Calculate the True Cost of Selling Your Home
Real estate commissions are only a part of the expenses you might incur when you sell your house. No matter how skilled an agent you hire, the person has a real estate license, not a magician’s license. You need to put some time and money into the process to facilitate the sale. Here are some costs you might incur.
Home inspection. Though not mandatory, sellers who have their own inspection have a heads up as to what they need to do to get the house ready for sale and anticipate what problems buyers might find. If the inspection reveals a crack in the foundation, you have the option to fix it or disclose it.
Repairs and renovations. Most homes need a faucet fixed or some minor repairs, but often, updating the kitchen or bath, replacing the carpets, refinishing the floors, or resealing the driveway are bigger ticket repairs that can increase your selling price.
Freshening up. Even if there are some repairs you can’t afford to do, repainting gives a fresh look that makes the home inviting. The buyer might want another color in the future, but if the room is newly painted, the buyer knows he has the option of moving right in.
Curb appeal. Since buyers develop their favorable or unfavorable first impression about your home in 30 seconds, you want to make sure it’s a good one. Cleaning up your yard, repainting the trim, and planting some flowers can do the trick.
Real estate sales costs. Average commissions might be 5-7% for full service agents and 3% for discount brokers if you use an agent. Even if you sell yourself, you will have advertising costs. You may think you are saving money by not using an agent, but you are paying for knowledge you may not have to price and present your home to the market.
Negotiated sellers’ costs. Buyers often expect, or at least request, that sellers pay part of the closing costs and ask for allowances for undone repairs or upgrades. Refusing to pay can be a deal-breaker even though your agent will help you counter-offer any demands you don’t accept.
Closing costs include lender closing costs, title fees, up-front interest (if any), escrows, transfer taxes, and real estate commissions (if any).
Payoff costs. Does your home value exceed your current mortgage? If you are like many underwater homeowners, you may have to pay the excess back to the bank when you sell. Does your lender have a pre-payment penalty?
Opportunity costs. Remember Economics 101? You pay opportunity costs in money and time while you wait to sell. If you make renovations or repairs of any kind, you divert your funds in hopes of getting a return you may not see when you sell your house. If you handle the repairs yourself, you sacrifice your time. The more time you wait for your home to sell, the more you are postponing moving on to the next step. If you want to buy a new house contingent on selling your old one, you may lose it if your sale drags.
You must factor in both time and money when you calculate the true cost of selling your home. If you want to sell your home in a competitive market, prepare to expend one or the other.
What home selling expense do you think sellers are most likely to forget?
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