The Hidden Costs of Selling a House the Traditional Way
Selling your home as is traditionally costs substantially more than expected. While the majority of people anticipate – whether willing to pay or not – the real estate commission as the biggest eyeball expense that greets them in the beginning of this process, it’s only one of several expenses easily totaling 10-15% of a home’s ultimate sale price. Thus, if sellers knew what they were getting into at the outset, they’d better evaluate how to sell their homes and budget adequately in advance. But sellers find themselves blindsided after making their decisions and opening their mail for invoices for services rendered that they never knew they’d need in the first place. There’s a difference between pre-sale expenses and the final expenses on closing day, and it’s easy to chip away at a sale and undervalue how much selling truly costs.
Real Estate Commission – The Greatest Cost
The greatest cost that most people expect (and most people know about) is the real estate commission. Most agents give listing and buying agents a 5-6% commission. Therefore an average house selling for $300,000 would result in a real estate commission of $15,000-$18,000.
However, commissions are not set in stone. While some agents may charge less on commission or have various different fees associated with different offerings, at the end of the day, all agents will charge something for their marketing (or should if they’re successful), showings, advocacy and transaction skills.
As the listing agent also assumes responsibility for getting the property sold, sellers should appreciate and respect their agents for everything they do for them; however, it should be mentioned that it’s the majority of commission that’s related to percentiles – which means an expensive home will yield a far greater fee – even though time and effort involved remain fairly static for homes of any price point.
Therefore some sellers – for whatever reason – seek to save money on selling costs in efforts of using a flat-fee sale or discounted broker. Yet these options come with caveats that require less comprehensive customer service or a non-comprehensive marketing push. Therefore those agents who’ve substantiated full-service offerings to make it all easier to access charge top dollar to use them.
Costs to Get the Property on the Market
Another way that people fail to understand how much selling their home prior to selling it actually costs comes in incurring expenses merely to get their homes onto the market. For example, a professional cleaning costs anywhere from $200-$500 based on size of the home and general condition. Most agents recommend deep cleaning, carpet cleaning and possibly even professional organizational cleaning for any surfaces that may have accumulated dust or dirt over time that may have been ignored that could create a negative impact at showings.
Even basic staging fees come as a surprise – $500 for basic furniture rentals and $5,000+ for significant staging efforts on larger homes. However, staging makes a home sell faster and at higher profit margins (in competitive markets) so sellers feel that it’s necessary to have it but must ensure they have the requisite funds ahead of time so they don’t feel they’re getting played.
Similarly, small repairs suggested by agents become necessary as sellers fix up homes prior to listing and prior to absorbing those repairs. This includes paint colors, landscaping efforts and small touch ups here and there – for a cumulative range of $2,000-$5,000 depending on how worn down or neglected the home has been relative to market standards. Agents provide sellers lists of small repairs that they deem “small” but over time these add up.
Even marketing efforts – photos, tours and collateral costs – cost sellers more ($300-$800) as well – which some agents include in their commission fee as well since high-quality marketing efforts for competitive markets are essential.
Costs While Selling Your Home
Furthermore, when people sell their homes traditionally, additional expenses are incurred while they’re selling them such as listing carrying costs.
For example, from the moment someone lists their home until it closes (usually 30-90 days), sellers need to continue paying property taxes + mortgages (if applicable) + insurance expenses + utility payments if they want the house functioning while they’re still owning it.
For example, an average home payment on an average-sized mortgage is about $2000/month. Therefore a seller who’s selling a house averages $6,000 just on mortgage payments over three months – never mind property taxes and insurance requirements – which are additional supplemental charges. This gets exponentially accumulated if someone has already moved into a new home and is paying double payments yet still taxed with ownership of this one.
Sellers also need to keep their homes functional – which means utilities stay on which means air conditioning or heating needs temperature adjustments unless landscaping is required in front of the house or trash removal during winter months, which adds up as well. All this accumulates until closing day when all needs are no longer needed.
A buyer like Houston Cash Home Buyer purchases properties with cash and as-is condition. Since cash buyers don’t require mortgage approval, sellers can skip the months-long waiting period typical with traditional buyers. This eliminates the carrying costs that accumulate during extended listing periods.
Costs Associated With Inspection
Inspections also occur when buyers want sellers to fix items instead of ignoring them before closing despite any disclosures made before negotiations. In fact, good homes still come back with requests that fail inspection which costs $1,000-$3,000 in minor requested repairs (higher if the homes are old or deferred maintenance).
Usually it’s HVAC service checks; wiring adjustments; plumbing asks/fixes or breaks; roof access/maintenance as well. Sellers can negotiate with buyers who present ideas for requesting repairs – or small repair requests if they want to be more desirable in a competitive market – but for the most part repair requests are fulfilled without question by sellers who find this more appealing in retaining post-sale buyers anyway.
Instead of actual repairs, sometimes they’ll offer closing credits instead – which makes sense but also credits (albeit now being reduced credit) taken away from seller bottom-line transactions instead – shouldn’t help buyers save money when they should be seeing more equity return from seller market value appreciation anyway.
Closing Expenses
Closing expenses mostly fall onto sellers or partially onto sellers with title insurance needs. More often than not cities report or require attorney fees depending on region/location or price; contingent access fee considerations ($1,000-$2,500 on average depending on assessments) exist; some cities require inspections or certificates (fees) or fees that don’t show up until listings are hit – it’s only when people go to close that they realize there are additional exclusive sale expenses for which they didn’t budget.
Cities differ from transfer taxes and recording fees so closings can apply to sellers $300-$3,500 due; some cities charge higher amounts due to required articles that are city-based (mandatory certificates requested).
Whether prorated property taxes or utility credits – unexpected adjustments occur on closing day when people sell during property tax season/high use months – and all add up until T’s crossed and I’s dotted on closing day.
Conclusion
All in all an average sale costs 8-12% based on various expenses incurred from selling it – and if there are savings expenditures made in pre-listing prep, then at 10% it seems like it’s naturally undervalued. If someone sells their house at $300K (seeing actually $270-$275K after commissions/depreciative renovations needed from waiting time/legit fees), people naturally assume foreclosure sales get people money quickly due to financial hardship so they only see what they’re entitled to – not what they could have sold for had they taken their time maximizing value appraisals first before selling.
However, extensive costs involved don’t make sense for sellers not to want to take this route unless they’re desperate for time/money too good based on property that needs immediate action.
Therefore those who love selling without this option love selling too when time is on their side and compelling properties exist – but it makes sense that other options exist when time/external pressures facilitate poorly.
If people realize how much they’ve invested it avoids sticker shock down the line which could help minimize this approach from originally appealing – or even selling at alternative value appeal – for equity before it’s too late.