Expenses a Home Seller Will Have to Pay
When you’re selling your home, it’s important to know what you’ll profit from the sale. The only way to get an accurate estimation is if you take into account all of your expenses. You don’t want to wind up like many sellers and have unforeseen expenses chip away at your hard earned cash. To help you avoid that, here are some of the most common expenses you’ll encounter as a seller:
Mortgage payoff balance – Unless you’re part of the lucky few that can call your home your own, you will still have a mortgage balance when you sell your home. After you make the sale, you’ll have to pay off the mortgage balance before you leave. How much this will run you depends on how far along you are with your payments.
Lien releases – If there is an unpaid lien on your home, you’ll have to get that cleared away before you can sell your home. Getting sued by your lender because of failure to make payments is an expense that most sellers try to avoid.
Prepayment penalty – When you sell your home and pay off the mortgage balance, you’re usually making a significant payment. Some lenders charge a prepayment penalty on deposits of more than 20% of the mortgage balance, which means you could have to possibly pay a fee. Unfortunately, prepayment penalties aren’t cheap. Typically, they are 80% of six months interest. So if you have a 200,000 mortgage balance with a mortgage rate of 5%, your interest-only payment would be $833.33. Multiplied by six (months) that would be $4999.98. It’s a decent chunk of change that you definitely don’t want to overlook when planning your budget.
Recording fees – In order to get it into the public record that the debt has been paid on your house, you’ll have to pay a recording fee. The cost will vary depending on where you live.
Commissions for listing and selling agents – It’s not necessary to hire a listing and/or selling agent, but if you do, you’ll have to pay out. These agents get paid on commission at the close of the sale (they will often split the commission), and while rates vary, you can expect somewhere around 5-6% of the selling price.
Notary fees – You’ll have to get a notary to verify your identity and make sure your documents have all been completed properly. It shouldn’t cost too much, but every little bit adds up.
Escrow/Closing fee – You’ll have to pay the title company, escrow company, or attorney that administered the closing. This fee will usually amount to $250, plus around $2 per thousand of the purchase price.
Title search fees – You need proof that you have a legal right to sell your home. Title companies go through public records and will give you a title insurance commitment. A title search is another fee that can vary in price, but it’s not unusual for it to cost around $100-$250.
Repairs – We’re not talking about full-scale remodeling (although, depending on your situation, you might consider it), but there’s no denying that a drippy faucet, creaking door, or some other little maintenance issue is worth taking care of before an inspector comes to evaluate your home. Preparing for a buyers home inspection is something all sellers should do but many don’t. This can end up costing a sale in many circumstances.
Seller concession – If you’re trying to sell your home quickly, seller concessions like a closing cost credit are one way to draw in buyers. There are a variety of different fees that you could pay for the seller. If you went all out, they could run you a few thousand dollars.
Smoke detector inspection – in many states having working smoke and carbon monoxide detectors is a requirement as part of the home sale. The fee is usually minimal to get the inspection done by the local fire department but something to keep in mind none the less.
Home warranty – The home warranty is another way to separate yourself from the other sellers. First time home buyers who are nervous about repair expenses will be especially drawn toward the safety of a home warranty. It’ll most likely cost you around $300 to $500, and will last for one year after the closing date.
Termite letter – While it’s not required for the seller to submit a termite letter, getting one won’t hurt. It’s important to know what you’re dealing with before you put your home on the market. The last thing you want is for the buyer to dig up some dirty laundry on your home. If your home gets a clean bill, then the cost could be minimal, but if repairs need to be done it could be $100-$300.
Landscaping – If you’ve got a flourishing garden, you’ll want to flaunt it. Depending on your landscaping skills, you might be able to get away with doing the work yourself, but if not, you’ll have to shell out for a professional crew. The size of your yard and the scope of the project will determine the cost, but if you spring for the crew, it could be over a thousand dollars.
Painting – If you want to freshen up your home without spending too much money, a new coat of paint is the way to go.
Inspection reports – You won’t have to pay for the buyer’s inspection, but if you want to be one step ahead of the game, you could have your own home inspection done prior to theirs. This would ensure that their inspector doesn’t find a deal breaker. For around $200, it can be worth the peace of mind knowing there isn’t some serious problem that you’re unaware of.
Staging – Staging a home isn’t cheap. You’re likely to shell out a few thousand dollars if new furniture has to be brought in. While it’s been proven that borrowers pay more for staged homes, whether or not it’s worth the money is something you’ll have to decide.
Window washing – If you’re like most people, it’s been a while since you washed your home’s windows, especially the ones on the second floor. Every little detail is important when selling your home, so if your windows are crystal clear, that’s one more advantage in your favor. Hiring professionals is the safe and smart decision, and will usually cost $2 to $7 per pane.
Bottom Line:
If you’ve taken a hard look at your property and have a carefully crafted budget, there’s no reason why selling your home shouldn’t be a rewarding and profitable experience.
Carter Wessman is a writer and marketing analyst at Total Mortgage Services, a nationwide lender. He is a mortgage market junkie who closely follows the latest rates and trends.
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