Worried about how much it will cost to sell your home? Its more than just closing costs and taxes. Below are 7 fees you may not think about when getting ready to sell, so prepare your purse strings! Remember, these are mostly not up front costs, but what your proceeds will be reduced by. Still, you will want to know where all your money is going!
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Are you interested in selling your home but are concerned about the cost that may come up when you sell your home? Today I'm going to tell you about seven costs that you may not realize when selling your home!
- COMMISSION: The most expensive is the real estate commission. Keep in mind, you may be losing money by not hiring a realtor. They can often get you more money and help you with the negotiations with a buyer. Even if you sell your home yourself, the buyer may ask you to pay their realtor's commission, so you may still be out even if you don't use a listing agent. Why would you not want to use a listing agent to have someone representing your interest in the transaction?
- PREPARING YOUR HOME: These things are going to cost you money up front: cleaning, staging, delayed maintenance, landscaping, painting, repairs requested by the buyer. You don't have to do any of these things, so it depends on how much money you want to put into selling your home.
- BUYER'S COST: A buyer may ask you to pay for their costs in their offer. Many buyers do not have funds available to pay both a down payment and closing costs. Depending on the type of loan that they have, there can be a restriction on how much the seller can pay or other people can pay of the buyer's closing costs. I believe the cap on FHA and RD and VA loans is six percent of the loan. For example, on $100,000 offer, $6000 you may be paying of the buyer's closing costs.
- YOUR CLOSING COSTS: Sellers have their own closing costs to pay as well. These make sure that the property is transferred legally. The title company gets paid to do all the paperwork; you're going to pay a lawyer to prepare the deed. Somebody at the title company has to do the title search and the state will require what's called deed stamps or transfer tax. In Arkansas, it's three dollars and thirty cents per thousand and that's usually split fifty/fifty with a buyer and seller. You also have property taxes. You may have already paid your tax bill this year, but you'll still have prorated taxes from the first of the year all the way to the closing date. If that's one day on January 2nd or a whole calendar year on December 31st, you're still going to have prorated taxes no matter when you close. If you're in Cherokee Village (or other similar communities like Horseshoe Bend or Ozark Acres), you'll have prorated county taxes as well as pro-rated SID taxes. Currently SID taxes are paid ahead and county taxes are paid in arrears which makes it all the more complicated. Some other closing costs a seller might pay is if you own a townhouse then there would be a property owner's association fee; that will also be prorated because that's usually paid on an annual basis. You can also pay it monthly so either way the townhouse fees will have to be paid. Another closing cost paid by the seller is usually a termite policy. Termites are pretty common in our area and I would highly recommend a buyer get a termite policy and some loans require them (FHA VA RD). A clearance letter is required by them if no policy is in place. If you already have a policy in place, then it would be less expensive to just transfer to the new buyer, but the lenders mentioned above will require a new clearance letter.
- MORTGAGE PAYOFF: Another thing that will show up on your closing statement will be any payoffs you have. The first payoff will be your primary mortgage. Hopefully you're lucky enough to not have a mortgage on your home and when you go sell it, you can pocket all the funds! The majority of the seller's do have a mortgage-they'll have a payoff. Keep in mind that it's not your remaining balance that is necessarily what's going to be taken out. They will add prorated interest from the day you last made your payment until the day you close, so there will be a little bit more than your last statement. You might have other things that need to be paid off: liens, judgments, credit cards - anything that's tied to you as a person or the property has to be paid off when you close so there may be other things that you don't expect to come up that will be have to paid off. They have to be paid off and a release filed for it to be a clear title for them to pass.
- RELOCATION COSTS: You're not going to stay at your home anymore when the new buyer is moving in! Costs for this include not only packing materials for your belongings, possibly a storage building that you're renting while you're listing your house for sale, as well as actually the moving truck, plus any costs if you're buying a house. Please keep all these in mind when you're selling a house.
- CAPTIAL GAINS: Of the fees a seller pays when selling their home, capital gains could actually be the most-but not likely. You don't necessarily think of income taxes when you go to sell a home, but the title company will send you documentation after closing you need to report on your income taxes. There is a possibility that you would owe capital gains taxes, especially if you are selling an investment or vacation home. There are short-term capital gains and long-term. Short-term capital gains are if you own the home for less than a year and those taxes are significantly higher; you want to do everything possible to not sell a home within one year. Long-term capital gains cost less since you've held the asset for more than a year. I can't tell you exactly what they cost since it based on your tax rate and how much you make and where you fall in the tax brackets. It's going to be different for everyone (here is some rates and a calculator capital-gains-tax-rates). Neither short-term or long-term capital gains apply if you use that home as your primary residence for at least two out of the last five years. The part you have to claim on your taxes is an adjusted amount. If you bought the house for a $100,000 and you sold the house for $200,000, you're not necessarily taxed on the hundred thousand left over. You can deduct your closing costs, improvements you've made and more. If it's not your primary residence, you can exempt up to $250,000 as an individual or 500,000 dollars as a married couple from your taxes. Check with your accountant to see which applies to you and if any tax laws have changed.
We've covered several fees a seller pays when selling a house. Unfortunately, they can add up pretty quickly. Talk to your favorite realtor about estimating your expenses when selling, so you come out on top!
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