Looking at the Real Costs Involved in Marketing and Selling Your Home
Visions of money fairies throwing cash their way is often what people selling their homes seem to expect. But the reality can be sobering. The old cliché “In order to make money, you must spend money” holds true even in the housing market. So before you go spending all that money on vacations and cars, make sure you have done your homework and know exactly what your profit margin is likely to be.
Most homeowners are aware of the agent commission and this is the first and most obvious expense. The commission typically comes in at 6% of the selling cost. (For instance, a home selling for $300,000 will have a commission cut of $18,000). If you decide to forgo an agent, know that you could spend that much yourself trying to draw up contracts, market, list and negotiate the deal alone and you won’t have the legal backing of a licensed agent. While the commission may seem a steep cost that you would like to circumvent, it is certainly one that pays for itself while protecting the seller (and buyer).
Before a home is ready, there are usually repairs that need to be made. This is the second expense. Not only will those repairs boost the curb appeal and make your home more appealing to a potential buyer, it could increase the value and allow you to bring in a higher purchase price. So no more procrastinating! A homeowner can often fix a leaky faucet, slap on some new paint or replace the carpets on a modest budget.
The third expense you will need to brace for, is the cost of after-inspection concession repairs. Once your home is under contract, the buyer will have a home inspection done, to ensure that they are purchasing a sound piece of property and making a wise investment. If the inspection uncovers any major issues, like out of date electrical, major plumbing or roof issues, you could be facing a painful expense in order to close the transaction. Before you list your house, it is wise to be realistic about its condition and address any serious issues preemptively, or be ready to reduce your cost to accommodate these fixes.
The fourth and fifth expenses will not be incurred by everyone and are dependent on circumstances. Those expenses are utilities and staging respectively. If you intend to vacate your home prior to selling, then you will want to keep your lights, water and power going to make the home appealing to buyers. (It’s hard to envision yourself living in a dark, dank home without power or light. Not to mention, buyers love to turn on faucets and get a feel for water pressure etc). Depending on how you have priced your home, this should only be a month or two and is a relatively minimal expense. Staging is another optional expense. If you have a unique style that is not universally appealing, it can turn off potential buyers. This goes for super cluttered, outdated or ornate homes. For anywhere from $500-$1000 you can have professionals come in and stage your home to appeal to the masses and make it easier to market and sell.
The last two costs that you will incur while selling your home are mortgage payoff and closing costs. You will need to get together with your mortgage company if you have an outstanding mortgage and find out what you are facing here. It is likely that the number on your mortgage statement might be a little less than you owe (due to prorated interest you’ve accrued and the penalty associated with early pay-off), so be prepared for this sticker shock! As for closing costs, you may be asked to incur this because it IS a buyers’ market. These costs can include HOA fees, transfer of taxes and title insurance, attorney fees, escrow fees, brokerage fees and property taxes.
By being prepared you can have a realistic idea of what you will make from the sale of your home. Before you list, make sure to sit down and consider of the expenses you could be facing. Knowing is half the battle after all!