It is only after you list your home for sale that you may realize the mistake of not accounting for selling costs in the sale price. These selling costs could bring your profit margin down. According to a report from Clever Real Estate, Americans spend nearly $55,000 on home selling expenses. 89% regret their sale and thought they could have earned $50,000 more than they actually did.
This report lists various expenses homeowners should consider when selling their homes to avoid unexpected financial blows during closing.
Staging Costs ($2,263)
Staging costs refer to the amount you must pay a professional to make your home ready, welcoming, and appealing for prospective buyers. Home stagers advise you to spruce your home with paints, furniture, or art for buyers to envision living there.
It is worth spending on staging costs if you can afford it. A 2023 report by the National Association of REALTORS Research Group states that 21% of seller’s agents said that staging a home greatly reduced the time the house was on the market. The sellers also witnessed an increase of one to ten percent of the dollar value the buyers offered on their homes compared to similar homes.
Marketing Costs ($2,300)
You need to advertise your home for sale, whether you do it yourself or through an agent. These costs include professional photography, videography, virtual tours, brochure printing and distribution, yard signs, open house invitations, and social media promotion.
The more exposure your house gets, the more potential buyers you can attract. Hence, make sure that the sale price covers the marketing costs. A 2022 survey by the National Association of REALTORS Research Group revealed that 84% of buyers found photos the most useful feature while considering buying a home. Other buyers were in favor of virtual tours (43%), videos (28%), information about upcoming open houses (20%), and virtual open houses (12%).
Moving Costs ($3,250)
Selling a house means you have to relocate and shift your stuff somewhere else. You must incur some logistics costs even if you do it yourself instead of hiring professional movers. Other hidden costs of moving are the building fee, house cleaning, painting, utilities, lawn care, groceries and takeout, and vehicle registration and insurance fee.
Long-distance or interstate relocations can be more expensive.
Buyer Concessions ($7,200)
A Gallup survey shows that 76% of Americans think it’s a wrong time to buy a house, and 68% predict higher prices. Many people are also postponing their home purchases due to inflation, the high mortgage rate, or fulfilling other aspirations, such as travel.
Since interest in new homes is declining, 89% of sellers offered them concessions or incentives to make the deal more attractive. Sellers are willing to reduce prices, provide a home warranty, allow buyers to keep their property, make repairs, and keep a flexible closing date.
Closing Costs ($8,000)
The closing costs for sellers and buyers vary depending on their real estate transaction agreement. Standard closing costs for sellers are title insurance, document preparation, escrow and wire transfer fees, a credit check, attorney fees, homeowners association fees, mortgage payoff penalties, existing liens, and taxes.
Keep a wiggle for these costs in the proceeds of the sale.
Pre-and Post-Listing Repairs ($10,000)
New homeowners don’t prefer buying homes that need repairs and renovations because they add thousands of dollars to their buying costs. Unsurprisingly, 76% of sellers spent money on repairs and updates to things such as plumbing, kitchen, electrical system, painting or staining, and roof.
Fixing up your house can increase its selling opportunities. However, disclosing the repairs you have undertaken is advisable to safeguard against any legal or financial claims after the sale.
Real Estate Agent Commission ($22,000)
The agent commission as a percentage of the house’s selling price is the most expensive proposition for sellers. One reason is that they have to pay the fee for both agents. Hence, sellers bear around 5.49% commission cost, divided nearly equally between the listing agent and the buyer’s agent. However, the commissions are negotiable.
Surprisingly, 49% of sellers don’t know that the existing commission model requires paying for the buyer’s agent. The good news is that sellers may get some relief in light of a lawsuit settlement by the National Association of Realtors. Under this settlement, home buyers will likely pay their agents directly and separately if it receives final court approval (expected in November 2024).
You may forego the agent commission cost if you decide against hiring a listing agent. You can put up your home for sale on Multiple Listing Service (MLS) or For Sale By Owner (FSBO). However, you may not receive the best value for your home. An agent usually takes end-to-end responsibility for selling your home, from staging to price negotiations with buyers to closing the deal.
Other Miscellaneous Costs
Apart from the seven primary costs mentioned above, you should recover other sundry costs from the sale price. These include carrying costs such as property taxes, utility, maintenance, and home insurance premiums, even when your home is unoccupied. Capital gain tax (if the profit from selling the house exceeds the specified threshold limit) is another cost you must consider.