Whether you are selling a house in Los Angeles or Miami, be ready to spend 10% to 12% of your property’s value on selling costs. Many sellers do not know the true cost of selling a house till they sign the closing papers. Till then the costs may add up to thousands of dollars.
⚡ Top Home Selling Costs
- Real Estate Commission: The seller pays a real estate commission of 6% of the final home sale value.
- Closing Costs: Closing costs make up 2% to 4% of the sale value.
- Seller Concessions: Seller concessions are optional but can go up to 6% of the buyer’s loan.
- Home Improvements: Sellers spend $14,000 on home improvements on an average.
💲What are the Costs of Selling a Home?
The realtor’s commission is the biggest selling cost. It makes for 5% to 6% of your property’s value. Plus, there are expenses, property taxes, and payoffs. The total cost of selling a house is 10% to 12% of your final sale value. Some of the major selling costs are:
- Home Improvement Costs
- Home Staging and Cleaning Costs
- Real Estate Commission
- Closing Costs
- Seller Concessions
- Relocation Costs
- Optional Costs
Breakdown of Home-Selling Costs
Given below is the cost breakdown of selling a house. It is based on the median home selling price for March 2023 which is $400,528. The numbers mentioned are average figures that can vary according to location.
📃 Costs of Selling a House: A Comprehensive List
The process of selling a house can be costly and time-consuming. On average, the home selling process takes a year. It involves several types of costs that you should be aware of as a seller. Here is a comprehensive list of all the home-selling costs.
Preparing Home for Sale
A buyer will first notice your home’s curb appeal. You can spruce up your home’s exterior by spending $1,000 – $3,000 on the front yard’s landscaping. Select a landscaping service that can give a good ROI. Don’t go for any major remodeling.
Apart from landscaping, sellers spend around $5,000 on home improvements. Carpet cleaning, AC repair, interior painting, and bathroom and kitchen remodeling are popular home improvements. You can choose any of these. To get the best ROI, consult an agent.
Listing Home for Sale
1. Staging Costs
Home staging involves an initial design consultation that costs $300 – $600. The actual staging of one room costs $600 per month. If you stage a home of 2,000 square feet, you need to shell out $2,400 per month. Staging is worth the expense. It can help in selling homes faster and save the cost of holding a vacant house.
2. Marketing Costs
Property marketing is crucial to attracting buyers and involves certain costs. Such advertising costs include:
- Professional photography and video
- Property floor plan
- Listing description
- Open house brochures
- Online and print advertising
Some costs are optional and a few are already covered by the agent’s commission. In total, the marketing costs take up 0.5% to 1% value of home.
1. Real Estate Commission
Mostly, the real estate commission is 6% of the property’s value. This fee is evenly split between the seller’s and buyer’s agent. It covers the listing cost and some of the marketing costs as well. If you want to save on commission, try Flat Fee MLS and opt for an FSBO transaction.
2. Owner’s Title Insurance
As a seller, you are expected to pay for title insurance. If there is a title dispute or outstanding lien, the insurance protects the buyer’s interests. It costs anything between 0.5% to 1% of the sale value.
3. Escrow and Closing Fees
The escrow fees are split between the buyer and seller. It is around 1% of the sale value. The Escrow company handles the closing. It is a third party with no interest in the deal. It holds the funds in an account and releases the final amount after deducting the fees upon closing.
4. HOA Fees
If your property is managed by the HOA, you have to pay a transfer fee of around $200. It is charged for transferring the home ownership. You can negotiate with the buyer as to who will bear this fee.
5. Concessions to the Buyer
You can offer some concessions to the buyer to increase the chances of a sale. Common concessions include paying for post-inspection repairs or accepting a lower sale price. Buyers can ask you to cover the cost of the home warranty which can range from $300 – $500.
6. Credits towards Closing Costs
Apart from the common concessions, you can offer to cover the buyer’s closing costs. You can provide total or partial coverage to reduce the buyer’s liability.
7. Attorney’s Fees
The attorney’s fees vary according to the location. 21 states have made it mandatory to hire an attorney to oversee closing. Mortgaged home transactions involve legalities. An attorney charges anything between $500 – $1,500 based on the services provided.
Taxes and Payoffs
1. Mortgage Payoff Penalty
Along with the closing fees, you need to clear the mortgage payoff and the associated prepayment penalty. The remaining mortgage amount is prorated to the closing date. The penalty is decided as per the policy of your mortgage company.
2. Capital Gains Tax
If you make a profit through a sale, you are liable to pay capital gains tax. However, you can get a tax exemption. The exemption for single people or married couples filing separately is up to $250,000. Married couples filing jointly are eligible for an exemption of up to $500,000.
Your application will be accepted only if you have lived in your home for at least two of the last five years. If you are supposed to pay a capital gains tax, consult a tax professional. He can help to reduce your tax liability by deducting the costs of home preparation from the profit.
3. Transfer Tax
Along with other taxes, you need to pay the transfer tax or title fee to the government. It legalizes the transfer of homeownership. The tax amount varies according to location. It can be charged as a flat fee or as a percentage of the final sale value.
4. Property Tax
The property tax is fixed after assessing your property. You are supposed to pay it to the government as the homeowner. The prorated tax amount is mentioned in the settlement statement.
1. Alternative Housing Costs
You need to time the home sale transaction to avoid additional housing costs. Don’t end up paying alternative housing costs along with an existing mortgage. Time your closing right.
For open houses and showings, you have to leave the utilities on. Make sure that your bills are prorated as per the closing date. Failing that, you may have to pay an additional amount unnecessarily.
3. Moving Costs
For local moves, the average moving cost is around $475. This includes a truck and two movers. The cost varies according to the size of your house.
A pre-inspection costs $300 – $500 depending on the size of the home and the location. Although optional, a pre-inspection done before listing helps to resolve major issues.
Selling a home as is can be an option for you if your home is structurally strong. You can spruce it up with a fresh coat of paint or landscaping. Major repairs are not necessary and cost a lot. You can end up spending $10,355 on a simple kitchen remodel.
⬇️ How to Reduce the Cost of Selling a House?
Now that you know how much it costs to sell a house, try to optimize your profit. For that, you need to reduce selling costs and find low-cost alternatives.
⚡5 Powerful Tips to Reduce Home-Selling Costs
- Skip an Agent: Save 3% of your home’s value by skipping an agent. Choose Flat Fee MLS for listing your property as FSBO.
- Sell As Is: Skip repairs and sell as is. The buyer may offer a lower price to cover repair costs. But you will sell faster and save a huge amount by avoiding repairs with low ROI.
- DIY: You can shift furniture, remove old items, spruce up the outdoors, and declutter. It can save the cost of hiring professionals.
- Negotiate: Check the details of the sales contract carefully. Negotiate real estate commission and expenses like seller’s concessions and closing costs to save money.
- Price it Right: Price your property at the fair market value and offer smart concessions. This can increase buyer’s interest and you may get some great offers.
🚩 How Much Does it Cost to Sell a House on Your Own?
The ‘For Sale By Owner‘ method costs 5% to 10% of the final selling value of your home. A big portion of this cost is the realtor’s commission. You can save the listing agent’s commission in an FSBO transaction. However, there are other costs you cannot avoid:
- Buyer Agent’s Commission: You have to pay a commission of 2% to 3% to the buyer’s agent if the buyer opts for representation.
- Closing Costs: Your share of closing costs includes attorney’s fees, HOA fees, escrow fees, home inspection charges, settlement fees, and title insurance.
- Taxes: After settlement, you need to pay the transfer tax, property tax, and capital gains tax according to the home sale value.
- Mortgage Payoff: If you have any mortgage amount remaining, you have to pay it along with the pre-payment penalty during closing.
✍️ Pro Tip: Consider Flat Fee MLS
A good way to cut down FSBO selling costs is to opt for Flat Fee MLS. You can list your house for as low as $349 with no hidden costs.
👍 Advantages of the Flat Fee MLS Method
- Saves Realtor’s Commission: You can save the listing agent’s commission which is 3% of your property’s value.
- More Control Over Transactions: You interact and negotiate directly with the buyer or his agent. Listing, Marketing, Showings, and Sales are all under your control.
- Speeds Up the Selling Process: You don’t have to wait for the agent to begin the selling process. You can start whenever you are ready. FSBO websites can list your property within 24-48 hours and help you sell faster.
- MLS Exposure Without Agent: You can get MLS exposure through FSBO websites like Houzeo. They can list your property for a small fee and without hiring an agent.
- Assistance With Paperwork: FSBO websites offer assistance with paperwork and legalities. They charge a nominal fee and sometimes a small commission at closing.
How Can Houzeo Help?
- List your property on the MLS with Houzeo.com within 2 business days
- Manage Showings effectively with Houzeo Showings
- Review, Compare, and Negotiate Cash Offers with Houzeo Offers
- Opt for the “Contract to Close Consulting Package” and get a licensed broker to assist you during the closing
🏡 List Your Home Only For $349
Houzeo is the fastest way to list on the MLS and market your home to a wide pool of home buyers
START YOUR MLS LISTING NOW
The average home prices may decline by 4.5% in 2023 based on the Case/Shiller index. As a seller, you need to decide which optional costs you want to incur apart from the fees and taxes.
Some investments in home improvements can fetch a higher value while others may not increase the ROI. If you are planning to sell a home in 2023, check out the selling cost breakup and decide wisely.
Frequently Asked Questions
1. When selling a house who pays for what?
The seller pays the total real estate commission which is 5-6% of the final sale value, owner's title insurance, home warranty, real estate transfer taxes, and escrow fees (split with the buyer).
The buyer pays for home inspection and appraisal, lender's title insurance, and his share of closing costs.
2. How much does it cost to list a house?
The seller usually has to pay 2-3% of the final sale value as listing fees to the agent. However, they can opt for Flat Fee MLS to save most of this amount and list without hiring an agent.
3. How much does it cost to sell house by owner?
It costs around $4,000 to $5,000 to sell house by owner. A Flat Fee MLS service can reduce the cost of an FSBO transaction.
4. How much do you lose selling a house as is?
If you sell a home as is, you can lose upto 20% of your home's value as the buyer deducts the cost of renovation. However, the actual figure depends on the buyer's preferences.
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