Contrary to popular belief, not all home owners smile all the way to the bank after selling their homes. In most cases, the actual return doesn't match the expected return. This can be attributed to the numerous costs of selling a home that are usually overlooked or unforeseen. These costs can easily consume a significant percentage of your anticipated profits forcing you to look for funds elsewhere to undertake future projects/investments. To avoid such instances, you must be fully aware of all the costs incurred when selling a home. If you are interested in discovering such information, look no further. Below are some of the main costs you should expect to incur when you sell your home.
Expenses Incurred When Selling A House
1. Repair/upgrade costs: These are by far the most important costs to consider when selling a home. Although most home owners anticipate repair costs before selling their homes, they don’t consider the fact that the costs can easily get out of hand if they aren't monitored closely. Some of the most common repair/upgrade costs incurred before a house is sold include; painting, remodeling/fix-up, house washing and landscaping costs.
These costs are inevitable because they improve the appearance of your house significantly which in turn increases the value. Repair/upgrade costs can range from a few hundred dollars to thousands or millions depending on factors such as the size of the house, extent of damage, type of upgrades, location etc.
2. Staging costs: This is one of the most commonly overlooked expenses by home sellers. Although it’s not a must to hire a professional staging company when selling your home, it is advisable to do so to make your home look perfect. Home staging companies are better versions of interior designers since they are highly experienced and knowledgeable in making homes appeal to potential home buyers.
A home staging company will use their own furniture to make your home look perfect. According to numerous research studies, staged homes fetch more money. The importance of staging can’t therefore be overlooked. In regards to costs, a professional home staging company will charge a few thousand dollars or less if they consider using some of your furniture/decor.
3. Pre-inspection costs: In most cases, you will be required to hire a professional to inspect your house for pest damage among other structural issues. Such costs are necessary since they prove to potential buyers that you are selling a structurally sound house. Pre-inspection costs range from $200 upwards depending on the kind and number of inspections done.
4. Lighting and heating costs: Contrary to popular belief, vacant houses usually incur lighting and heating costs. Such costs are inevitable since you can’t showcase a cold or dark house. You should expect to pay similar or slightly higher utility bills if you want to make your home perfectly habitable when showcasing it to potential buyers.
5. Extra homeowners insurance cost: It is important to note that most homeowners’ insurance doesn't cover vacant homes. Many home sellers are therefore forced to purchase extra homeowners insurance for the entire vacancy period. Since most homes take a few months to sell, you may be forced to incur this extra cost which is typically a few hundred dollars or more if your house is above average with expensive fittings, decor etc.
Home Sellers Usually Pay Closing Costs
6. Real estate agent fees/commissions: To be able to sell your home fast and professionally, you will be required to hire a real estate agent. Most agents demand a 5 – 6% commission. It is important to note that this figure can vary downwards or upwards depending on many factors. Either way, real estate agent fees can take a sizable chunk out of your net profit.
7. Transfer tax: Depending on where you live, you may be required to pay transfer tax when you sell your home. Transfer tax is usually charged on the selling price. The tax is usually less than 1%.
8. Home warranty for buyers: In some cases, home buyers may request for a home warranty to cover potential repairs to home appliances, systems etc. during the 1st year of ownership. Although it’s not a must to sell your home with a warranty, you get more buyers and a better price because of the assurance that comes with buying your home. Typical home warranty costs approximately $500.
9. Capital gains tax: You may also be required to pay capital gains tax if your house exceeds a certain price i.e. $500,000. Although it is possible to avoid capital gains tax through a number of tactics i.e. subtracting costs of selling your house, filling joint ownership etc, you are better off factoring this cost for obvious reasons.
10. Moving costs: This is another common expense overlooked by many home sellers. Before you sell your home, you need to move your belongings to your new home. These costs shouldn't be overlooked when you want to calculate the actual profits made when you sell your house.
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The costs mentioned above are the most important to consider when selling your home. Although there may be some other additional costs that aren't discussed above, the above costs are adequate enough to help you calculate the true cost of selling a home.