If you’ve never sold a home before, you can think of the costs similarly to staying at a hotel. When you book the hotel, there’s a listed price for your room, but you know that’s not actually what you’re going to pay. There are additional costs like taxes and resort fees, so you don’t know the final bill until you’re checking out. Selling a house is just like this: you’ll know your realtor’s commission upfront, but it can be hard to estimate the cost of all your expenses until you’re closing with a buyer. That’s why many people mistakenly think selling a home costs 6%–because they’re only taking into account average commission fees. In reality, the average total cost of selling a home is about 10% of the sale price. Here are the hidden costs of selling a home that you might not know about and estimates of how much you’ll pay:
More than 6%: the hidden costs of selling a home
If you’ve never sold a home before, you can think of the costs as like staying at a hotel. There’s a listed price for your room, but that’s not actually what you’re going to pay. There are additional costs like taxes and resort fees, so you don’t know the final bill until you’re checking out. Selling a house can feel similar: you’ll know your realtor’s commission upfront, but it can be hard to estimate the cost of all your expenses until closing. Below are estimated costs you can expect in a traditional sale and where you can save with DiGiovanni Real Estate. If you are taking advantage our Foreclosure Solutions or All other solutions, you can find out more by visiting our Pricing page:
1. Holding & Repair Costs (8%)
One of the most overlooked expenses when selling a home is the cost of housing during the transition period from your old home to your new. If you’re like most people, you’ll need to sell your old home before you can buy a new one to have cash for a down payment. Timelines almost never align perfectly, so you may need to set aside funds to either stay in a hotel and store your belongings, get a short-term rental, or negotiate a lease-back during the months it can take to search for and close on a new home. Even if you are able to move into your new home before selling the old one, be prepared to pay holding costs for the days you still own your old home like property taxes, mortgage payments, HOA fees, utilities, and insurance. With DiGiovanni Real Estate, you have full control of the timing of your move—you chose your close date and even have the flexibility to move it if something unexpected comes up. That means no extra spend on housing, storage, or holding costs during that transition period between moving out of your old home and into your new one. After you’ve agreed to an offer, your buyer will get your home inspected for any defects. Most homes that have been lived in will have some needed work just from normal wear and tear. Usually, the buyer will either ask you to make the repairs yourself or ask for a credit equal to the expected cost of making the repairs.Our analysis of industry data suggests these costs typically range from 8-10% of the sale price but could go even higher depending on the severity of the repairs and length of the transition period.
2. Agent Commissions (6%)
In a traditional home sale, the seller pays the commission fees of both their own agent (the “listing agent”) and the buyer’s agent. The total commission in many areas is about 6% of the sale price, which is often split evenly between the listing agent and the buyer’s agent. Even if you’re planning to save money by selling your home on your own, you’ll likely still need to pay a commission fee of about 3% to the buyer’s agent. According to the National Association of Realtors, 88% of buyers have an agent.
3. Closing costs (2%)
When the sale is nearly complete, you’re left with one last set of costs: closing costs. Closing costs cover items like title insurance, escrow fees, and HOA transfer fees. They can range from 1% to 3% based on the different fees and legal requirements for each state and municipality. At DiGiovanni Real Estate, we’ll provide you with an estimate in advance
4. Seller concessions (2%)
You’ve found a buyer and they’re willing to pay asking price—congrats! But wait, they’re asking for concessions, what does that mean? It’s common for buyers to ask sellers to pay for costs on their behalf such as inspection fees, processing fees, transfer taxes, and more. The maximum amount of seller concessions a buyer can ask for is determined by the type of loan the buyer is using. For example, the max for a conventional loan is 3% to 9%, depending on the size of the down payment. Our analysis of home sale data indicates that when buyers in Phoenix, Dallas, Las Vegas, and Atlanta do ask for concessions, they ask for about 2% of the home’s sales price. Buyers usually ask for concessions when they have enough cash for their mortgage down payment but not enough for their closing costs. If you sell to DiGiovanni Real Estate, you don’t have to worry about those concessions.
5. Staging & home preparation costs (2%)
To sell your home, you must get it “show ready”, or presentable enough for buyers to make an offer. Paying to stage your home isn’t required, but it’s common and often recommended. At minimum, you’ll need to clean and declutter your house and pay storage fees for the furniture you’ll need to hide away while your home is on the market. It’s also likely you’ll invest in cosmetic touch-ups like fresh paint and new carpet. If you have eclectic or outdated furniture, or live in an area where there’s a lot of competition, hiring a professional stager may be recommended. The cost of staging varies based on factors like the size of your home and whether you need to rent furniture. There’s no staging, storage, or prep costs when you sell your home to DiGiovanni Real Estate. We aim to give you a fair market offer based on the important factors: your home’s features and condition, recent nearby sales, and market trends. You don’t have to worry about clutter or worn furniture affecting your offer.
Low appraisals: a risk to be aware of
One potential hidden cost of selling your home is a low appraisal. Imagine you’ve signed with a buyer to sell your home. It’s a great price, you’re feeling good, your new home is all lined up, and you’re ready to move! Then, your home appraises for below the sale price. What do you do? The first thing you should try is an appraisal rebuttal. A knowledgeable agent can help you through this. Unfortunately, rebutting an appraisal usually won’t help much. So what can you do next? You’ll want to negotiate with the buyer for one for one of the following:
- The buyer makes up the price difference in cash. If the appraisal is close, you may be able to get the buyer to come to the table with more cash. In our experience, this rarely works because most people buy the nicest home they can afford.
- You and the buyer split the difference. If your buyer has more money available than they needed for the down payment, this is a great option. Unfortunately, many buyers don’t have that cash on hand and are already putting as much as they can into the down payment.
- You eat the price difference. Appraisals vary by more than 5%, so this could be a big chunk out of your pocket. We’ve experienced this issue ourselves when reselling some homes we’ve purchased, and there was nothing we could do about it.
- You lose the contract with your buyer and re-list your home. For big appraisal differences, this is the best option. It doesn’t guarantee the next buyer will lead to a better appraisal, but you have a chance. Unfortunately, if you were expecting to buy a home, you may need to walk away.
For most of us, our home is the most valuable thing we own. It’s important to maximize our proceeds when selling it because it determines how much we can spend on our next home and how much our mortgage payments will be for years to come. So remember: don’t focus solely on commission. Be sure to sit down and calculate how much you’ll spend on all the fees listed above – so you will be able to determine the true cost of selling your home. This will help you figure out your net proceeds or the amount of cash you’ll end up with in your pocket after subtracting all the expenses of the sale from the total sale price.