Owners salivating over the huge profits they are about to reap from the sale of their homes are often surprised when they discover their bounty is a lot less than they figured. The old adage, "Don't count your chickens before they hatch," comes to mind.
Most folks realize that a good chunk of their proceeds will be going to the real estate professional who lists their house on the multiple listing service and then, markets the place online and with ads, flyers and other media tools. But there are often many other costs incurred by sellers. Your agent usually doesn't warn you about them, but they are there, and there's little you can do except pay them.
No one can tell you what your exact selling costs will be. But here's a brief rundown of the fees that will inevitably eat away at your bottom line:
-- Commissions. Most agents these days charge 5 to 7 percent of the eventual selling price. But the tariff could be more if your place is difficult to sell, or less if it is a cream puff.
Most houses these days are sold through the MLS, which is where everyone eventually looks to find their next home. And to get your place into the MLS, you'll need an agent.
Of course, you can try to sell on your own. But it might be better to look for a discount broker who will enter the house on the MLS and perform other services for either a flat fee or a smaller percentage of the pie.
Also worth noting: Even the commission paid to full-service agents is completely negotiable.
-- Inspections. Most buyers have the home inspected. But to avoid any surprises that you may have to deal with later, a seller's inspection is also in order. This will allow you to spot any issues and tend to them before the buyer even knows about them.
Figure on spending upwards of $200. It could be well worth it, when you consider that buyers tend to think repairs will be much more expensive then they really are. At worst, it could prevent the deal from being blown out of the water altogether.
-- Repairs. Who knows? But the inspection usually turns up at least a few problems that need to be addressed. Even if it's just things that you've lived with -- a slowly dripping faucet, for example, or an electrical outlet that doesn't work -- the buyer will probably want them fixed.
-- Staging. Most people realize that they must do a certain amount of fix-up to get their homes ready to sell. Painting, for sure, and perhaps washing the windows, and certainly making sure everything works as it should. But to really make their homes stand out, some sellers hire a stager, who is a professional at decluttering, reorganizing and sprucing up homes to look their very best.
-- Utilities. If you move out before you close and leave the house unoccupied, you'll have to keep the heat, water and air conditioning on while the place is empty so it can be shown to prospective buyers.
-- Insurance. You shouldn't cancel your homeowners' policy until the new owner takes over the title. So if you move out early, before the place is sold, you'll still have to keep coverage in force. Beware, though: Some insurers won't cover an unoccupied dwelling, and others will charge a higher premium.
-- Warranty. Once upon a time, a warranty to protect the eventual buyer for a year after the deal is closed -- paid for by the seller -- was one of the best marketing tools going. Now, though, nearly every seller includes a warranty, which is really a year-long service contract that covers repairs to appliances and the home's systems. So you'll stand out like a sore thumb if you don't offer one.
-- Closing costs. These vary from place to place, but it is common for sellers to pay at least 3 percent of the buyer's closing costs.
-- Legal fees. You may or may not hire an attorney to represent you in the transaction.
-- Property taxes. This universal tax is typically collected in two annual installments. You'll owe it from the date of your last payment to the day of the closing. This prorated amount will be larger the closer your closing day gets to the day your next payment is due.
-- Transfer taxes. Real estate transfer taxes are imposed by states, counties and municipalities on the transfer of title of real property within their jurisdictions. According to the National Conference of State Legislatures, 37 states and the District of Columbia have this levy.
-- Title insurance. Again according to local custom, the seller may be called upon to pay for the buyer's title insurance, which is a guarantee that a house has a clear title when it is transferred from one owner to the next.
-- Exit fees. Many condominium and homeowners' associations levy exit fees similar to transfer taxes. The few that don't collect monthly assessments from their owners hit them with a big fee when a unit within the complex is sold.
According to a 2010 study by the Community Associations Institute, half of all HOAs -- covering roughly 11 million homes -- charge what are sometimes called "transfer fees." Nearly 75 percent charge a fixed amount, ordinarily no more than $500. But it could be more. Almost 10 percent charge a percentage of the sales price, always less than 1 percent. And the remainder charge a multiple of the monthly assessment, typically two or three months' worth.
-- Interest. You'll owe interest on the outstanding amount on your mortgage. So don't count on the balance due from your last loan statement as your final payoff. Interest is calculated from the day your last payment is credited to your account until the day of closing. Consequently, the amount changes daily. And of course, the later in the month you close, the greater the amount you'll owe your lender.
-- Moving expenses. Finally, don't forget to subtract the cost of moving out of your old place and into the new one from your bottom line.