This concise guide outlines the costs for selling a house, including a costs calculator, and mistakes to avoid that could cost you more.
In the real estate market, home sellers commonly close on a home as soon as an offer is made. However, if you rush the process of selling your home, you may end up with much larger consequences.
If you want to avoid some common and costly mistakes, here are a few common errors you’ll want to avoid to minimise the costs of selling a house.
Mistakes can be costly in lots of ways, not just when they are made. For instance, homeowners might end up with a lower sale price if they don’t do the necessary steps to prepare their home for sale.
Costs for selling a house
Closing costs for selling a house
You should add any estimated closing costs right at the beginning, rather than waiting until the house is sold — and then getting a nasty urprise. Using this Seller closing costs calculator can also help you prepare for the closing of your home when you find the best buyer.
Some document processes incur costs for selling a house. The cost range that you have to expect here is also more in exceptional cases, for example if you do not want to do without extras such as virtual tours.
In addition, there are the costs for the land register or title extract. In general, you should expect administrative fees and copying costs for documents that you apply to any government office or bank in the process of calculating costs of selling a home.
The notary costs are usually borne by the buyer. If the sale is not concluded, the person who commissioned the notary must pay. It is therefore advisable to leave the notary assignment to the buyer so that you minimize your cost risk in the event of a voided contract. Also read about different types of escrow that may be used in house sales.
Valuation costs for selling a house
The first step in the sale of real estate is the valuation. Here you have the opportunity to have an expert opinion drawn up. This already beats for a medium-sized condominium with approx. $1,000 in some jurisdictions. Such an expert opinion – quite extensive and detailed – is not necessary in most sales cases.
Here you can often save costs when selling a house by leaving the real estate valuation to your broker. However, if you are selling independently, you may need to have a valuation to convince potential buyers.
Costs for renovation, styling and maintenance
Whether you renovate before the sale is up to you. Renovation work should be well calculated so that there are no costs when selling a house that are not in proportion to the price achieved. Smaller work such as beauty repairs is recommended. The desired goal is to give the property a well-kept and inviting impression. Modernization work is usually to be avoided, as it is too complex and expensive to be worthwhile for you.
Home styling is suitable for getting the most out of your house. Professional home stagers often offer different service packages between $200 and $600 or more. If you are planning very extensive measures in the field of home staging, you should expect to pay about 1-3% of the sales price in styling costs for selling a house.
Maintenance costs for selling a house can also still come to you during the sales phase. This includes costs in the areas of facade, heating, sanitary and electrical. All this still needs to be maintained and repaired if necessary during the sales process.
Advertising and marketing costs for selling a house
House sellers may end up spending more on marketing or advertising to get it sold. In order to sell your home as quickly as possible and to receive the highest possible sale price, it’s important to be well prepared.
The marketing of a property is extensive and time-consuming, at least if you want to sell the property privately and find the right buyer as quickly as possible. During the sale of the house, you will cost money as follows:
- Marketing collateral creation, including photos and description
- Advertisements in newspapers and online
- Sales sign and other posters if necessary
- Possibly open visits with additional advertising and expenses for visitors
Marketing collateral depends on convincing content and professional preparation. Accordingly, a professional exposé with service providers costs several hundred dollars. If you also hire a photographer for the photos, he will charge $200 over $1,000 depending on the fee. If you are thinking of taking photos and writing the description yourself, it should be said: Both must be of high quality in order to attract prospective buyers.
Advertising costs directly reduce taxable income if the profit on the house incurs a capital gains tax in some jurisdictions. Sellers can, among other things, claim expenses for advertisements for tax purposes. The advertising costs do not include the notary costs and the brokerage commission.
However, there is an exception for rented properties sold through a broker. If the proceeds of the sale go into the financing of a new rental property investment, the brokerage commission may be deducted from the advertising costs pro rata to the sales proceeds.
Rental accommodation if selling before buying
People often try to sell their homes before they buy a new one. They may think that selling first will give them more time to find the perfect property or that it will help them save money on down payments and closing costs. But selling first can actually cost you more than it would take to just buy the house outright.
So be sure to think before selling and be well prepared for what selling a home actually entails.
Not documenting damage or repairs
When your home is sold, as the seller you should properly document any repairs done to it. This decreases the chances of a dispute about the condition of the property after it has been sold.
Many sellers skip this step and do not document all repairs when selling their property which leaves them open to potential costly disputes. In turn, they have to deal with disputes as well as any consequences that come from not documenting repairs. Save yourself the time and later frustrations and have everything well documented!
Getting the home inspected
There are many risks involved in not having your home inspected before selling it. Some of them include hidden water damage, structural issues, mold and asbestos exposure.
The only way you can protect yourself is by hiring a professional who can find any hidden dangers that may lie in your future and set yourself up for a smooth closing when you find a buyer.
Broker/agent costs for selling a house
If you commission a broker, he is responsible for marketing the property. The marketing costs for selling a house are then usually included in the commission depending on the state. The commission is usually between 3-8% of the sales price — although it can be higher with sone brokers — and is collected either by the seller, the buyer or both parties.
In addition, a broker does much more: A real estate agent evaluates your property and thus sets a realistic selling price, he takes care of the sales documents, carries out inspections and accompanies you with his expertise until the notary appointment.
Depending on the brokerage contract, in addition to the commission, other costs, for example for advertisements, may also be credited to you. Each broker can determine this individually.
The wrong realtor can have a negative impact on the selling process. Not only will you have to deal with the problem of trying to sell your home with a bad agency, but you also risk losing the potential buyer. High-quality realtors will help you get the most out of the process. Realtors who know how to market homes are also likely to effectively sell them leading you to potentially more buyers and a higher selling price.
If you are single and have lived in a house for 2 of the previous 5 years, you will not pay any capital gains tax if the profit on the sale is $250,000 or less. For couples filing jointly, that profit ceiling is doubled to $500,000.
For any profits above that level, you will pay capital gains tax, at a rate that depends on your tax bracket in that year. Exceptions are made in some jurisdictions if there are extenuating circumstances: such as if you have to relocate because of illness, loss of employment etc.
If you lose money on the sale, unfortunately you cannot claim this back against your tax, however.
Early loan repayment costs when selling a house
If you have to cancel your loan early due to the sale of real estate, your bank will demand early payment compensation. You can find out how high this can be and whether you can deduct it for tax purposes on the page on early payment compensation.
Remember to follow these tips to avoid the common mistakes mentioned above.