You may have pictured the dollars pouring in your bank account when you’ve got your home on the market. After all, home prices are rising in many markets across the country, and odds are pretty good that your home has appreciated over the years.
It’s easy to forget that in selling a home sometimes costs a lot of money too. Of course there are the obvious costs you’ve probably anticipated, like commissions to the listing and buyer’s agents (typically amount to 5% to 6% of your home’s price). There are also a variety of smaller expenses to factor in. Check out our list below.
Many of us may have let our home’s maintenance lapse, and because of this, we may need to hire a handyman or a general contractor to get the property ready to put on the market. Don’t even try to cheap out with this one because buyers are going to catch sloppy repairs during the home inspection and may end up paying more than you should just have used with a good handyman. To avoid this, you should walk through your home, and draw up a list of noticeable problem areas such as rotted wood, cracks in the ceiling, or chipped paint. These are some minor issues that’s worth fixing because some buyers assume that there might be a bigger problem beneath the surface.
Different goes for making major repairs though. You’re probably better off lowering the listing price – or maybe just giving the buyer a credit at closing instead of doing the work yourself as this may cost you a lot more.
“First impressions last,” and “Love at first sight,” these phrases mean a lot. According to the National Association of Realtors®’ 2015 Real Estate in a Digital Age Report, “four in 10 home buyers start their search by looking at properties online.” And photos are overwhelmingly viewed first, according to a study by Old Dominion University. Given that it would be cheaper to let your agent take pictures, it’s still worth paying for a professional photographer.
Landscaping is the first thing that potential buyers see, and it reflects well – or poorly – on other homes in the neighborhood. Good landscaping can add up to 28% to overall home value, says landscape economist John Harris. But don’t landscape merely to flip a house. You won’t get your money back, says Sandy MacCuish, a California appraiser. Rather, landscape for your enjoyment, knowing that you’re making a good investment. Take the time to remove weeds, trim hedges, and mow the lawn.
The home staging industry has been around since the 1970’s and is a wise investment for savvy sellers. 94% of staged homes generally sell within 29 days compared to homes not staged. While home staging includes the basics of de-cluttering and cleaning, it’s really all about the magic of marketing and creating an emotional connection with your buyers. Staging is where you hire a professional to arrange furniture and other items in a home to make it more appealing. Staging your property will also help your home typically sell quicker and for a higher offer.
Hiring a professional home stager to assist you if you are not a DIYer is money well spent. However, if you are willing to invest some time and effort, you can highlight your home’s strengths and differentiate it from the other homes on the market. Buyers need to be able to visualize what it will be like living in the home.
Even if you’ve already moved into your new home, you’ll want to pay to keep the electricity on while your property is on the market. You wouldn’t want your potential buyers to walk into a hot or cold house, or a house that’s pitch-black right? And also, if you turn off the air conditioning during the summer, you’re putting your home at risk for mold.
Capital Gains Taxes (CGT)
Taxes are indeed inescapable and the real estate industry is no exception. If your home has appreciated a lot, you may have to pay Capital Gains Tax. This tax is based on the difference between your home’s purchase and selling prices, minus the value of documented improvements such as an addition. So, if you’re in a hot market and your profits are substantial, it may take a small chunk when April rolls around. Better talk to your accountant or a tax preparer for more information.
Closing costs will likely be your second-biggest expense behind commission fees. It could cost you roughly 2% of your home’s sale price. The buyer typically chooses the closing company, and closing costs tend to be fixed, including transfer taxes, mortgage processing fees, escrow fees, and notary fees. This may also include any outstanding property taxes, a prorated share of the water and sewage bills (depending on when you sell), and the remainder of your mortgage.
Source: Realtor.com, houselogic.com, expertbeacon.com, Investopedia.com
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