What Costs Are Involved When Selling a House?
What Costs Are Involved When Selling a House?
When most homeowners commit to selling a house, they plan to walk away with a profit. Ideally, the asking price is more than what they bought it for, allowing them to pay off their remaining mortgage and have a down payment for their next purchase. But selling a house is not as simple as sticking a sign in the yard and accepting a check from a buyer.
Getting the house in showing condition costs money, and so does making required repairs and paying closing costs. All of this can add to the cost of selling a house, so it’s best for sellers to have an idea of what they will need to spend before putting the home on the market.
Optional Costs When Selling a House
Some expenses, while not required, can help boost the asking price or help a home sell faster. Of course, if a seller’s budget is tight and they are just looking to get out from under the property, they may opt to make minimum improvements. They can even sell the house as-is and do virtually nothing. But sellers who know they can potentially make more by spending more should be willing to make the effort.Boosting Curb Appeal
This is one of the lowest expenses that can make the biggest impact. A freshly painted front door, bright potted flowers on the porch, new landscaping mulch, and a simple wreath that says “Welcome” are enough to make drive-by buyers want to see the inside. Sellers might also consider trimming existing shrubs or planting new ones.Renting Storage Units
Decluttering is one of the first steps sellers take before putting a house up for sale. Reducing the amount of stuff in every room allows potential buyers to see more living space, while also giving sellers a head start at packing. Some sellers have enough space in the basement or garage to store boxes and bulky furniture, but renting a storage unit is a good option for homes that don’t have those areas. If the budget allows, it’s not a bad idea even for homes that do have storage. An empty garage, basement, and closets look bigger, which could be a significant selling point.
The average price per month for a storage unit ranges from $70 up to $300 depending on the amount of space needed. Fortunately in today’s market, most homeowners only have to spend that for a couple of months before selling a house.Staging
If buyers can picture a home being theirs instead of the current owner’s, they are more likely to make an emotional connection to it. Moving personal items to a storage unit makes it easier to stage a home to create an inviting, aesthetic space that buyers want to make their own. Realtors and professional stagers stay on top of decor and furniture trends, and know how to arrange a room to feel just like it jumped out of a magazine or HGTV. Photos of staged homes also appeal to potential buyers as they browse through real estate websites.
The cost for staging ranges from about $700 to $2,000, which can be well worth the investment according to the National Association of Realtors 2023 Profile of Home Staging. The recent survey found that:
- 40 percent of buyer’s agents said clients were more willing to walk through a staged home they saw online.
- 81 percent of buyer’s agents said staging made it easier for their clients to visualize the property as their home.
- 27 percent of seller’s agents said staged homes spent less time on the market.
- 20 percent of all agents said home staging increased a home’s value by up to 5 percent. 14 percent said it increased value by up to 10 percent.
While staging is optional, most realtors recommend it. And as these statistics show, it is a good investment.
Sellers only get one chance to make a first impression, and homes that are not only clutter-free but squeaky clean always impress. While a homeowner might do a decent job of sweeping, mopping, and dusting to get the house ready to sell, buyers will notice grimy shower doors, greasy appliances, and dirty baseboards. Professional house cleaners see all the hidden dirt that sellers don’t, so it often makes sense to invest $200-$400 to hire experts for a one-time deep clean.Painting and Other Updates
Buyers want to add personal touches to their new home, but they also want a house that’s move-in ready. Seeing neutral wall colors means they won’t have to change the hot pink bedroom or lime green bathroom as soon as they move in. Even if sellers don’t paint every room, appealing colors in the main living areas make a great first impression.
The same goes for flooring. Buyers might decide to lay new hardwood down the road, but if unsightly carpet stains turn them off as soon as they walk in, they may never make an offer in the first place.Inspections
Usually, buyers are responsible for paying for a home inspection before closing. But since sellers in Illinois and Missouri must disclose knowledge of any material defect, it may be in a seller’s best interest to get a pre-listing home inspection to know what to fix before selling. According to the U.S. Department of Housing and Development (HUD), a home inspection costs from $300-$500.Rent-Back Agreement
If a seller is buying and selling at the same time and has a few days or weeks until closing on their next home, the buyer may agree to let them pay rent after closing. This can be drawn up in a contract that states the amount of time the seller can stay and how much they will pay.
Required Costs of Selling a House
No matter how much or how little a homeowner is willing to spend on their home before selling, every seller will have these expenses before the sale is complete.Closing Costs
Sellers pay closing costs from the money they receive from the sale, which typically add up to 8-10% of the sale price. In a seller’s market like we’re in now, eager buyers may be willing to sweeten their offers by agreeing to pay for some fees or a certain percentage of closing costs. Any such agreements will be put in writing and paid at the closing meeting.
Closing costs for sellers include the following taxes, insurance, and fees:
Agent commission. Unless the buyer agrees, the seller is obligated to pay 5-6% of the sale price to real estate agents, with the buyer’s agent and seller’s agent typically splitting the commission. For a home that sells for $500,000, that means $30,000 will be knocked off of the seller’s profit.
Escrow fee. This fee covers banking and office expenses related to the sale. It is usually about 1% of the sale price, but buyers and sellers normally split the fee.
Prorated property taxes. Sellers must pay property taxes for the time they owned the home during the year they sold it. For instance, if the seller owns the house for one month after their last tax bill, and that payment covered the previous six months, they will owe one-sixth of that amount as prorated property tax.
Title insurance. While the buyer pays insurance to protect their lender in case there are disputes about the title, the seller pays insurance to protect the buyer’s interest. This is just a single payment rather than an ongoing insurance premium as the name might suggest.
Prorated HOA fees. Some Homeowners Associations require payment of dues for the number of days the seller lived in the home.
Transfer tax. Sellers in Metro East Illinois municipalities must pay a transfer tax which is .10% of the sale price. Missouri does not have real estate transfer taxes.
Penalty for prepayment. Some mortgages contain clauses that charge a fee to pay the loan off early. The fee is added to the amount of the mortgage payoff and both are due at closing.Repairs Discovered During a Buyer’s Inspection
In sales funded by HUD or USDA, sellers are often required to make certain repairs for a buyer’s financing to go through. These usually have to do with issues that violate building codes or that could make the structure unsafe, such as foundation problems, roof damage, HVAC, plumbing or electrical systems.
Other repairs are negotiable. For instance, if an appliance is not working or the buyer is not happy with the dingy carpet, the seller can decide if they want to lower the price or cover some of the buyer’s closing costs.
The Right Agent Can Help You Make the Most Profit When Selling a House
While sellers are eager to get their asking price and move on to their next home, there will be some unavoidable expenses. On top of that, they can choose to up their home's attractiveness and possibly even the asking price with some additional investments. Knowledgeable real estate agents can help homeowners decide which updates are worth it, and which ones aren’t worth the time or expense.
The agents of Berkshire Hathaway HomeServices Select Properties are here to help with professional expert advice.
Cover image by Andy Dean Photography by Canva.com