What are the Costs to Sell Your Home?
CAMERON WARD
With a strong real estate market across the country this year, many homeowners are thinking about selling homes they may have otherwise stayed in long-term. Cashing in on your equity can be a great thing, especially to re-invest in another home. Here I’ve outlined the typical costs you can expect when you sell your home so you can make a smarter decision regarding one of your largest assets:
Commission. When you list your home with a Realtor, you’ll pay a commission which is a percentage of the sale price. There’s a lot to talk about with commission, but the simplest explanation is that your Realtor will earn part of this commission as their income for selling your home and they will split part of that commission with a buyer’s agent that assists the buyer of your home. It’s important to ask your Realtor if they charge extra fees on top of the commission. At The Alms Group, I am proud of our transparency and honesty with all consumers; we don’t charge any extra fees to sell your home.
Property Taxes. In Kansas, property taxes are paid about six months in arrears. For example, the property taxes for July-December 2020 are due in May 2021, so you’re always paying for a previous half-year’s taxes. When you go to sell, you’ll need to credit the buyer for the property taxes during the time that you owned the home. If your taxes are paid from an escrow account, you’ll need to pay off the entire tax amount with the proceeds of your home at closing and wait for your lender to refund you the balance in your escrow account.
Title Insurance. Title insurance guarantees that you have a clear title to pass on to your buyer and it also protects both buyer and seller from potential claims or liens from previous owners. This policy is issued by the title company that completes the sale and the cost is based on the price of the home. If your buyer is getting a loan to purchase your home, their lender will require title insurance. The title insurance policy for $250,000 costs around $800.
Title Fees. The title company that completes the closing charges a nominal fee to prepare the closing documents, complete the closing, deal directly with the buyer’s lender, and most importantly, get you PAID when the house closes! Their fee is typically $250-$300.
Negotiated Items. The buyer might request certain additional items in the offer they make on your home. This could include a seller-paid closing costs allowance, a home warranty, or other provisions. These items can add up, so make sure to consider all additional costs.
Capital Gains Tax. Capital gains tax is a tax amount assessed by the IRS on the proceeds you make on your home. There are some exemptions to this tax, such as if the property you’re selling was your primary residence for 2 of the last 5 years or if you are using those proceeds to purchase a like-kind investment property (this is done through a 1031 tax exchange, which is another topic altogether). If the property you’re selling was a rental or you haven’t claimed it as your primary residence, you will likely be subject to capital gains tax when you file that year’s tax return. The amount of this tax is calculated based on your net gain (profit) in the property, but some costs to sell can sometimes offset that gain. I always recommend speaking to a tax professional with specific questions about the tax implications of selling real estate.
There’s never been a better time to sell your property but calculating all of the costs to sell will you make a more informed decision. Part of our job at The Alms Group is helping guide you in that decision, so any of our agents are happy to help calculate your estimated proceeds. Give anyone in our office a call for the most seamless experience when you sell your home!
