Unless you’re in the real estate business, the hidden costs of selling your home can seem complicated. In truth, there are many costs that sellers need to budget for—and these doesn’t even include moving costs.
We’ve laid out some of the most common hidden costs below. This will help you know what costs to budget for when you’re ready to put your home on the market.
Home staging: $400
Staging your home for resale, or the process of tweaking your home’s design so that it will appeal to the greatest possible number of buyers, is the first cost that many sellers encounter.
According to the 2019 Profile of Home Staging by the National Association of Realtors (NAR), sellers spend a median amount of $400 on these costs.
This expenditure, however, seems to be well worth the investment. The NAR found that nearly 40% of the real estate agents who participated in this survey reported a 1% to 10% increase in the dollar value offered by buyers after a home had been staged. In fact, none of the agents surveyed reported a decrease in the home’s value after investing in staging.
Repair costs: $11,000
Next, after you accept an offer and the buyers do their inspections, there are repair costs to consider. Traditionally, sellers will either offer the buyers a credit toward any negotiated repairs at closing or take care of the repairs themselves. Sometimes, a home inspection report can ask for big repairs such as fixing cracks in the walls and ceilings or small repairs such as adding a railing to a flight of steps.
Although the exact amount you can expect to pay will vary depending on your negotiations and the condition of your home overall, one study by Repair Pricer looked at 50,000 home inspection reports and found that most homes required an average of $11,000 worth of repairs.
Commission and closing costs
These costs can go up to 8% to 10% of your home’s sale price. Your closing costs comprise any fees necessary to close on the home. As the seller, the biggest closing cost that you’re responsible for is commission, which is then split between the agents on both sides of the transaction.
In a typical transaction, commission usually adds up to between 5% to 6% of the home’s sale price. However, depending on what services each agent chooses to offer and what fee model they subscribe to, it is possible to work with agents who charge as little as 1% commission, which can have a substantial impact on your wallet.
In addition to commission, however, there are likely other closing costs that you will need to budget for. This includes transfer tax, title insurance, escrow fee, and title search.
In all, closing costs are about 8% to 10% of the home’s sale price.
Finally, you may have to pay some capital gains tax on the sale of your house.
There is a partial exclusion for this tax if you’re selling your primary residence. As a single individual, you can exclude the first $250,000 of profit from this tax. As a married couple who files jointly, you’re allowed to exclude up to your first $500,000 worth of profit. If you’re unsure how the capital gains tax is will affect you, talk to an accountant or a tax professional.
Selling a home is exciting and the start of the next chapter in many people’s lives. However, to make it a smooth experience, you must be prepared for all the costs that come with it.
Author: Ben Mizes
Ben is the Co-Founder and CEO at Clever Real Estate, the nation’s leading real estate education platform for home buyers, sellers, and investors.