How To Sell A House For Less Than You Owe – Edited by Troy Segal Edited by Troy SegalArrow Senior Editor Right Troy Segal is a senior editor at Home Landing. It handles home ownership stories along with stories about the pros and cons of mortgages and home equity loans. Connect with Troy Segal on Twitter Connect with Troy Segal on LinkedIn Connect with Troy Segal on LinkedIn Connect with Troy Segal by Email
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How To Sell A House For Less Than You Owe
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With all the chaos that comes with the home selling process, potential home sellers tend to overlook the depreciable value of their property. Some expenses can be negotiated, but sellers should still expect to foot all or part of the bill for various home selling expenses, including taxes and closing costs.
How much does it cost? Plan a portion of the purchase price (at least 5 percent) to cover the real estate agent’s fee, which is usually paid by the seller. Add costs such as attorney fees, notaries and document filing, title fees and all other minor administrative costs to get the deal approved. Depending on your state, there may be estate tax and transfer tax; If you’re paying off a mortgage, your lender may charge you some fees as well.
It’s best to be prepared so you’re not surprised when the final number on your closing statement is lower than you expected. Here are some typical rates from suppliers and how much it will cost you.
Real estate commissions are typically the largest fees a seller pays – historically 5 percent to 6 percent of the sales price. So, if you sell your home for $300,000, you might pay $18,000 in commission.
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The commission is split between the seller’s agent and the buyer’s agent. In most cases, these costs are covered by the seller. However, you can negotiate a lower commission. Real estate agents are more likely to accept lower rates if the home is expected to sell quickly, if the local market is strong, or if the home is worth a relatively high price.
Many homeowners try to avoid paying commissions by not using an agent and not listing for sale by owner (FSBO). If you do, be prepared to handle the duties of an agent, including showing the property to potential buyers, negotiating and managing things like disclosure statements. According to the latest data from the National Association of Realtors (NAR), only 10 percent of home sales in 2021 will be FSBO sales. Additionally, these homes sold for less – an average of $225,000 for FSBO listings, compared to $330,000 for listings with an agent. So, while it’s a cost, finding the right agent can pay big and get you a better price negotiation.
Another reason to work with an agent is that someone with experience in the market can advise you on the best time to sell, which can limit the length of your listing while the market gathers dust. As time goes on, you may be saddled with what are commonly called moving costs: regular mortgage payments and homeowner association (HOA) fees, for example, when you move to a new place.
When you sell your home, there are many non-negotiable expenses that eat into your net income. The following examples may not apply to every sale, but when they do, they’re hard to avoid.
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Most closing costs in a real estate transaction are the buyer’s responsibility. But there are also closing costs for sellers. Don’t be surprised if the buyer is asked to foot the bill for some of the expenses—they’ve been relatively rare in seller’s markets over the past few years, but may become more common now that sales are slow. The average closing cost for a single-family home in 2021 was $6,905, according to ClosingCorp.
Some of these common seller costs may include HOA fees, pre-listing inspections, recording and repair fees, and title insurance. You may also be required to pay escrow fees, brokerage fees, and courier fees. Additionally, if you hire a real estate attorney to help negotiate the contract, his services must be paid at closing.
Even if you plan to move before selling your home, you can continue to pay for water and electricity. A home without air conditioning, heat or lighting can be difficult to show to buyers and may even damage the home. Your current bills will give you an idea of how much it will cost each month to turn off your utilities until a new buyer arrives. However, since you don’t live there, your consumption will naturally be lower; There are other steps you can take to keep your utility bills as low as possible.
The proceeds from the sale of your home will be used to pay off your mortgage, but the payment amount on your mortgage statement may be slightly less than the actual amount owed. Pro-rated interest may need to be added to the total balance. Additionally, if your mortgage has a prepayment penalty, you may have to pay a fee (check your loan documents or contact your lender to find out).
How Much Does It Cost To Sell A House?
Don’t forget to consider how selling your home will affect your taxes. If you sell the home for more than you paid for it, it’s considered a capital gain and must be reported on your federal tax return if it exceeds a certain threshold.
The good news is that most homeowners are eligible to exclude up to $250,000 of income ($500,000 for married couples).
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