Well…yes. A seller may think that as long as they will receive more for their house than they owe they are in good shape. Not so. There is a cost to selling your house. Some costs are incurred by the seller in every transaction. There are other costs in selling that may apply to your situation. For purposes of this blog, we will discuss a single family residence.
Following is a general explanation of some of the most common costs incurred by the seller when selling is house. These costs are usually only payable if and when the house actually sells.
COMMISSION: Generally, all sellers will incur a listing commission – if you are using the services of a real estate agent (REA). The commission varies depending on the listing agent. The selling commission for most single family residences is between 4 and 7 percent. Some agents are more willing to negotiate the commission, but remember, if the commission is negotiable something gives – usually some of the REA’s services. The listing commission usually includes services such as marketing, open house (if desired), photographs/videos used in marketing, and negotiating with the buyers’ agents. The listing commission percentage is applied to the purchase price agreed to in the purchase and sales agreement. For example, if the commission is 6% and the purchase price is $450,000, then the commission cost is $27,000.
PROPERTY TAX: Property taxes are prorated between the seller and the buyer. The seller pays for the number of days of ownership in the year that the house is sold. For example, it the house is sold (the transaction closes) on May 31, the seller will have owned the house for 159 days. The number of days owned is divided by the number of days in a year (159/365) to obtain a percentage (43.6%). This percentage is applied to the total tax bill for the year to obtain the property tax cost owed by the seller (43.6% times $5,200 = $2,267 seller’s share of property tax).
ESCROW SERVICES: This is usually a cost charged by the escrow company that handles the closing transaction. The escrow service monitors the requirements of the purchase contract to ensure that the buyer and the seller complete their respective activities. Some of these activities may include the house inspection, financing obtained, or repairs made. (The cost varies - an estimate might be $900.)
Other costs may be incurred depending on the specific transaction. Some of these seller costs are included below:
HOA DUES: Homeowner’s (HOA) dues are prorated between the buyer and the seller based on the period of their respective ownership during the year. They are calculated in a manner similar to property taxes. The seller pays the dues proportional to the amount of time the house was owned during the year.
SPECIAL ASSESSMENTS: Some properties may have special assessments. These are usually for some sort of utility/improvement that a governmental entity (e.g. county) has made to the property. An improvement may be the addition of sewer or public water lines. (Note: Most buyers want the sellers to pay for these assessments; however, it is generally subject to negotiation.)
REPAIRS: Repair costs may be incurred by a homeowner in preparation of selling. It is important to consider whether the costs of the repairs will add enough value to the final sales price to make the repairs worthwhile. Repair costs may include a new roof, new flooring, painting (inside and/or outside), upgrading kitchen counters/cabinets, upgrading bathrooms, upgrading lighting, or removal of hot tub or children’s play set.
Note: The seller may not have any repair costs when listing the house; however, a buyer may negotiate repairs as part of the purchase contract. The seller needs to know beforehand whether they may be repairs that a buyer might ask to be made. (The REA can help with this as part of the basic services paid for by the listing commission.)
LANDSCAPING: Landscaping upgrades may be necessary to enhance curb appeal. If the seller decides not to make the improvements, then the eventual sales price will reflect the lack of adequate landscaping. If no additional landscaping is needed, it is important to consider the costs of maintaining the home during the time it is on the market. If the home is vacant, a landscaping service may be needed to maintain the property’s good appearance.
Neither of these lists are meant to be exhaustive in the types of costs that a seller may incur when selling a house. They are meant as a general reminder that there are costs to selling a house. For clarification or for more detailed information, please contact me.
Prepared by Nancy Van Pelt, Broker
Nancy Van Pelt Real Estate