It's widely known that real estate is one of the most efficient ways to exponentially increase your net worth. After all, there's a reason why so many people want to be real estate agents.
You don't have to be involved professionally in the industry in order to benefit from it, though— selling your home can leave you with plenty of money to make future investments. Interestingly, selling a house isn't as straightforward as many people believe.
Not sure where to start? Don't worry, we’ve got you covered.
Let's take a look at everything you need to know about the true cost of selling a house.
Real Estate Agent Commission
Ironically, many sellers tend to forget that they have to pay a certain amount and commission to the agent that helps them with their transactions.
In general, this number will be between 5% and 6% of the price you sell your home for. It's important your agent provides you with a marketing proposal with an extensive overview of their plan for success.
If your home has any outstanding repairs that need to be made, it's often in your best interest to handle these on your own.
Not only will this entice a larger number of buyers, but you'll also avoid a large handful of complications in the future. For instance, it's not uncommon for buyers to learn from their inspectors that repairs need to be made. They might then ask that the cost of repairs be deducted from the sale price.
It's far more beneficial for sellers to organize the repairs on their own if their goal is to get as much money from the home as possible. In fact, you can often have this work done for far less than the buyer would like to deduct from the home's price.
Regardless, you can't neglect repairs to your home because they will cost you money in one form or another.
You can't expect to sell your home for the price you'd like if you don't stage it properly. In order to get a better idea of what it would be like to live in the property, many buyers attend open houses to get a feel for its atmosphere.
This means you'll need to consider costs like applying a fresh coat of paint to your home's exterior, new flooring, new hardware, etc. Put simply, you'll need to make cosmetic improvements anywhere that's practical.
If you're not quite sure where to start, you can hire a home staging professional in order to help you do so. So, you'll need to consider the cost of improvements as well as outsourcing to someone who can help you stage your home as effectively as possible.
Remember the home repairs that we talked about earlier? In most cases, you won't be aware of the repairs that need to be made unless you hire a professional inspector.
But, you'll want to do this before a potential buyer hires their own inspector to investigate your property. This will allow you to take care of outstanding repairs before your home goes on the market, meaning buyers can't use them as leverage to lower your asking price.
In general, these inspections cost around $400-$500. But, they are easily worth it due to how streamlined they can make the rest of the process.
Capital Gains Tax
Unfortunately, you will have a significant financial obligation when it comes to taxes after you sell your home in some circumstances. If you sell your home for a profit that exceeds $250,000, you will need to pay taxes on the amount over $250,000.
For example, let's assume that you sell your house for $700,000 and you originally paid $200,000 for it. You would subtract $250,000 from $500,000 and then pay capital gains tax on the remaining $250,000 from the profit amount
Sellers will be pleased to know, though, that if they do not profit at least $250,000, they can exclude this amount in order to avoid paying capital gains tax. For married couples who file taxes jointly, you can exclude the first $500,000 of profit instead.
In many scenarios, closing costs are a responsibility that the buyer takes care of. But, if you're trying to sell your home as quickly as possible or sell it within a market that favors the buyer, you may have to pay for this obligation.
Costs in this category typically include property taxes, title insurance, homeowners association fees, and brokerage fees. When added together, closing costs typically amount to be 3% of the price that you sell your home for.
Managing The Cost of Selling a House Can Seem Difficult
But it doesn't have to be.
With the above information about the nuances that influence the cost of selling a house in mind, you'll be well on your way toward ensuring that this process goes smoothly.