The Expensive Side of Selling a House

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Most people are concerned with how much they'll make from selling their house. This is especially true now, with the housing shortage and high prices. But there’s a financial downside to selling your home.

When your house goes on the market, you may not realize that both the seller and you will be spending money. There are hidden costs in every aspect of the sale. But what are these costs, and is there any way to avoid them?

Costs of Selling a House

If you want to sell your house, there are some expenses that you must factor into the final selling price. And although you may profit from the sale, you’re not keeping all that money.

You'd make a lot more if you didn’t have these hidden fees and not-so-hidden expenses.

Real Estate Agents’ Commissions

Your real estate agent’s commission will most likely be the biggest expense. You’ll be paying 2.5–3.0 percent of the home’s sale price.

But that 2 percent encompasses you and the buyer. You pay both agents who are involved.

That means if you have a $500,000 house and sell it, using the 3 percent commission number, you’ll pay $15,000. But if you’re savvy and have a higher price home, you may be able to pay less commission.

But commissions and how they’re paid might be changing.

Real Estate Class-Action Suit Settled

In April 2024, there was a settlement with the National Association of Realtors (NAR). The association agreed to pay $418 million to settle 12 antitrust lawsuits. The NAR was accused of creating rules that inflated commissions, but the association didn’t admit any wrongdoing.

After the dust has settled, home sellers will pay smaller commissions, allowing them to keep more of the sale price. Buyers, not sellers, will now decide how the real estate agents will be paid.

No one is certain how the real estate market will adjust to this new change.

Paying More in Taxes

When you sell, you'll need to pay pro-rated taxes. These could be low if you just paid for them, but they could be thousands of dollars if you owe any.

Your state may have a real estate transfer tax. This tax is charged when a property changes ownership. The amount you pay depends on your location and property value.

The seller or buyer could pay it. Sometimes, both pay for it.

If the profit from the home is more than $250,000 for a single or $500,000 for a married couple, you may have to pay capital gains taxes.

Although it’s not a tax, any homeowners association (HOA) fees will be prorated before you move. There is sometimes an HOA transfer fee.

Closing Costs for Seller

Although many closing costs are the buyer’s responsibility, sellers have them as well.

For example, title insurance protects the buyer in case there’s an issue with the home’s ownership history. Buyers will purchase a title policy to protect the lender when applying for a mortgage.

Sometimes, the seller pays for the buyer’s title insurance. The average cost is $1,000.

Title companies run a title search during the sales process. If they reveal a lien on the seller’s home, it must be settled before the house can be sold.

Legal fees must be paid at the closing. Sometimes, the seller pays the buyer’s legal fees. Although not required, this is part of standard negotiations.

Escrow and wire transfer fees are often charged to the seller.

When it’s all said, the seller’s closing costs are usually between 1–3 percent.

Sellers Mortgage Pay Off

Any remaining balance on the house must be paid before the property transfer. Often, the accrued interest is added to the total balance. There also might be a prepayment penalty. Contact the lender ahead of the closing so there are no surprises.

Other Costs of Selling a House

There are other optional costs to selling a house. But sometimes these tasks need to be done. These costs can put a dent in your budget.

Repairing House for Sale

There’s usually a home inspection; they want to know the property’s condition. If some parts of your home have failed inspection or are unsatisfactory, the buyer may ask you to repair them.

Inspect your home to avoid delays due to a bad inspection.

Potential Moving Costs

Moving costs depend on how much furniture and miscellaneous other items you have and where you are going. The average cost to move a two- or three-bedroom home locally is $1,250, but if you are going further away, it could cost $4,890.

Sort through your belongings before you move to ensure you’re not moving something you don’t need.

Selling a Home Is Expensive

The biggest expense is the real estate agent’s commission. Fortunately, a lawsuit against the NAR may have diminished that somewhat for the seller. Miscellaneous expenses like closing costs, title insurance, and taxes can also inflate your selling budget.

The Epoch Times copyright © 2024. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.