In an April 2011 Gallup poll, majority of Americans indicated they see a buyers’ market in the housing industry. Sixty nine percent of those interviewed think now is still a good time to buy a house – a sentiment that has prevailed since 2009. In a buyers’ market sellers usually have a difficult time to set the prices they want to set. Buyers dictate the general level of prices because of the glut of homes being put up for sale. Still, sellers have no reason to be discouraged. A recent study by Pew Research Center showed that up to 81 percent of Americans think home ownership is their best option for a long-term investment. To take advantage of this perception, sellers will have to be savvy in making their homes stand out and they should know the costs involved in selling a house to be able to realize a profit.
Typical Cost to Sell A House
The typical cost for selling a $250,000 house ranges from $16,600 to $37,700 if you involve the services of a realtor. If you decide to sell your home yourself (for sale by owner or FSBO), the costs would range from $6,600 to $22,700.
A realtor is your most expensive option and you give up control over the selling process. It, however, offers you a greater chance of success. The For Sale By Owner route is your least expensive option. You have control of the selling process but attracting serious buyers could take you a longer time.
Consider These Factors When Selling A House
The biggest factors that will have an impact on your selling costs rests on your decision to sell it yourself (FSBO) or engage the services of a realtor. A realtor usually gets 4 percent to 6 percent of the sale price. Deciding to sell the property yourself will significantly reduce your selling costs. However, there are a number of challenges facing an FSBO seller – one of these is that it could take a longer time to make a sale. Closing expenses will also have an impact on selling costs – transfer taxes, property taxes and legal fees related with the closing and finalizing of the sale will range from 2 percent to 4 percent of the sales price. Another factor is the amount of repairs needed to fix your home to make it more appealing to potential buyers. This would be dependent on the age of your house and its current condition. A further factor is the cost of moving or relocating. If you will relocate to another house nearby it probably won’t cost you much. But, if you are moving cross country the cost could be significant.
Included in the Cost
A realtor’s commission is usually between the range of 4 percent to 6 percent of the sale price. If you opt to sell the property yourself, you get to keep the commission. For a $250,000 home, a realtor’s commission will range from $10,000 to $15,000. This would be the amount you will save if you decide to go the FSBO route. Closing expenses – transfer taxes, property taxes and legal fees related with the closing and finalizing of the sale, will range from 2 percent to 4 percent of the sales price, or $5,000 to $10,000. Home inspection will set you off by an estimated $300. A minor, pre-sale facelift can be in the $300 to $400 range. Items included here are: new paint, hardware, carpet for living room floor and landscaping service. Moving and relocating costs used in the example is in the $1,000 to $12,000 range.
The table below shows how the details of the costings:
Home Sale Price: $250,000.00
|Item||Using Realtor Services|
|Lower Range||Upper Range|
|Realtor’s Commission||(4%) $10,000.00||(6%) $15,000.00|
|Closing Costs||(2%) $5,000.00||(4%) $10,000.00|
|Home Inspection (estimated)||$300.00||$300.00|
|Pre-Sale Facelift (estimated)||$300.00||$400.00|
|Moving Costs (estimated)||$1,000.00||$12,000.00|
The figures in the table relate to the cost range if the services of a realtor is used. If you decide to sell your home yourself (for sale by owner or FSBO), the costs range would be less the realtor’s commission, or, from $6,600 to $22,700.
Additional Costs To Selling A House
If the house is still under mortgage, whatever is the remaining principal balance will have to be deducted upon the sale of your home. Using the above example, let us say that $50,000 is still being owed by you on your current mortgage. That amount will have to be deducted from the $250,000 sales price. Additional costs may also be encountered if extensive repairs are needed around the house (that is, if the pre-sale facelift budget estimate is not enough). You may have to pay an expert for a detailed estimate of the repairs needed. For more expensive fixes, you can always negotiate with the buyer at the time of sale.
Another additional cost could be encountered when marketing the property to buyers. Brokers would usually list your home on the Multiple Listing Service (MLS) so that other brokers can help sell it. MLS listing costs $395. Other marketing costs could involve placing ads on newspapers, online classified sites and on other forms of marketing media.
Home staging is another marketing option you can consider. Studies show that well-staged homes sell up to 50 percent faster than their counterparts. Home staging is after the fixes and repairs have been done. It is an art with the aim of appealing to the maximum number of potential buyers for faster sale and better value. Home staging can be done by the owner or by professionals. Either way, this will incur additional costs.
Tips For Sellers
During times when home sales are slow, realtors might be inclined to accept a lower commission rate. This could significantly lower your selling costs. You may consider shopping around for a realtor who could be amenable to this proposal.
Any gains you realize over $250,000 is taxable and should be reported. The amount is $500,000 if married filing jointly. If you sell your home and realize a loss, you cannot deduct the loss. Check your state laws. If you have advanced payment on your property taxes for the year, you may be able to get a credit. Your state laws may also cover refunds on prepaid escrow costs for home insurance and other expenses related to the sale of your home.
If you still have a principal balance on your mortgage, you can approach your lender and ask if they can prepare a payoff statement so you can verify the figures. If a fee is charged for this service, you can you can deduct this as a cost in selling your a home.