Home selling costs you might be overlooking
As you prepare to put your house on the market, it is tempting to imagine how you’ll spend the proceeds. Of course you’ll put the bulk toward your new house, and you’ll have to cover the real estate agent fee. But what if you turn a little more profit than you anticipated? That might have you thinking of a backyard hot tub, new wardrobe or tropical vacation.
But hang on a second. Before you start packing for Honolulu, be sure you’ve budgeted for all the expenses related to the sale of your house. Like with anything else, the devil is in the details and there are a number of incidentals that can really add up on your way to closing day. Set the swimming goggles aside (temporarily, anyway) and find out about the other home selling costs you might not have thought of.
Here is a list of some typical costs associated with selling a home. Depending on your unique circumstances and location, other costs may apply and the amounts will vary.
The cost of a new house
Obviously you aren’t going to forget about this one, but it’s here for the sake of thoroughness. Unless you plan on renting or have other arrangements, you’ll need a new house once you’ve closed the deal on your current home. This will be your biggest expense by far, but hopefully the proceeds from selling your old house will cover the cost of the new house. If you still owe on your current mortgage, you may be able to transfer it to your new home, pay it off early, or have the buyer take it over.
The real estate agent's commission
This fee covers all the leg work, marketing and advice provided by your sales representative, as well as commission to the buyer’s real estate agent (the seller pays both!). You can expect commission fees to be a predetermined percentage of the home’s sale price, which is negotiable.
Legal fees and disbursements
When you’re involved in a financial transaction as big as this, you will want to be sure you are protected. Your real estate lawyer (or notary in Quebec) will ensure that the buyer has made good on all terms outlined in the offer to purchase, and that you have met your legal obligations so that the deal may close. Legal fees vary widely, and the total cost depends on the extent of services provided. You will also be responsible for disbursements (any costs related to handling your file, such as long distance calls and travel).
Utility and property tax adjustments
This might not be a cost for you, depending on how your property tax and utility bill payments are scheduled. If you prepay these expenses, then you can expect the buyer to refund you the difference by closing day. If, however, you don’t pay these expenses in advance, it will be you paying the buyer for the amount accrued prior to possession date. The exact amount will be calculated by your real estate lawyer.
Although this is entirely optional, many sellers choose to commission a professional house inspection before the buyer’s inspection (and sometimes even before the house is put up for sale). This protects you from any unpleasant surprises uncovered by the buyer’s inspector that might jeopardize the sale. A little advance notice gives you time to repair these issues.
Repairs and renovations
When it comes time to show your home to prospective buyers you want your house looking its best. Some renovations can actually return your investment in the value they add to your selling price. Other fix-ups are expenses that you’ll just have to absorb in order to make your house attractive to buyers. Too many serious issues left unfixed may make a home unsellable.
Following the sale of your house, you’ll have to clear out your stuff and send it to your new home. So budget for the moving company, utility hookups and all the incidentals involved in buying and moving to a new home.
Once you’ve tallied up your total costs you’ll have a better idea of whether you can afford to jet off to the sunny South – or settle for a piña colada on the patio.