When you’re selling your home, it’s important to know what you’ll profit from the sale. The only way to get an accurate estimation is if you take into account all of your expenses. You don’t want to wind up like many sellers and have unforeseen expenses chip away at your hard earned cash. To help you avoid that, here are some of the most common expenses you’ll encounter as a seller:
Mortgage payoff balance – After you make the sale, you’ll have to pay off the mortgage balance before you leave. How much this will run you depends on how far along you are with your payments.
Prepayment penalty – When you sell your home and pay off the mortgage balance, you’re usually making a significant payment. Some lenders charge a prepayment penalty on deposits of more than 20% of the mortgage balance, which means you could have to possibly pay a fee. Unfortunately, prepayment penalties aren’t cheap. Typically, they are 80% of six months interest. So if you have a 200,000 mortgage balance with a mortgage rate of 5%, your interest-only payment would be $833.33. Multiplied by six (months) that would be $4999.98. It’s a decent chunk of change that you definitely don’t want to overlook when planning your budget.
Recording fees – In order to get it into the public record that the debt has been paid on your house, you’ll have to pay a recording fee. The cost will vary depending on where you live.
Commissions for listing and selling agents – You can expect somewhere around 5-6% of the selling price.
Notary fees – A notary must verify your identity and make sure your documents have all been completed properly. It shouldn’t cost too much, but every little bit adds up.
Escrow/Closing fee – You’ll have to pay the title company, escrow company, or attorney that administered the closing. This fee will usually amount to $250, plus around $2 per thousand of the purchase price.
Title search fees – You need proof that you have a legal right to sell your home. Title companies go through public records and will give you a title insurance commitment. A title search is another fee that can vary in price, but it’s not unusual for it to cost around $100-$250.
Repairs – We’re not talking about full-scale remodeling (although, depending on your situation, you might consider it), but there’s no denying that a drippy faucet, creaking door, or some other little maintenance issue is worth taking care of before an inspector comes to evaluate your home. Preparing for a buyers home inspection is something all sellers should do but many don’t. This can end up costing a sale in many circumstances.
Seller concession – If you’re trying to sell your home quickly, seller concessions like a closing cost credit are one way to draw in buyers. There are a variety of different fees that you could pay for the seller. If you went all out, they could run you a few thousand dollars.
Home warranty – The home warranty is another way to separate yourself from the other sellers. First time home buyers who are nervous about repair expenses will be especially drawn toward the safety of a home warranty. It’ll most likely cost you around $300 to $500, and will last for one year after the closing date.
If you’ve taken a hard look at your property and have a carefully crafted budget, there’s no reason why selling your home shouldn’t be a rewarding and profitable experience.