Many homeowners mistakenly believe that all the money made from the sale of their home is pure profit, but this is not the case. There are many fees associated with selling a home. Before the total profit of the sale of a home can be realized, mandatory fees must be subtracted from the selling price of the property.
Broker fees are typically the highest expense associated with selling your home. Keller Williams Realty says that broker fees are typically 5 percent to 7 percent of the sales price. You will likely negotiate the fees with your listing agent, who will split the commission in half with the buyer’s agent. You do have the option of bypassing these fees and selling the home by owner, if you decide to do all the sales and negotiations on your own.
If any problems are found with your property during the home inspection, the buyer will expect you to fix them or to compensate him to have the repairs completed after the closing date. While you are not required to do this, the buyer can pull out of the sale if he is not pleased with the results of the home inspection, meaning you will have to start the listing process all over again. Some sellers pay for an inspection before putting their home on the market to uncover any potential repairs.
The seller is expected to pay for some of the closing costs. Precisely which items you are responsible for can vary according to the terms of the purchase agreement, but escrow fees, title insurance and various document fees are commonly the responsibility of the seller. Many buyers also ask the seller to pay a certain percentage of the closing costs as a condition of the purchase agreement. The percentage can vary and whether you agree to it is your decision, but it can often mean the difference between making a sale and having the buyer pass on your property.
The amount of taxes you will need to pay on the sale of your home, and who is responsible for paying the fees, varies according to each state. You may need to pay fees such as a real estate excise tax to transfer ownership of the property. If your home is a rental property or you used part of your home as a business, you may owe federal taxes at closing. Keller Williams Realty says if you sell your owner-occupied home, you will typically not have to pay federal taxes but advises sellers to check with a CPA or a real estate/tax attorney. You might also need to pay a portion of your property taxes to cover your time in the house.
If you owe money on your mortgage when you sell your house, you will be responsible for repaying it to the bank. You will need to have a check to cover any extra money owed on closing day.
Laura Jerpi has been working in marketing since 2007. She is an interactive copywriter who writes for Thought Leadership Publications, Ai InSite and South Source. Jerpi holds a Bachelor of Arts in communications from the University of Pittsburgh and a Master of Business Administration from Robert Morris University.