If you’re ready to move on to a new home, you may be wondering how much to budget to sell your current home. In this guide, we dive into what costs sellers should expect to pay. Fees may vary based on your location, market conditions, and what repairs you make before selling.
Here’s what costs you’re likely to incur when you sell your home:
Repairs and Renovations
If your home is in its best condition when you put it on your market, it can put you in a great spot. Repairs and renovations can be one of the pricier expenses for a seller, and the cost ultimately depends on your home’s condition.
Replacing roofing, upgrading your HVAC system, or fixing plumbing issues can be higher ticket items, but they are can also turn buyers away if they are left unfixed. Your location, price point, and market conditions can all impact which repairs and renovations you should focus on. In strong sellers markets, you might be able to get away with minimal repairs. But, in a buyer’s market, you can prevent buyers from passing over your property by ensuring that all repairs are made.
Buyers typically pay for a home inspection, but some sellers get a pre-listing inspection to get ahead of repairs and avoid potential roadblocks in the selling process. If the home inspector discovers undisclosed issues after a buyer enters the picture, the buyer may demand a contract renegotiation or even cancel the deal altogether.
Having the inspection before you list can help you ensure everything is in its best condition before you list your home.
Real Estate Commission
Commission fees make up the biggest portion of a home’s selling costs, accounting for 5% to 6% of your home’s sale price. According to national transaction data collected by HomeLight, U.S. home sellers pay an average of 5.8% in agent commission. Commission fees can vary depending on your home’s location.
Listing agents typically split the commission fee with the buyer’s agent, which the seller pays for when the home closes. Both agents will then share a percentage of their commission with their sponsoring broker. According to a report issued by the Consumer Federation of America (CFA), commission rates and splits tend to remain consistent in most areas.
Settlement and Third Party Fees
Closing fees (also known as settlement fees) include the costs related to the transfer and sale of your home, which may include:
- A settlement agent or closing fee
- Tile insurance search and policy premiums
- Document preparation fees
- Notary fees
- Home warranty
- Recording fees
- Homeowner association document and transfer fees
Local customs tend to dictate whether a seller should expect to pay for certain closing costs. In Kentucky, for example, the buyer typically pays for both the owner’s and lender’s title insurance policy and title search.
A sales concession is an incentive that you can offer to buyers to sweeten the deal. This means essentially agreeing to pay for costs that a buyer would typically pay for. For example, a seller could entice a buyer by offering to pay for some or all of the buyer’s mortgage fees at closing.
Utilities and Upkeep Until the Sale Closes
If you move out early, you’ll need to keep major utilities such as water, gas, and electricity until your home sells. Without utilities, the home inspector will not be able to test water lines and other major systems.
Capital Gains Tax
If you sell your home at a higher price than you bought it, you may owe capital gains tax on your annual federal tax return. The IRS taxes long-term capital gains at 15% for most individuals and up to 20% for high-income earners. However, you may not have to pay taxes on gains of up to $250,000 (or $500,000 if married and filing jointly) from the sale of a home you’ve lived in as your primary residence for the past two of the past five years.
Ready to Get Started?
Homeowners who are educated about the selling process usually have a smooth transaction. By having an experienced agent and asking the right questions, you’ll improve your odds at this.
Team Melton has over 50 combined years of real estate experience to assist you through every step of the process. Contact us today to get started on selling your home!