Selling your first home is a sign that you’re moving up and on to bigger and better things, but be aware that you might end up paying some of your own money to close the deal. This comes as a surprise to some homeowners, but the good news is that you can usually reduce these out-of-pocket expenses by carefully setting your home’s asking price, and by addressing known house problems before listing your home.
A real estate agent takes a cut of the sales price in exchange for listing or selling your home. This fee is always negotiable, but it usually runs around 6 percent of the sales price. When you list your home with a real estate brokerage, you agree to pay this fee. If you find your own buyer, or if you sell your home to a buyer soon after the listing contract expires, you might still owe the brokerage a percentage of the sales price, so read the listing contract terms carefully before signing.
Some homeowners choose to market and sell their homes without benefit of a real estate agent. While this is cheaper, you'll have to pay the advertising costs associated with marketing your home. Thanks to the Internet, for sale by owner classifieds reach thousands of potential buyers, but then it’s up to you to investigate the buyer’s finances and put the deal together. While some homeowners enjoy selling their own property, others prefer letting an agent handle all the marketing, showing and transaction details. When buyers make an offer on your house, they can ask you to pay a portion of the closing costs and other settlement charges, but you're under no obligation to comply. Even if you go the FSBO route, don't be surprised if a real estate agent approaches you with an offer to show your home to an interested party in exchange for a commission if the agent sells your home. If you agree, the agent will ask you to sign a one-time-showing contract, and if the agent sells your house, you will owe the commission upon closing.
Homebuyers often need bank financing to purchase a house. To qualify for a mortgage, most lenders require a down payment of up to 20 percent of the sales price. Buyers face additional costs including title insurance, which is typically around 1 percent of the sales price, and lender closing fees that can run $1,000 or more. Appraisal fees can add another $300 to $500 and survey costs can be as much as $500. It's common for buyers to ask sellers to help out. When a buyer makes an offer, he can ask for seller concessions that range from half the title insurance fee to thousands of dollars to be paid at closing. The seller might want cash to purchase appliances or furniture or for any other number of reasons. At the closing, the settlement agent will subtract the costs you agreed to pay in the contract from the amount of money you receive from the sale. All seller concessions are negotiable and you have the right not to pay any of the buyer's costs.
Home Repair Costs
Unless your house is less than a few years old, it might need repairs or maintenance in order to pass the lender’s inspection. If you’re aware of any issues, fixing them before you list your house is the simplest and most effective way to avoid problems. If a problem shows up during an inspection, such as active termite infestation or water damage, you might have to pay for the repairs before the sale can close. In some cases, discovering undisclosed problems can lead to the bank refusing to finance the house. Typical bank-ordered home repair costs include repainting, replacing old appliances, repairing roof leaks, treating for termites, adding railing to steps and stairs and installing storm windows.
Your county treasurer will prorate your property taxes, based on when the sale closes. Because property taxes are paid in arrears, you will owe a portion of this year’s tax when you sell your home. The closing agent, which could be a bank, an abstract company or an attorney, will call the county treasurer and find out how much you will owe in property taxes as of the date of closing. This amount will be subtracted from your proceeds.
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