If you’re selling your home, you’re probably hoping to make some money. But before you start calculating what you’ll make on the sale, it’s important to understand what it’s going to cost you: There are a number of costs associated with selling your home, and you won’t simply pocket the full amount of the sale price. Here’s more on how to calculate your potential profit on a home sale.
If I sell my house, how much will I have left?
The total amount of the sale price of your home is not your net proceeds from the sale. In fact, you definitely won’t keep the full amount, and the amount you keep depends greatly on a variety of factors. It may be wise to think about what you have to pay rather than what you get to keep.
Average cost of selling a house
In a traditional home sale, the biggest cost to the seller is likely to be the real estate agent commissions. Typically, the seller must pay both their own agent and the buyer’s agent (though that may change if a recent lawsuit regarding commissions is successful).
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Commissions: The average agent commission is between 5 and 6 percent of the sales price, so if you sell your home for $400,000, you’ll probably pay between $20,000 and $24,000 in commissions.
In addition to real estate agent fees, there are many other costs that the seller incurs when preparing their home for sale. Some optional costs that sellers often take on to make their home more attractive to buyers include:
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Staging: Hiring a professional home stager can help make your home more attractive to buyers, especially if it’s cluttered from years of living there – or is empty because you’ve already moved out. In a recent study by the National Association of Realtors, 20 percent of agents said home staging increases the amount they offer on a home.
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Pre-listing inspection: Although it’s optional to have your home inspected before you sell, it can still be a good idea. Learning about problems and fixing them before you put your home on the market reduces the chance that it will turn off a buyer. The inspection will likely cost a few hundred dollars. Keep in mind that if your inspection reveals any significant defects in your home, you may be required to disclose them to a buyer, depending on your state’s disclosure laws.
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Repairs: You might want to fix that leaky faucet or creaky floorboards before you list your home to avoid making a bad impression with buyers. And major repairs can really set you back financially, so be prepared before you decide to sell, especially if you expect a home inspection might uncover problems.
Repair |
Cost |
---|---|
Foundation issues |
$2,000 to $25,000 |
Electrical systems |
$100 to $2,500 |
Roof repair |
average 950 USD |
Roof replacement |
up to $8,000 |
Water heater repair |
600 USD on average |
Replacing the water heater |
1,700 USD on average |
Water damage |
2,600 USD on average |
Leaking pipe |
$600 – $1,600 |
Septic tank |
1,750 USD on average |
Heating, ventilation and air conditioning technology |
average 350 USD |
Mold remediation |
2,350 USD on average |
Termite damage |
3,000 USD on average |
In a real estate transaction, many closing costs are the buyer’s responsibility. But the seller also incurs closing costs. Common closing costs you can expect include:
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Mortgage repayment: Do you still have a mortgage on the home you’re selling? How much it costs to pay this off depends entirely on your outstanding balance, and the amount will be deducted from the sale proceeds. For example, if you sell your home for $500,000 but still owe $300,000 on your mortgage, you’ll have to pay $300,000 back directly to the lender. Prorated accrued interest will likely be added as well, and you may also be charged a transfer fee.
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Transfer taxes: In most states, a tax is assessed when you transfer ownership of your home to the new owner. The amount of the transfer tax depends on the location of your home.
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Proportional property taxes: As a homeowner, you are responsible for property taxes for the entire duration of your ownership until closing day. The same goes for HOA fees if the property is part of a homeowners association.
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Title-related fees: Sellers often pay for title searches and title insurance, both of which relate to the title and whether someone else has a claim to the property. The costs and who pays them vary by location and can often be negotiated.
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Legal fees: Many states even require you to hire a real estate attorney if you want to sell a home. But even if your state isn’t one of them, it’s wise to have a legal professional review the transaction to make sure your interests are fully protected.
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Moving costs: While these are not closing costs per se, they are still an expense that all sellers should factor into their budget. The cost of moving all of your belongings from your old home to your new one is cheaper in the off-season than in the summer, and much more expensive for a long-distance move than a local move. If you need to store your belongings during the move, that will also be an additional cost.
Sell your house for a higher price than when you bought it
Add up all of the above costs for your home sale and subtract the total from your final sales price. What’s left is your net profit. This amount can vary greatly from sale to sale and depends greatly on how much you still owe on your mortgage. According to a recent report from ATTOM Data Solutions, the typical U.S. home seller made a profit of $121,000 in 2023.
In 2023, the typical U.S. home seller made a profit of $121,000.
Source: ATTOM Data Solutions.
If you made a really big profit – double the average or more – you may also have to pay capital gains taxes. In this case, you’ll also need to take that amount into account to determine your net proceeds.
Do you get all the money at once?
Typically, the buyer must pay the money for the sale at closing. This is used to pay the broker’s fees and closing costs as well as the mortgage payment. The net proceeds are then paid to the seller.
The buyer can usually provide the funds via cashier’s check or wire transfer. Depending on the payment method and closing procedures in your state, it may take anywhere from 24 hours to several days to receive your share of the funds.
Example: If I sell my house for $400,000, how much will I get?
Let’s say you sold your home for $400,000 and still have $200,000 to pay on the mortgage. Assuming the selling costs below, here’s what you can expect to end up with.
Cost |
Cost |
---|---|
Brokerage commissions |
$22,000 (5.5%) |
Preparatory work |
$1,450 |
Pre-listing inspection |
$375 |
Repairs |
500 US dollars |
Mortgage repayment |
200,000 US dollars |
Closing costs |
3,500 US dollars |
Remaining bills for the property |
1,000 US dollars |
Moving costs |
$1,650 |
storage |
500 US dollars |
Total expenditure |
$230,975 |
Net proceeds (sales price less costs) |
169,025 USD |
Be prepared for holding costs
Even if you’ve already moved out and your home is vacant, you’ll still have to pay typical homeowner costs until the purchase agreement closes. These costs are called holding costs. Holding costs include expenses such as utilities and basic maintenance – you’ll have to keep paying these costs until the sale is complete and ownership passes to the buyer. Make sure you factor these costs into your budget as you prepare to sell the property.
Next Steps
There’s a lot to keep track of when selling your home, and professional help can be invaluable. Hire a real estate agent who knows your area well and can guide you through the process. A licensed agent can advise you every step of the way, from properly pricing your home to closing the sale.
FAQ
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It’s about capital gains tax. If the house was your primary residence for at least two of the last five years, you can get a significant portion of your gain tax-free from the IRS. But if you sell the house before then, your gain is taxable. So if you’ve owned your home for two years or more, you’re less likely to have to pay taxes to the IRS.
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The net proceeds from a home sale are the total amount you have left after paying off the existing mortgage, closing costs, and any other related fees. This is different for every home seller, even if they sell their home for the same price. If you sell your home for $300,000, you will need to add up your closing costs, mortgage payoff amount, realtor commissions, and other fees, then subtract that total from $300,000 to find your net proceeds.
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There are a number of fees associated with selling a home. The largest cost is probably the realtor’s commission, which is paid by the seller and is usually between 5 and 6 percent of the sales price. If you sell your home for $300,000, a 5.5 percent commission is $16,500.