The True Cost of Selling Your Home: What Most Homeowners Overlook
When homeowners prepare to sell their property, they often focus on the sale price and potential profit. But the process of selling a house comes with its own set of expenses—some expected, some surprising—that can significantly affect your bottom line. Understanding these costs ahead of time will help you make informed decisions, avoid unnecessary stress, and walk away from the sale with a clear picture of your net proceeds.
1. Real Estate Agent Commissions
One of the largest costs of selling a home is the real estate agent commission. In most cases, this fee is around 5% to 6% of the home’s sale price and is typically split between the seller’s agent and the buyer’s agent. For example, if you sell your home for $300,000 and the commission is 6%, you’ll pay $18,000 in commission fees.
While it may be tempting to sell your home yourself (known as For Sale by Owner or FSBO) to avoid paying commission, keep in mind that agents bring market knowledge, negotiation skills, and access to marketing channels that often help homes sell faster and for more money.
2. Repairs and Home Preparation
Before listing a home, many sellers invest in repairs and upgrades to make the property more appealing to buyers. These costs can vary widely depending on the home’s condition and the local market.
Common pre-sale expenses include:
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- Painting: Fresh paint can make a home look cleaner and brighter. Expect to pay a few hundred to a few thousand dollars depending on how much you paint and if you do it yourself or hire a professional.
- Landscaping: Curb appeal matters. Simple upgrades like mowing the lawn, planting flowers, or adding mulch can cost $300 to $1,000.
- Minor Repairs: Fixing leaky faucets, replacing broken tiles, or updating outdated fixtures may cost $500 to $2,000.
- Staging: Professionally staging your home to appeal to buyers can range from $500 to over $2,500, depending on the size of the house and the market.
While these costs add up, they often result in a quicker sale and a higher sale price.
Kentucky Tom Pro Tip: Before undertaking any repairs or home preparations, talk with your real estate agent. They can guide you on what should and should be done from the perspective: what percentage of your investment will likely be recouped from the sale of your house.
3. Closing Costs for the Seller
Sellers often focus on buyer-related closing costs, but sellers also have expenses at the closing table. These may include:
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- Title Insurance for the Buyer: In many states, the seller is responsible for providing title insurance to protect the buyer. This can cost around $1,000 to $4,000 depending on the home price and state.
- Escrow Fees: Shared between buyer and seller in many states, escrow fees typically range from $500 to $2,000.
- Transfer Taxes: Some cities and states require the seller to pay a transfer tax when ownership changes hands. This fee can be a flat rate or a percentage of the sale price.
- Attorney Fees (where required): In some states, sellers are required to hire an attorney to handle the closing. Fees vary widely, typically $500 to $1,500.
4. Mortgage Payoff and Prepayment Penalties
If you still have a mortgage on your home, part of your sale proceeds will go toward paying off your remaining loan balance. Be sure to check with your lender to get an exact payoff amount.
Also, some mortgages come with prepayment penalties, especially if you are paying off the loan early in its term. Check your loan documents or consult your lender to avoid surprises.
5. Capital Gains Taxes
In most cases, if you’ve lived in your home for at least two of the past five years, you can exclude up to $250,000 of capital gains from the sale if you’re single, or up to $500,000 if you’re married filing jointly. However, if the home has appreciated significantly or you don’t meet the residency requirements, you may owe capital gains tax. It’s a good idea to consult a tax advisor before the sale to understand your potential liability.
Note: I’m not a tax advisor and this is not tax advice. Please consult with your tax advisor.
6. Utilities and Holding Costs
If your home doesn’t sell quickly, you may need to continue paying for utilities, homeowners insurance, and maintenance. Even vacant homes need power, water, and heating or cooling for showings and to prevent damage. These holding costs can add up, especially if your home sits on the market for several months.
Kentucky Tom Pro Tip: If you plan to move prior to selling your house, include the cost to have your lawn maintained on a weekly basis. This is an important part of “curb appeal.”
7. Moving Costs
Once your home is sold, you’ll need to move! Whether you rent a truck and do it yourself or hire professional movers, moving expenses can range from a few hundred to thousands of dollars, depending on how far you’re relocating and how much you’re moving.
Kentucky Tom Pro Tip: Moving expenses are generally calculated based on how much you have to move by weight and how far the distance is between your current and future home. It’s important to consult with professional movers (if you’re not moving yourself) before you place your house for sale.
Example: If you’re moving the content of a full three-bedroom house a distance of 500 miles with a professional moving company, you could be looking at a price of well over $10,000.
For Your Consideration
Selling a house isn’t free—and the expenses can easily eat into your profit if you’re not prepared. From agent commissions and repairs to closing costs and taxes, these fees add up. But by budgeting in advance and working with experienced professionals, you can minimize surprises and ensure a smoother, more profitable transaction. Understanding the costs of selling your home puts you in the driver’s seat for one of the most important financial moves you’ll ever make.
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