Whether you’re selling your rental property or family home, it’s crucial to understand the costs associated with selling. Unfortunately, some people don’t realize that selling your home will also cost you money. In this article, we’ll go over the typical costs associated with selling a house and how to decide if it’s the right time. Keep reading to learn more.
Average Cost to Sell a House
When you put a home or investment property on the market, you can expect to pay up to 15% of the sale price to sell it. However, you may be able to cut these costs down by planning your sale correctly.
The average cost to sell a house can vary greatly depending on real estate commissions, closing fees, closing costs, insurance, and more. However, with good planning, the average cost to sell a house will be around 7% to 10% of the selling price.
That said, the majority of the costs will be from paying real estate agents. However, the high price is worth it since your agent will help you get the best deal on your home.
So, if you’re selling your home for $300,000, you can expect to subtract around $30,000 from your overall profits. Here are some of the typical costs associated with selling a house.
Typical Costs Associated With Selling a House
There are several factors to consider when selling a property. Unfortunately, it’s not as simple as it may sound. Instead, there are several costs and fees to be aware of and plan for when selling your home. Some of the typical expenses associated with a home sale include:
- Preparing Your Home
- Closing Costs
- Real Estate Agent Commissions
- Seller Concessions
- Capital Gains Tax
- Moving Costs
- Mortgage Payoff
Preparing Your Home
Before you can put your property on the market, you must ensure it’s ready to sell. For instance, ensure all repairs are done, inspections are completed, and the home looks presentable for prospective buyers. Then, you’ll want professional photos of the property so your buyers get a good image of the home’s details.
Some sellers spend money on professional cleaning, home staging, pre-inspections, and regular inspections. Additionally, spending extra time and care on landscaping and home improvements may be worthwhile. Although it will cost extra for you, a well-maintained home is a significant selling point.
If you’re looking to sell your investment property, work with a rental property management company in Northern Virginia to ensure maintenance and compliance within your area.
Closing Costs
Homebuyers aren’t the only ones who have to deal with closing costs. When selling a home, you may have to pay a transfer or prorated property tax. Since it varies by location, check the regulations in your area.
Some other closing costs that sellers often pay include an attorney’s fee, recording fees, and closing fees. You may also have to pay to make sure the property is undisputed and title insurance is taken care of.
Real Estate Agent Commissions
The majority of seller costs will go to real estate agent commissions. In addition, you’ll typically pay 5% to 6% of the selling costs to your agent, known as realtor fees. After all, your agent will help you market the property, negotiate prices to ensure you’re getting a fair deal, and provide guidance throughout the selling process.
You can reduce or eliminate this fee by selling the property yourself. However, you may still have to pay a buyer’s fee if they have one. Additionally, selling a house alone could cost you more money, and you may end up selling the home for less than its potential.
Seller Concessions
A seller concession means you agree to pay part of the closing costs on behalf of the home buyer. For instance, you may offer to pay for inspections or title insurance to make the sale seem better to the buyer. Generally, seller concessions will cost around 1% to 2% of the home’s selling price.
Remember that you don’t have to agree to cover any part of the buyer’s expenses. All it does is provide benefits to the buyer. However, contributing to some of the closing costs can help you seal the deal even quicker if it’s a buyer’s market. If you’re willing to contribute, keep in mind that there are limits based on the type of mortgage loan the buyer is using.
Capital Gains Tax
Selling your home can impact your taxes tremendously. When you sell a home for more than what you paid for it, it’s considered a capital gain and may be reported on your taxes. For instance, if you sell a home less than a year after buying it, you’ll pay taxes on the sale.
However, there are some ways you can minimize capital gains taxes. For instance, some homeowners may be able to exclude up to $250,000 of profit from their taxes as long as they haven’t used this benefit within the past two years. This tax break only works if you’ve lived on the property for two out of the previous five years.
Additionally, if you used the property as a rental, you may still be able to reap these benefits. To ensure compliance and maximum benefits, work with a tax professional.
Moving Costs
Another considerable expense for sellers is moving costs. After all, if you’re selling your current home, you’re likely moving to a new residence. Paying to move all of your items to a new location isn’t necessarily cheap–especially if you’re moving across the country.
To save costs while moving, consider packing and moving your items yourself instead of hiring a moving company. You can also go through your belongings beforehand and get rid of things you don’t need, which can help reduce moving costs.
Mortgage Payoff
If there’s a balance on your mortgage, you’ll need to get that paid off when you sell your home. That said, you can use the money from the sale to pay off the mortgage, but you may have a fee if interest has accrued. Call your loan officer to avoid fees and extra expenses to ensure you can pay the mortgage off early.
Additionally, keep your mortgage loan in mind when selling one property and buying another. After all, these expenses can quickly add up if you don’t plan accordingly. Next, let’s go over some of the reasons people may be looking to sell their homes.
Top Reasons to Sell a House
There are several reasons why you may be looking to sell your home. Whether you found a new job in another state or simply want to upgrade your living situation, selling your property is a major decision. Here are some of the top reasons to sell a house.
- Location- If your neighborhood has changed in a bad way or you don’t like the location you’re in, you may consider a relocation to a better area.
- Job Change- Many people sell their homes because they accept a job in a different area.
- Hot Market- If you want to take advantage of a hot market, you can make large profits by selling your home.
- Growing Family- When you have a growing family, you have to adjust to living with them comfortably. Sometimes this means buying a larger home!
How to Decide If It’s the Right Time to Sell
Selling your home isn’t a small or simple decision. A lot of time, thought, effort, and planning goes into making a home sale successful. First, you’ll want to decide whether it’s the right time to sell the home or not. This largely depends on the market, your finances, and how long it might take to complete the sale.
In a seller’s market, you’ll likely be able to sell your home quickly. However, there’s more competition in a buyer’s market, and your home may sit on the market for quite some time. To ensure you’re planning a sale at the right time, research the housing market and work with real estate professionals that will help you along the way.
When preparing to sell your home, you must prepare to pay for the expenses listed above. Although the goal is to profit, look at the average cost to sell a house and plan your finances accordingly.
Working With Management Professionals
If you’re looking to buy or sell an investment property, it’s best to work with property management professionals that can help you prepare the home. Bay Property Management Group offers comprehensive rental management services, including maintenance, rent collection, inspections, and more.
If you need rental property management services in Baltimore, Philadelphia, Northern Virginia, or Washington DC, contact BMG today.
