How much does it cost to sell a house?
Closing costs to sell a house
This can vary depending on where the property is located. I will break down the costs in Washington state. If you don't buy and sell properties on a regular basis, you will be SHOCKED as to how much it costs to SELL a house.
I remember the first time that I sold my first property and thought about the costs to sell my house. I knew the balance on my mortgage, the 6% real estate commission and my sales price. I thought that was it....WRONG! I found thousands of dollars in ‘closing costs' that I had to pay and couldn't be avoided. My real estate agent didn't explain to me the costs to sell a house.
Most real estate agents will tell you that it costs 9-10% of the sales price to sell your house. This is WRONG! I'm going to break down the other costs incurred that they don't take into account. I don't want you to be unpleasantly surprised like I was when I sold my first house.
Cost #1: Price reductions
Any agent will list your property for the price that you want. A good real estate agent will show you what other similar houses in the area have sold for and what is listed now. You should become familiar with your competition BEFORE you list your house. Most sellers start high, knowing that they will have to come down in price. This is normally 3% lower than what they are asking for. I would NOT say that is the case now. In the tri-county area, we are seeing any where from 5-15% below what was sold last year. This depends on the area of where your house is located in. Most agents DON'T take this into account when determining what the cost to sell a house is.
Cost #2: Real Estate Commissions
There have been a lot of flat fee or low fee listings in the market. Prior to the mortgage meltdown, this is a great way to save on commissions. I would NOT recommend this now. There are too many properties on the market and you need a real marketing specialist to sell your property. If you choose to do it yourself or do it for low cost, you will be paying for it in TIME and additional costs to sell the house.
I like to use the example of using a plumber to fix your toilet in 30 minutes verses you spending 3 days to figure out how to fix your toilet. The professionals have experience and can get it done faster and get it done correctly the first time.
With the current real estate market, there are a lot of inexperienced real estate agents leaving the market. You should interview real estate agents and see what their marketing plan is to get your house SOLD. Their commission is worth the money if you choose the right real estate agent. It will save in holding costs and headaches.
Cost #3: Closing Costs
Closing costs are 3% of the sales price. Washington state charges 1.78% excise tax for every sale. Then you have title and escrow fees to account for. Not to mention your loan fees to payoff the mortgage. Title fee is a fee that will verify all the liens on the property and any items that are included in the property. For example, their may be a lien on your property that you are not aware of but will need to be paid off BEFORE you sell the house. There may be easements, right of ways, homeowner's association, etc. that stay with the house.
Escrow is the company that makes sure all the T's are crossed and I's are dotted. They make sure that everyone is paid off correctly in the transaction and everything is recorded.
There are also loan fees you have to take into consideration. In the past couple of years there were a lot of pre-payment penalties on loans. Most people think their principal balance is their payoff balance. WRONG. The principal balance on your statement is NEVER your payoff balance. The banks add on ‘other fees for you to pay them off.
Cost #4: Holding/ Inspection costs
Whether the property is vacant or you're are living in it, there are always holding costs. Obviously, when the property is vacant, most likely you are paying for a mortgage on a house that you don't live in. That is an expensive cost. We normally estimate 3% holding costs. Even if you are living in the property now, there are still holding costs or what I call, opportunity costs, that you are incurring. You are being held back with your plan to move forward because your house has not sold yet.
95% of the time there will always be an inspection contingency. This is when the Buyer agrees to buy your house BUT they want to inspect the house before buying it. If there are any repairs to be made, they will come back to you to fix it or ask for a concession for the repair.
When we have sold properties, it usually costs 3% of the sales price for holding/inspection costs. Again, most agents will NOT take into account for this cost item yet it directly affects what you net from the house.
Cost #5: Seller contribution to closing costs.
Since the mortgage meltdown, more and more buyers are getting qualified through FHA loans. There are FHA loans that require the Seller to contribute 3-6% to the Buyers closing costs. Again this is money out of your pocket, yet it is necessary to sell your house. I am an advocate of Seller Financing to help the Buyer buy the house and you don't loose the 3-6% to contribute to closing costs. You will have to wait to get paid but you will make more money if you do Seller Financing.
Most agents will go through a Net Proceeds breakdown with you. If they don't, they are NOT an experienced real estate agent. The Net Proceeds breakdown will let you know how much money you will get paid once the house sells. Most agents will tell you it will cost 9-10% to sell your house. As I have shown you, that is NOT TRUE. It can be 10-25% to sell your house in this market. Also, there are more houses on the market so Buyers are pickier since they have more to choose from. It is also taking 4-6+ months to sell your house in this market. The cost to sell a house is not cheap or easy. To find out how to sell your house at a fair price on the date of your choice, contact us today. We are able to work with your timeframe and needs unlike the traditional way of selling a house.