Everyone knows that buying a home can be expensive, but many don’t even think about the cost of selling. Home sellers often have a plan for the proceeds from their house long before the house goes on the market—a new home, a new car, maybe a vacation—and knowledge of the major costs of selling a house can help sellers properly budget the proceeds in preparation for paying more fees than they probably would have imagined.
Realtor’s commission: Real estate commission is usually the biggest fee that a seller pays, often about 6% of the price of the home. The fee is split between the buyer’s agent’s brokerage and the seller’s. If you choose to list your home as For Sale by Owner, you may be able to structure a deal such that the buyer will pay his or her own realtor. However, you will then have to take on the realtor’s duties yourself, including negotiating and showing the home to prospective buyers.
Home maintenance: If you’re preparing to sell, you’ll likely want to do some quick sprucing up to make your home more attractive to buyers. Replacing damaged windows, de-cluttering and removing personal items such as pictures, and cleaning up the garden are only a few examples of fix-ups that can impress buyers and potentially raise the value of your home. In certain areas, the seller must pay for municipal inspections, such as sewer or sump pump compliance, and make any necessary repairs before the deal can close. Repairs might also be required by the purchaser in order for the deal to proceed.
Utilities: If you’re moving out before selling your house, plan to pay double utilities (and possibly insurance premiums) for a while—you’ll want to keep the lights and air conditioning or heat running while potential buyers and their agents may be stopping by the home. Check your current bills for an idea of what to expect.
Home staging: Staging goes hand-in-hand with maintenance. Hiring a professional to de-clutter and add new or decorative items to your home will go a long way towards impressing a potential buyer—in fact, studies suggest that buyers will pay more for staged homes. If you choose to hire a professional stager, expect to pay a few thousand dollars for their services, but even if you choose to stage your home yourself, you’ll likely have to buy new items such as artwork, throw rugs, plush towels, and possibly furniture.
Search and survey: The title company charges a fee to perform a check of the public record to verify that the seller is the legal owner of the property, and that there are no liens, overdue assessments, or other claims that could affect the transfer of title. If you don’t have the original search, you will need to purchase one, which could cost approximately $1,000 to $1,500. If you just need to update the search, it will cost less; the cost will depend on how far back the search seller must search into the public record. Surveys for typical residential lots cost approximately $450 to $600, but for large or rural lots, a survey can cost $1,000 or more.
Legal fees: A lawyer can ensure that your legal rights are protected when you are selling your property. Whether you are selling a property in some state of distress, selling a house with an uncooperative partner, or have liens in your background, an attorney can provide counsel on any legal issues related to selling your home as well as help with negotiations and closing paperwork. Some attorneys charge by the hour, while others offer a fixed rate to conduct a real estate closing.
Other closing costs: Buyers typically pay more in closing costs, but sellers have to pick up a few tabs, especially in a market with a lot of homes for sale. While a seller could require that a buyer pay for a greater share of closing costs, such a request could deter potential buyers from making offers. Closing costs include all fees associated with a home sale beyond the cost of the home itself, and typically cost between 2% and 4% of the price of a property. In addition to realtors’ commissions and attorney fees, closing costs can include:
- Transfer taxes: Erie County charges $9 per $1,000 of the property sale price for transfer of the deed from one owner to another, and most other counties charge $4 per $1,000.
- Title insurance: Title insurance protects homeowners from anything that challenges their ownership of the property, such as a forged deed from some point in the property’s history. While title insurance is typically a buyer expense, the seller may have to pay for title insurance if there is an issue with the title that cannot be cured.
- Property taxes: Sellers must pay prorated property taxes and homeowners’ association dues up to the settlement date.
While a potential seller might balk at the idea of having to foot such a large bill, which typically comes to about 10% of the sale price of the property, many of the costs that you incur while selling your home will help to increase the return on your home in the long run. Before you embark on the process of selling your home, be sure to research these selling costs to ensure that you’ll be getting the highest possible return for the least amount of money.
If you have any questions after your research, do not hesitate to give the attorneys at HoganWillig a call to have any questions answered. You can reach us 716-636-7600.