Selling a house is a long and complicated process that requires investing a lot of work, time, and money. While the time investment is too relative and dependent on various factors, it is possible to list some necessary financial costs of selling a house.
You’re probably thinking of making the biggest sale of your life, so it’s very important to make a good strategy for optimizing your profit. In order to do that, you have to educate yourself on various aspects of a real estate sale, and one of the most important questions is how much does it cost to sell a house.
Inspection
Before you put your house on the market, you should estimate its value precisely. You can hire a professional to do it for you, or you can simply look up the average square foot price in your area and make your own estimation.
However, you can’t know the real value of your house before inspecting it. If the house inspection shows some damage requiring repairs, the price will certainly go down. The buyer will most likely ask to inspect the house before closing, so it’s better to do it sooner than later.
Repairs & Upgrades
If the house appears to require some necessary repairs, it’s in your best interest to make them before the buyer shows up with their own inspectors. If they find out about some damage that you didn’t report, they will ask for a price reduction or possibly lose their trust and bail.
Even if your house doesn’t have any major problems that need to be fixed soon, you still might consider making some upgrades in order to boost the value of your home. We don’t recommend investing too much money in this, but making a few upgrades can definitely pay off.
Agency
Selling a house on your own is probably more work than you can handle. The average seller lacks the time and skills needed to close the sale at their preferred price. Of course, you can close the sale in a matter of days if you reach out to companies like SleeveUp homes, but if you want to make this the capital sale of your life, it’s best that you hire a realtor.
Real estate agents are people who are specialized in selling real estate as quickly as possible and at the best price possible. They almost exclusively work on commission, which is a good thing because you know it’s in their interest to make the best sale possible for you.
This commission varies from area to area, and it can even go up to 15%. In Southern California, the average realtor commission comes to about 5%.
Staging
Nobody knows your house better than you, and you probably feel like you can point out its perks better than anyone else. Throughout the years you’ve tried out multiple combinations of interior setup, and you’ve most likely found the right one for you.
However, it’s very unlikely that you can set up the place in such a manner that it objectively appeals to the majority of visitors. Setting up the interior for living and for showing is two completely different things. There is a certain science to it, and a professional stager knows it.
They will take a quick look at your home and know exactly what to do with it in order to attract visitors. Of course, everyone likes to think that they won’t fall in love with the first impression, but that’s simply the way we are. If the first impression gets us, we will easily get over some other flaws that we find later.
Closing Costs
Closing costs are a sum of costs paid by both buyer and seller when closing the deal. This includes the closing agent’s fees, attorney’s fees, recording fees, the transfer tax, any costs associated with your mortgage, etc.
These costs cannot be avoided unless you make a different deal with the buyer. On the bright side, the costs are usually lower for the seller who pays 1% to 3% of the sale price.
Capital Gains Tax
Any profit that you make by selling a successful and valuable investment such as precious metals, jewelry, bonds, or, in your case, a house, is taxed as a capital gain. Long-term capital gains (i.e. the gains you make from selling a house that you’ve held for longer than a year) are unrelated to the taxation of your regular yearly income, which means that there is no risk of moving to a higher tax bracket.
Capital gains are taxed at more favorable rates than ordinary tax. However, the rates vary depending on several factors: is it a short-term or a long-term capital gain (the rates are more favorable on long-term), was the house your primary residence, are you single or married and filing with your spouse, did you make any improvements to the house, etc.
Depending on these factors, capital gains tax can vary from 0% to 37% of the sale. In California, the sellers averagely pay 15% of the sale. It’s important that you educate yourself on the capital gains tax in order to improve your position, lower the tax rates, or even cut them to 0%.
To Sum It Up
In this article, we have only listed several of the most common costs of selling a house. We have skipped some obvious costs, such as moving costs, costs of waiting for the buyer (all the bills that you still have to pay while your house is on the market), the costs of reorganizing your and your family’s life while the house is staged and receiving visitors.
Not all of the costs mentioned in this article are obligatory. As you now know, you can go without inspecting and repairing, you don’t have to hire an agency, and you don’t have to stage your house. However, experience shows us that these costs often come back in another form if avoided initially.
If all of this looks like a lot of pressure to you; if you’ve inherited a distressed property and you’re not ready to invest in it: if you for any reason don’t have the means to close a traditional sale right now, you can think of contacting a company like SleeveUp homes.
These types of companies will offer you top dollar for your home, regardless of the state it’s in. Depending on the state of your house, after you add up all the necessary costs of building your desired price, their offer might come far ahead of your potential profit in a traditional sale.