When you plan to sell your home, you may be thinking only about the profit you’ll make and perhaps what you’re going to spend on your next home. There’s something else to think about as well, though.
When you sell a house, you have to pay different fees, and in some cases, they can be relatively high.
Commissions and other fees can take up around 10% of the sale price of your home, but some of these fees fluctuate in line with the market itself, and others are negotiable. When you know what to expect with fees, it can help you plan and be proactive as far as finding ways to reduce them and maximizing the earnings on your sale.
Real Estate Agent Commissions
The biggest fee you’re likely going to pay when you sell your home is a real estate agent commission. Realtor® commissions can be as high as 6% of the sale price, and this fee will usually be divided between the agents for the buyer and seller and then the brokers.
If you were to sell your home for $350,000, real estate commissions could be as high as $21,000.
Realtor fees vary depending on the type of home you’re selling, and other factors such as where you live in the country.
According to data from the National Association of Realtors®, 36% of agents around the country get a fixed split on commission. This would mean, as an example, the commission could be split 70/30 so 70% would go to the agent and 30% to the broker.
Some agents have a graduated commission split, and others have a capped commission split.
The commission is how agents are paid for their work such as marketing a property, hosting open houses, and doing showings. If you find an agent who’s willing to work below the typical commission rate in your area, you might be cautious because this could also mean they won’t put in the same amount of work as a more expensive agent. Usually, experienced Realtors and agents aren’t willing to negotiate their commission.
Fees when selling a house are also going to include closing costs in many cases. Closing costs can be anywhere from 2% to 5% of the sales price of your home. Often with a mortgage loan, there is the option or the seller to pay the closing costs for the buyer, but this has to be negotiated as part of the deal.
Other Fees When Selling a House
There are other fees you may be responsible for when you sell a house, but not always. These can include:
- You may have to pay a transfer tax, which is something some cities and counties (but not all) charge when you transfer your home into the name of the new owner. A transfer fee may be a percentage of the sales price of the property, so the more expensive it is, the more you may pay if this is required where you live.
- If you use a real estate attorney for your transaction, you may pay them anywhere from several hundred dollars to a few thousand.
- A home buyer may want title insurance to protect them against potential title issues. While the buyer pays for lender title insurance, the seller has to pay for the buyer title insurance, which can be upwards of $1,000, depending on the sale price of the home.
- Escrow fees are most often split between buyers and sellers, and they can be anywhere from $500 to $2,000.
- Until the day you close on your home, you’re responsible for paying property taxes, so on your settlement statement, this could be listed as a prorated amount. The same is true of HOA fees. You may have to pay prorated HOA dues until your closing date, and some HOAs charge a transfer of ownership fee as well.
- If you’re still paying off your mortgage, then as you’re going through closing, you’ll need to pay off the mortgage balance, which is prorated up to the sale date. There may be a prepayment penalty with your mortgage company too.
Finally, another thing to think about when calculating fees when selling a house is capital gains tax. If you lived in your home for at least two of the past five years, you’ll have a tax break on your profits from selling your home.
If you aren’t sure about your potential capital gains liabilities, speak with a tax professional.
If you are ready to sell your home, EffectiveAgents® can help. Learn more about how to find the best Realtor® based on sales performance.
Photo by Ralph (Ravi) Kayden on Unsplash