Most people correlate selling their house with making money. While this is (hopefully) the case, selling your house can also cost you quite a bit as well. Here's a breakdown of the hidden costs of selling a home that you need to be prepared for.
Preparing for the Hidden Costs of Selling a Home
Let's start with the basics, first. These are expenses you can always count on to accompany selling your home and are also known as closing costs.
Transfer Taxes or Recording Fees
Depending on which state you're in, you'll be charged a small percentage of your sale price in tax to transfer the title. A recording fee to record the title change may also be required as part of the sale.
Loan Payoff Costs
If you sell your home for less than you owe on it, you'll need to pay the difference to the bank as part of the closing costs. Additionally, if you took out a Home Equity Line of Credit (HELOC), that will need to be settled at closing, too.
Some mortgages have a pre-payment penalty attached to them. If you are selling your home before the contract term is up, you will be responsible for any loan prepayment penalty upon close as well.
Real Estate Agent Costs
Depending on which real estate agent you use and depending if the buyer uses an agent or not, you could be responsible for paying up to 6% of the sale price of the house in real estate agent commission. This money goes toward the marketing of your house and the expertise you used to sell your house, as well as overseeing the contracts and getting a buyer in the door.
Title Insurance Fees
Sellers usually pay the owner's title insurance premium to protect the owner against any future claims against the title.
Some sellers use an attorney at the closing settlement. Using an attorney can save you between $100-$200 in fees, but is not necessary. This is not something you will pay if you decided to opt out of using an attorney.
Liens, HOA dues, and Prorated Property Tax
If there are any liens against the property, you'll need to pay them at the close. In addition, any HOA dues that are overdue or are prorated, as well as any property tax that is prorated will be due at the time of close.
Beyond the basics, there are some costs that you'll likely incur when selling your house as well.
Capital Gains Tax
You will have to pay capital gains tax if you have not lived in your house for two out of the last five years. Depending on the profit you make on your house, you can plan on paying up to 20% of your profit to capital gains tax.
Remodeling or Renovating Costs
If you are planning on updating any portion of the house to ready it for a sale, that is money you'll need to set aside. Many people choose to update in some aspect--even if it's only painting the house or installing new carpet.
Rather than get your hands dirty before the big day, you might decide to hire someone to up the curb appeal. Landscaping can include trimming the lawn and shrubbery, planting flowers, laying topsoil, and pulling weeds. Many homeowners hire a landscaper before listing their house to get more interested buyers.
If you hire a professional cleaner to get your house in tiptop shape, that will need to be prepared for. Many buyers request the house get professionally clean as part of the housing agreement before close. If you choose not to replace your carpet, you may end up in this category.
If the inspection turns up anything major that needs replacing, such as the roof or insect damage, the buyer may include that as a caveat before closing on the house.
Whether you decide to professionally stage your house or do it yourself, there will be costs involved. Staging the house yourself typically saves you money, but buying the items to stage your house is a cost to prepare for as well.
How to Prepare
As you can see, there is quite a list of costs associated with the close of your house, and you need to be prepared to pay them. But how can you prepare?
Most experts advise setting aside between 2-5% of your sale price for closing costs. This means if you sell your house for $300,000-- you can expect to pay between $6,000 and $15,000 in closing costs.
If you price your house to where that may not be a problem, having the money won't be a problem. If you are underpricing your house, on the other hand, you'll want to save in advance.
Get a Pre-Sale Inspection
Avoid any unexpected costs as a result of the buyer's inspection by getting a pre-sale inspection. A pre-sale inspection will give you an idea of everything that needs repairs and will give an idea of what you should repair or expect to pay out when someone buys the house.
Get a Flat-Fee Real Estate Agent
A great way to avoid paying as much as 6% of your sale price in real estate commissions is by getting a flat-fee real estate agent. Flat-fee real estate agents give you all the service you need at a great flat rate.
While you'll still need to pay a buyers agent, you can expect a flat-fee real estate agent's commission rate to be 1% or less. If you need a local expert real estate agent that works for a flat rate, you need Clever. Call us today at 1-833-2-CLEVER or fill out our online form to get started.