It seems counterintuitive that selling a home could actually cost you money. While it is very possible to finish up a sale with a nice profit, it is crucial that you budget in the expenses that often accompany selling a home. Sellers should be prepared for a variety of costs that span the entire home sale process, from before prospective buyers even begin to view the home, to after a close is reached.
According to legal advisory website Nolo, buyers are generally willing to pay more for a staged home. Staging is a vital piece of the home-selling process and could be the difference between a buyer making an offer on your home or choosing to walk away. Staging means redecorating and refurnishing your home so it appeals to the greatest number of buyers and often involves hiring a professional stager, which can cost around $2,000. In addition, staging often requires you to purchase a lot of new decorative items, like hand towels, flowers and rugs, and those costs can really add up.
To save money, do as much online research as you can before hiring a professional stager. There are plenty of tasks you can probably manage on your own, and there are many websites out there that can walk you through the staging process. Do your best to accomplish at least a few things on your own before bringing in a professional to finish the job.
Oftentimes, the seller will be responsible for covering at least a portion of the closing costs. One expense the seller is always responsible for is the commission paid to both the buyer's and seller's real estate agents. Generally, this adds up to about 5 or 6 percent of the total sales price.
Realtor.com listed a host of other fees often taken on by the seller that may be deducted from the price of the home, including: attorney fees, title insurance fees, loan payoff costs, any homeowner association dues that haven't been paid, repair bills for issues found during the buyer's home inspection and more.
Sometimes, the seller will also pay for a buyer's home warranty to cover the cost of any repairs the buyer may need completed during his or her first year of living in the home. According to Nolo, the home warranty usually costs about $500.
When all is said and done, a seller could end up paying about 10 percent of the home's selling price in closing costs.
There are two major types of taxes a home seller will encounter during the home sale: the real estate transfer tax and the capital gains tax. The real estate transfer tax is generally looped in with the closing costs. The Motley Fool explained that the amount you pay in transfer taxes can vary greatly depending on the location of the home. For example, in Colorado the real estate transfer tax is only 0.01 percent of the sale price, whereas in Pittsburgh 4 percent of the sale price will go toward this tax.
Sellers only pay capital gains taxes under a few specific circumstances. If a seller does not file taxes jointly and earns $250,000 or less in profits from the sale, he or she does not have to pay the tax. If the seller is married and does file jointly, he or she does not have to pay the capital gains tax if $500,000 or less in profits was made from the sale.
To avoid the capital gains tax, however, there are a few other requirements. First, the property in question must be the seller's primary residence. Second, the seller must have lived in the home for at least two out of the five years prior to the sale. Third, the seller can't have made another home sale exclusion claim within the past two years.
There are certain costs you can deduct from your profits that may make you ineligible for the capital gains tax, so make sure you speak with your real estate agent to determine whether there are enough costs you can take out to avoid the tax.
In addition to staging costs, closing costs and taxes, there may be a few other costs you encounter along the way. For example, there may be certain repairs you want to take care of before putting your home on the market so as not to scare away prospective buyers. The Motley Fool said in some locations sellers must also acquire a certificate of occupancy before selling the home. A certificate of occupancy asserts that the home is safe to live in. It often costs $50 fee for the actual certificate in addition to the costs of an inspection by a representative from the municipality.
Nolo urged sellers to also invest in a new paint job, updated landscaping and a window-washing service. Sellers also need to factor in moving costs.
One way to save
A pre-listing inspection is a great way for a seller to save a lot of money in the long run. While there is an upfront cost, a pre-listing inspection can help a home sell faster and for more money, and it can also reduce the seller's repair expenses.
When buyers discover an issue with the home during their own home inspection, they will often demand more money than necessary to cover the repair costs. If sellers take care of these repairs before the buyer ever encounters them, they will almost always end up paying far less than if they wait until final negotiations. By then, the stakes are higher and a seller will not want the deal to fall through. Thus, he or she will be more willing to make concessions, which will likely result in spending more money.
Even if a seller decides not to pay for the repairs discovered during a pre-listing inspection, he or she can disclose them to the buyer from the start. That way, a buyer won't be surprised to discover an issue at closing and will factor the costs of repairs into the initial offer. Pre-listing inspections ensure deals run more smoothly while helping a seller save money.