner's association fees, escrow, and courier fees among other expenses that may spring up. There is also a title insurance policy, which protects the homeowner against claims made about the property, but this can be negotiated between the buyer and seller. Lastly, you'll want to consider taxes. You may receive a rebate if you already filed taxes for the year, or you could be responsible for paying any that you owe the next time you file. Capital gains tax may also apply to your next federal tax return. Luckily, there are tax breaks for up to $250,000, if your house was your primary residence for two of the previous five years.

About the Author

Justin is a married father of 3, with over 15 years of corporate finance experience in various industries. He is an avid personal finance enthusiast, blogger, and chaser of passive income streams.

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