Selling a home is one of the most lucrative financial transactions in the average person’s life. What many home sellers don’t realize, especially first-time home sellers, is that it can also be pretty expensive. Home sellers pay out an average of over $15,000 in the course of selling their home.
There are definitely ways to reduce seller costs on the front end. You could sell your home to a company that buys houses for cash, go with an iBuyer like Offerpad or use an innovative online brokerage like Redfin (which has changed the paradigm by paying agents a flat salary instead of commission and offering rebates to buyers) or Ideal Agent. Any of those choices will save you a little money but could also come with sacrifices on customer service.
The truth is the money you put into your house before selling it is a great investment that will most likely pay for itself — and then some. So where is all this pre-listing money going, and how does it boost your sale price? Read on and we’ll break it down for you.
Image Credit: Prostock-Studio / iStock.
1. Getting an Independent Appraisal
Pricing is one of the most important pre-listing tasks for sellers. Price your home too high, and you’ll scare off a lot of buyers. Price it too low and you’ll get a lot of interest but leave thousands of dollars on the table.
Getting an independent appraisal can give you a professional opinion of how much your home is worth, taking its unique features and condition into account. That’s valuable information for discovering your home’s ideal list price.
Traditionally, the home appraisal comes later in the sale process.
It’s conducted by the buyer’s lender, who wants to confirm that the home’s value is in line with the amount of the mortgage, and that appraisal is paid for by the buyer. It’s very unlikely they’ll be willing to use your appraisal for this purpose, but you also won’t have to pay for the new one.
On average, an independent home appraisal is going to cost from $300 to $500. Larger properties require more time and scrutiny to appraise and can cost more than average. Homes in areas with very high costs of living will also run you more than usual.
Image Credit: ronstik / iStock.
2. Professional Home Staging
Professional home stagers know from experience exactly what prospective buyers want to see in a home, and how to show off your property in its best light. Often, that means bringing in new furniture, furnishings, and even artwork, as well as changing the layout of key rooms in the house.
On average, a professionally staged home sells for 20% more and 88% faster than an unstaged home, according to Realtor.com. That’s a huge potential advantage!
The cost of your home staging will depend on how large your home is, and how much work it needs. But as a general rule, you’ll pay around $500 for an initial consultation, and then $500 to $600 per month per staged room. You’ll pay monthly because you’re essentially renting furniture, furnishings, window treatments, lighting, art, etc. from the staging company. If you’re selling a vacant, empty house, you’ll pay even more since it needs more work to feel lived-in.
In addition, many professional home staging companies require you to commit to a minimum amount of time, usually in the neighborhood of three months. You’ll be on the hook for the money even if your home sells after the first open house.
Image Credit: DepositPhotos.com.
3. A Pre-Listing Inspection
Having your home inspected before it hits the market will make sure there are no unpleasant surprises that could derail your home sale at the last minute. According to Zillow, 15% of home sales are called off because the inspection finds something unpleasant at the 11th hour, and the buyer backs out.
Having an inspection done yourself means you can solve those problems — whether it’s a crack in the foundation or a termite infestation — before your home even hits the market.
But even if a buyer’s inspection doesn’t derail your sale, it could still cost you. If a buyer’s inspection finds problems with your home, they may ask for the repairs to be done, or they may ask for a closing credit that won’t reduce the sale price of the home but will come out of your end.
If you opt to have repairs done, chances are slim that the buyer will allow you to do them yourself. They’ll likely want them done by a professional contractor, perhaps even one they choose themselves. That’s going to cost you a lot more than if you’d done DIY repairs before listing.
On average, a pre-inspection is going to cost you in the range of $300 to $500.
Image Credit: monkeybusinessimages/istockphoto.
4. Presale Repairs
If you’ve lived in your home for a while, it’s very likely you’re going to need to fix a few things to get your home ready for the market.
This could include big repairs like the roof or foundation, cosmetic repairs like painting, having your yard landscaped, or small repairs like fixing dead outlets or loose doorknobs. You may also want to consider refreshing your flooring or updating high-priority rooms like the kitchen or bathrooms.
The cost of your repairs is going to depend on the age and condition of your home. The average cost of presale repairs is around 4% of the sale price. As of Q4 2021, the average sale price of a U.S. home was just under $478,000, so the average price of presale repairs is just over $19,000.
Image Credit: dima_sidelnikov/istockphoto.
5. Professional Real Estate Photography
Professional real estate photos aren’t just a matter of vanity. High quality photos will get more eyeballs on your home, and make it sell faster for more money.
A recent study looked at 700 similar listings in the same ZIP code — 350 with professional listing photos and 350 without — and found that the listings with professional photos sold 50% faster and 39% closer to the original list price. The listings with professional photography were also viewed nearly 120% more than the listings without.
Professional real estate photos generally cost around $300 to $500, though they can be more expensive in high-priced markets.
This is usually just for photos — if you want extras like video or a 3D tour, be prepared to spend more.
Image Credit: Feverpitched/ istockphoto .
6. A Property Survey
In newer developments, property lines are usually well defined thanks to fence lines, symmetrical lots, curb cuts or even metal property pins that can be found with a metal detector.
However, if you’re selling an older property, especially one that hasn’t been on the market for a long time, the boundaries of your property may be a little fuzzier. Buyers may not be comfortable with a border of your lot being “from that tree all the way down to the street.” So, your agent may want a survey done before listing the property to clear up any ambiguity. Your buyer’s lender may also insist on a survey.
A survey will clearly define your property lines, so you can avoid future conflicts with neighbors. Disputes over encroachment often end up in court and can cost you thousands in legal fees.
A survey can also determine if there are easements on the property. An easement is when you’re obligated to allow access onto the property — for example, to a utility company so they can service a power station behind your lot. Buyers will want to know about obligations like this.
And finally, a survey can uncover things like hazard areas, which can have a big effect on the future development of the property, and elevation, which is an important data point for things like flood insurance.
The average cost of a property survey is around $400 to $600, though you may pay more if you’re surveying a large property.
Image Credit: mokee81 / istockphoto.
7. Carrying Costs
If you’re selling a property that you don’t live in, you’ll have to pay to maintain its condition. This can include expenses like insurance, utilities, landscaping, homeowner’s association fees while it’s vacant and then expenses like home staging when you put it on the market.
You may also want to purchase “vacant house insurance,” which will protect your unoccupied property against damage.
Your carrying costs will depend on the size and location of your property, as well as local utility and insurance rates, etc. But it’ll likely come to at least a few hundred dollars per month.
Image Credit: Depositphotos.
8. Paying Off Your Mortgage
If you’re still paying off a mortgage on the property you’re selling, you’ll have to settle up at closing. This will all take place behind the scenes between the lender, your agent, and the closing company, so that your final payout will already have your outstanding balance taken out.
Some sellers are surprised at how much they still owe on their mortgage. Avoid an unpleasant surprise by contacting your lender to find out exactly how much you owe. You can also get a “good faith estimate” from your agent, which will project your final payout after mortgage settling, commission, and other closing costs.
Image Credit: DepositPhotos.com.
9. Real Estate Attorney Fees
If you sold your property with an agent, you can probably get by without the help of an attorney. But if you listed the home for sale by owner (FSBO), you’ll probably want a lawyer to go over the paperwork and help you through closing. It’s not a total necessity, but having a lawyer make sure everything’s in order will give you peace of mind — and avoid problems down the road.
In general, real estate attorneys charge by the hour, usually around $150 to $350 per hour, but will conduct a closing for a flat rate of $750 to $1,250.
Image Credit: DepositPhotos.com.
10. Paying Off Liens
If there are any liens against your property, you’ll have to pay them off before the sale can go through.
A lien might have been placed on your home by a contractor who wasn’t paid for work done on the property, or by some other creditor. To remove a lien, you can either pay it off, or go to court and ask a judge to remove it. Either way, you’ll have to satisfy the lien before the sale of your home can be completed.
Image Credit: DepositPhotos.com.
11. A Home Warranty
You may want to purchase a home warranty as an enticement to buyers, especially if you’re in a strong buyer’s market.
A home warranty covers potential breakdowns in home appliances and major systems for a predetermined amount of time — usually no more than a year. Offering a home warranty can reassure a buyer that any problems with the house early on in their ownership will be covered.
The cost of your home warranty will depend on the size of your home and what your warranty covers. But a one-year home warranty generally costs a few hundred dollars and rarely over $1,000.
Image Credit: DepositPhotos.com.
12. Closing Costs
Closing costs refer to a bundle of small- to medium-sized transaction costs that take place at closing. These can include expenses like mortgage insurance, title insurance, prorated property taxes, transfer taxes, recording fees, and loan processing fees. These costs are automatically subtracted from the sale proceeds at closing.
Closing costs are generally split among the buyer and the seller. Though in a real estate deal, everything is potentially negotiable.
For sellers, the average amount of closing costs, including commission, comes to around 8% to 10% of the sale price.
So, for a $300,000 house, that comes to $24,000 to $30,000.
That’s a lot of money — but there are ways to reduce your closing costs. If you’re in a strong seller’s market, you may be able to negotiate for the buyer to cover most of the closing costs.
On top of that, the largest chunk of your closing costs is going to be the real estate agent commission, which traditionally comes to 6%.
However, sellers have many potential ways to reduce their real estate commission.
Image Credit: SARINYAPINNGAM / istockphoto.
13. Real Estate Agent Commission
This 6% real estate commission is probably going to be the largest single transaction cost involved with selling your home — but you can cut it down significantly if you shop around.
The previous decade has seen the emergence of discount real estate brokers, who offer full service (or nearly full service) selling experiences for much less than a traditional agent. If you sell with a discount real estate broker or a low commission agent, you can dramatically cut your real estate commission by several thousand dollars, since many of these brokers work for flat fees or sharply reduced commission.
Just keep in mind that the total commission is divided into two parts — the seller’s listing agent and the buyer’s agent, and you usually can’t reduce the buyer’s agent commission, since it works as an enticement for agents to bring buyers to your home. (In other words, if you reduce your buyer’s commission, buyer’s agents may not bring clients to view your property.) Any commission savings you get are going to come from the listing agent’s 3% share.
Image Credit: DepositPhotos.com.
14. Seller Concessions
Remember how we said that nearly everything in a real estate transaction is negotiable? That’s true for the buyer and the seller.
Buyers often ask for concessions to cover expenses like their portion of the closing costs, or repairs for issues their inspection may have uncovered. They may even request that you leave appliances, certain furnishings, or things like lawn furniture.
Requests for seller concessions are more common in a buyer’s market, though they’re not unheard of in a strong seller’s market like the one we’re currently experiencing. While you can always turn down a request for concessions — especially if you’ve received multiple offers for your home — it can sometimes be an acceptable price for quickly getting a home sale across the finish line.
Image Credit: DepositPhotos.com.
15. Capital Gains
If your home has appreciated in value since you bought it, you may owe capital gains taxes on the profit you made.
To calculate your capital gains on a home sale, take the final sale price of your former home, and subtract the amount you originally paid for the home, the cost of any improvements you made while living there (not including routine maintenance), and closing costs.
Those are your capital gains — and they could be subject to a big tax bill.
However, the IRS does offer a capital gains tax exclusion for individuals. If you’ve lived in the home for at least two of the previous five years, your tax bill will be reduced. If the home was your primary residence for those entire previous five years, and your net profit is less than $250,000 ($500,000 for married couples), you won’t have to pay any capital gains tax on that profit — as long as you haven’t already claimed the exclusion in the previous two years.
This article originally appeared on Realestatewitch.com and was syndicated by MediaFeed.org.
Image Credit: DepositPhotos.com.
More from MediaFeed
The US city that Boomer homebuyers are flocking to
Image Credit: Prostock-Studio / istockphoto.