Selling a home involves many expenses that a first-time home seller may not be aware of. Between the realtor commission, title costs, staging expenses, and credits for repairs, it’s easy for closing costs to run into tens of thousands of dollars.
To confuse the sales process even further, closing costs aren’t always transparent or easy to anticipate. Sellers can find themselves overwhelmed, both emotionally and financially, by the real estate sales process.
If you’re a first-time home seller, keep reading to find out everything you need to know about some expected selling costs, so you can plan ahead and prepare yourself for closing day.
Preparing Your Home for Market
To secure the highest sales price possible for your home, it’s essential to make a great impression on potential buyers. This means highlighting your home’s best features so that buyers can imagine themselves living happily in it. The most effective way to make your home show worthy is to have it professionally staged. Professional staging uses furniture and decor to create a welcoming environment for buyers. This can make them more likely to put an offer. In fact, according to a study by the National Association of Realtors, 25% of buyer’s agents stated that a staged home typically received offers between 1% and 5% percent higher than unstaged homes.
Although it can be a smart investment, professionally staging a home is often pricey. If you’re planning to professionally stage your home, it will cost anywhere from $500 to $600 per room. This cost can quickly add up if your home sits on the market for longer than a couple of months. When determining your sales costs, include the cost of staging if you plan to use a professional service.
If you’d like to save some money, you can opt to stage your home on your own, with your existing furniture. Start by storing away personal or polarizing items, as well as cleaning and decluttering your home. Be sure that each room has a clear and designated use so that buyers can easily visualize its use.
Repairs and Renovations
Another major component of getting your home ready for the market includes making any major repairs and renovations before you list. Some major renovations, such as kitchen remodels, can add a lot of value to your home. On the other hand, smaller repairs like updating old lighting fixtures don’t add as much value but can make your home appear much more attractive to buyers.
If you’re aware of needed repairs in your home, but don’t have the time or money to complete them, you can list your home “as is.” In this instance, it’s important to note that you’ll likely have to reduce your list price or be prepared to give credit for the value of the needed repairs. It’s impossible to plan for every unknown, but the repairs you should plan ahead and budget for the repairs you’re aware of to lessen their financial impact.
Real Estate Commission
Real estate commission is one of the highest costs that sellers are responsible for. Home sellers are typically responsible for both the listing agent’s commission and the buyer’s agent.
Realtors typically charge an average of 3% in commission fees, so you’ll should expect to pay a total of 6%. This equals $21,000 on a $350,000 home.
Closing costs typically equal 1-3% of your home’s sale price, not including realtor fees. Seller’s closing costs are usually from property taxes and titles fees; however, there can also be other miscellaneous expenses.
On closing day, you should expect to pay any outstanding loan amounts you owe on the property. In addition, any outstanding property taxes are also due as well as mortgage prepayment penalties (if applicable), realtor commissions (if applicable), and title or attorney fees.
Each state and county determine their own tax rates, so you’ll have to check your local laws for an estimate. It’s not unusual for transfer taxes to be over 1% in some states, so budget in this expense when selling your home.