The Cost of Selling a House Explained

As much as selling a house is hard work, its cost isn’t cheap either. From the time you decide to sell your home, you may have to bear various costs until you close the deal. However, some expenses are optional or negotiable. Although, you have to spend a significant share of your home’s sale price (around 10-15%) if you want to get a fair price for your home.

This article explains the typical costs associated with selling a home, best practices for how to sell a house, and provides some suggestions for cutting down certain costs.

What are the costs of selling a home?

Real Estate Agent Commission

The commission you will pay to a realtor, or a real estate agent is most likely the highest cost you may bear as a seller. Real estate agents are experts in handling negotiations, home valuations, staging, and paperwork, thus hiring one is highly recommended. Usually, the commission accounts for about 5-6% of your home’s sale price, and it is split between your agent and the buyer’s agent.

These commissions, however, are negotiable, and you may be able to reduce them a bit. There are also discount real estate agents, particularly online brokers, who are willing to go with a smaller percentage like 1-2% or a flat fee.

If the cost of real estate agent commission is too much, you can always fly solo and sell your home without an agent. However, you still may be ended up paying a commission to the buyer’s agent because about 87% of buyers use an agent. Therefore, the buyer’s agent commission is often an unavoidable expense.

Costs of prepping your home

A house must be prepared before selling so that it will attract interested buyers. However, there are some costs when selling your home to consider, such as staging costs, landscaping costs, home repairs and maintenance, and home improvements.

Home’s visual appeal is very important because it makes potential buyers fall in love with your home at first sight. Staging can help you with that, which improves your home’s best features by arranging furniture and decorations.

The average cost to hire a professional stager varies between $2,300 to $3,200. But you can save money on staging if you do it yourself. As much as the inside of your home, the outside is also important when it comes to selling. Because curb appeal is the first impression that your home makes on potential buyers.

You can just spend a few hundred dollars for simple landscaping like weeding, pruning shrubs, and sprucing up your flower beds, or you can do more comprehensive landscaping work that would cost you around $3,239. However, the cost will depend on the size of your yard and the extent of the job.

In addition, you may have to bear home repairing and renovation costs, if your home needs them. Repairs might be necessary if there are damaged features, broken appliances, and spaces. However, it makes more sense to do smaller renovations that would add value to your home rather than going for remodeling your entire house, which will cost you both time and money.

Seller concessions

You may probably have to bear a concession ranging between 1.5-2% of the home’s sale price as certain payoffs to the buyer generally include inspection fees, processing fees, and other costs. This concession is usually used for getting the buyer to agree to the current sale price so that the seller can close the deal.

But it is also beneficial for the buyers because they can use it to bargain or offset the cost of having to make a higher offer to compete in a seller’s market. However, the concession a buyer can receive varies according to their loan type and the amount of the down payment the buyer.

Closing costs

When closing a real estate transaction, both you and the buyer must pay certain closing fees. Sellers usually pay between 1 and 3% of the home’s sale price at the close of a deal. However, you have to bear a lower cost compared to the buyers because there are fewer closing fees, such as closing agent payment, property taxes, attorney’s fee, recording fees, transfer taxes, and any costs involved with your original mortgage payoff.

Other additional costs

Even after closing the transaction, still there are some costs that you may have to bear. Since you’re moving to a new home, you must take moving costs into account as well. Generally, moving costs take up to about 1-2% of your home’s sale price. However, costs depend on factors, such as the distance you’re moving to, the number of household items you’re carrying, and whether you’re moving yourself or hiring professional movers. Therefore, you can reduce the moving costs by changing these things in a way that it’s convenient for you.

In addition, you may have to pay income taxes, if there is a large enough profit from selling your home. However, you can still reduce a certain amount from it if you owned the home for at least two years and you lived in it for at least two years out of the last five years.

For example, if you owned the home for at least two years, then you’ll be taxed under long-term capital gain, which is at a lower rate than that of short-term capital gains. Also, you should keep in mind that your profit is based on the adjusted cost basis, not what you paid for the home initially. The cost basis accounts for both what you paid for the home and the costs of any improvements you’ve made over the years.

So, if you had any improvements to your house, then it will increase your basis while decreasing the profit.

The bottom line is that you must take all the potential costs into account before deciding to sell your home. It’s no surprise that you’ll be frustrated by all these costs of selling your home but remember that many of these costs will help you to upgrade your home’s value, thus increasing the sale speed of your home.