Show Me the Money!
Considering selling your home? It’s critical to know what your home will sell for, but it’s even more important to know how much money you will walk away with when it’s all said and done.
Will there be enough for… a down payment on a new place, or retire, or send the kids to college or??? The internet is flooded with Home Valuation sites, but these are rough estimates at best, and never share the real costs of selling. Let us clear this up for you!
First time homeowners recently contacted us about selling their home. Their #1 question? What does it really cost to sell? As always, we had prepared a custom Estimated Net Proceeds document (see below) with 3 different sales price scenarios based on recent sales in their neighborhood. They were so relieved to see all of the costs spelled out! They were expecting brokerage fees and realized there were other expenses too….but had no idea what they really were or how much they would be. They called these mystery expenses “the scary stuff in the middle” — between the sales price and their profit!
So what is all that “Scary Stuff” in the middle?
- Brokerage Fees make up lines 2 and 3. These can vary, but usually average around 6% of the sale price and are split between the listing and selling broker.
- Seller Assistance with Buyer Closing Costs. If an offer requests the seller to contribute a certain amount (expect anywhere between $1000 – $4000) towards their closing costs, this would be reflected here.
- Pro-Rated Property Taxes. In Indiana, property taxes are paid one year in arrears (behind). In this example the closing date is March 31, so taxes are still owed for all of 2015 and from January 1 to March 31 2016. Because the state has not yet billed these taxes, the seller provides the buyer a credit for the taxes still due and then the new owner assumes all tax payments from the date of closing. If the sellers are also buying a new home in Indiana, they will receive a similar tax proration from the sellers of that property, so this may be a wash if you’re remaining in Indiana.
- Title Company Fees. It’s customary for a seller to provide an owner’s title policy for the buyer. This insures the buyer against any unknown liens or title issues on the property. The actual owner’s premium is based on the sales price so it may change with each counter offer, however the other title fees normally remain constant.
- Other Expenses include miscellaneous fees such as State Insurance fees, county recording fees and possibly a Home Warranty (which can range in price from $390 – $600).
The fees are subtracted from the sale price to determine the subtotal. Then the Mortgage Balance is also subtracted to determine the Estimated Net Proceeds – the amount the seller will walk away with after the sale.
When sellers receive an offer they see this document again, but this time it’s updated with the actual numbers from the Offer and any Counter Offers. See an example of how this custom net sheet helps you track your bottom line throughout the offer process.