First Time Home Buyers at some point become First Time Home Sellers
When you have the great pleasure of owning a home at some point you will have the need to sell. Just as when you bought your home you had lots of questions about how that would all work out, selling will be the same. With this blog I hope to answer some of those basic questions...
We are going to base this HYPOTHETICAL sale on a home priced to sell at 100,000 , a agreed upon commission of 6% and your Payoff to Mortgage compnay for 75,000.
First of all lets talk about commission I know that some people think this is ta-bu to talk about, I do not, it is all about making an informed decision. So you an your “listing Agent” have come to a agreed upon commission of 6%, a large majority of the public is under the impression that the agent that "list" the home gets this 6% for themselves. That is just not the case.
In most cases whatever the commission percentage that you have agreed on will be split equally between the Listing Agency and the Selling Agency, notice I said Agency. Also we are talking about “most” cases. So lets focus on the Listing Agencies 3% for now. Your listing Agent works for the Agency so when you sign the Listing Agreement you are actually hiring the Agency not the Agent. So when the home is SOLD the Agency will pay the Agent from the 3% that the Agency received from the sell of your home. Now how much the Agent receives is completely up to what was negotiated when the Agent went to work for that Agency. Now,in most cases, the Agent is responsible for the cost of marketing your property for you which they pay for up front and throughout the listing period in hopes that all things will come together and the home will sell. So when they get paid from the company you must deduct the cost associated with the marketing of the property, their taxes, before you get what they will NET from the property. So lets just do a hypothetical break down..
Purchase price 100,000 Purchase price 100,000
Listing Agency Commission 3,000 Selling Agency 3,000
Agent Split w/ Agency 70/30 2,100
Cost for MLS fee, Flyer's, Advertising 300
Agent pay before taxes,insurance $1,800
I feel like this is something that needs explaining so that you are better informed when talking with a perspective Agent so that you understand where they are coming from and you can meet on neutral ground. Just remember that EVERYTHING is negotiable in Real Estate
Now lets talk about the OFFER
That is exactly what it is an offer. This is NOT a personal attack on you in any way and you are under no obligation to accept the offer unless it meets your needs. Now one thing we need to remember it that Real Estate transactions are all about NEGOTIATIONS. So you might not like the Offer but send a memo back saying what you MIGHT consider. They may want you to pay some closing cost on their behalf. Did you receive some closing cost paid for by the seller when you purchased the home? For some people it is all about how much money they have to spend at closing. So they may be more apt to pay full price but get the closing cost paid so it is easier on them. You want to get as much information as you can so you can make an informed decision. So don't “shoot” the messenger Agent when they bring you the offer, most of the time if you keep your cool you can work through it and both sides can be happy with the results. We are going to say for sake of this hypothetical scenario that you have agreed to pay 1500.00 on their behalf.
Let talk about what you ARE going to have to pay..
You know that the State has to get something out of the fact that you have decided to sell your home. So you will have to pay Excise Tax on the PURCHASE price.
100,000 divided by 500= 200.00
Then you sill also be responsible for pay to have the deed prepared and Courier fees to pay off your loan, etc. We will estimate this to be 300.00
Depending on the time of year that you sell your home you will most likely have to pay your portion of the taxes from Jan1 till the day of closing. You will be receiving this money back from your Escrow account if your Mortgage company has been collecting monies to pay your taxes and insurance. But for this we are going to say they have been paid for the year.
We now have Purchase Price 100,000
Pay Off Of Mortgage -75,000
Listing Agency Commission -3,000
Selling Agency -3,000
Closing Cost Paid for Buyer -1,500
Excise Tax/Revenue Stamps -200
Deed Prep and Misc. -300
Seller Proceeds +17,000
I hope this answers some BASIC questions that First Time Home Sellers need to know. If you would like additional information please feel free to contact me!
Photos of these GREAT sitck people Courtesy of LuMaxArt FS