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Selling your home is a significant financial opportunity that could yield a substantial profit. But to make the most of your sale, it’s important to understand the costs that could impact your bottom line. Whether you’re selling a house, condo, townhouse or vacation home, knowing what to expect can help you plan ahead, price strategically, and maximize your return.
The Largest Costs to Expect When Selling Your Home
Selling a home can come with a range of costs — some expected, others easy to overlook. Here are the largest costs that may affect your net profit.
Mortgage Payoff
If you have an outstanding mortgage, the balance will be paid at closing. Your lender will issue a payoff statement with the total amount due, including any interest through the closing date. This amount is taken directly from your sale proceeds and, depending on your remaining balance, could be the largest expense impacting your net profit.
Some mortgages also come with prepayment penalties or administrative fees, so it’s a good idea to confirm any additional charges with your lender ahead of time.
Real Estate Agent Commissions
Another significant cost you'll likely face when selling your home is the real estate agent commission, which typically ranges from 5% to 6% of the final sale price. For example, if your home sells for $400,000, you could expect to pay between $20,000 and $24,000 in commissions.
Your listing broker and the buyer's agent typically split this amount, which is then paid from your proceeds at closing.
Home Repairs and Improvements
Many homeowners make strategic improvements before putting their homes up for sale. Whether it’s a quick coat of paint or a substantial kitchen update, the right upgrades can leave a strong impression on buyers and potentially boost your sale price.
In some cases, repairs may be necessary to meet state requirements or address issues uncovered during the buyer’s home inspection. Costs can range from a few hundred dollars to several thousand for more complex work.
While some improvements may offer a solid return on investment, they still represent one of the larger upfront costs sellers should anticipate. Planning and budgeting wisely can help you invest where it counts without cutting too far into your net proceeds.
Closing Costs
While buyers often cover the bulk of closing costs, sellers are typically responsible for several expenses related to finalizing the sale. These can include:
- Title insurance (for the buyer’s policy): In many states, it is customary for the seller to pay for the owner’s title insurance policy that protects the buyer.
- Transfer taxes: These government-imposed fees are charged when property changes hands. In many locations, the seller typically covers this cost, although this may vary depending on state or local laws.
- Escrow fees: Escrow charges are often split between the buyer and seller, but practices can vary based on location and agreement.
- Recording fees: These fees are paid to officially record the change of ownership with the county or municipality and are often the seller’s responsibility.
Taxes and Capital Gains
Depending on your situation, you may owe taxes on the profit from your home sale. This profit is known as capital gains–the difference between the amount you paid for the home (plus certain costs) and how much you sold it for. Factors that influence whether you’ll owe capital gains tax include:
- How long you’ve lived in the home
- Whether or not the home was your primary residence
- How much profit you made
The IRS allows homeowners to exclude up to $250,000 of capital gains — or up to $500,000 for married couples — if the home was their primary residence for at least two of the last five years.
If your profit exceeds the aforementioned limits, or if the property wasn’t your primary residence, capital gains taxes may apply. A tax professional can help you understand how the rules apply to your specific situation.
Miscellaneous Expenses
While loan payoffs, agent commissions, and title-related fees tend to get the most attention, several smaller expenses can also affect your final proceeds. These aren’t always mandatory, but they’re common.
- Home staging and deep cleaning: Making your home show-ready can go a long way in attracting buyers and securing strong offers. Professional home staging or deep cleaning services can range from a few hundred dollars to over $1,000, depending on your home's size and specific needs.
- Prorated bills and property expenses: As the seller, you’re responsible for utility bills, property taxes, and any homeowners association (HOA) dues up to the closing date. These are often prorated and deducted from your proceeds at settlement.
- Buyer concessions: These are seller-paid costs offered to help close the deal. Buyer concessions are used to make the home more attractive to buyers or resolve issues that arise during the home inspection. While not always required, they’re sometimes negotiated in slower markets or when buyers need financial flexibility, and they can reduce your net proceeds. Examples of buyer concessions include:
- Offering repair credits post-inspection instead of completing the work yourself
- Providing allowances for cosmetic updates like flooring or appliances
- Covering part of the buyer’s closing costs
Additional Overlooked Costs to Keep in Mind
Beyond the larger costs tied to selling your home, take into account these sometimes-overlooked expenses that can affect your overall budget during the home-selling process.
- Utility bills: Keeping the lights, water, and HVAC running for showings and inspections is required. Those bills can add up, especially if your home stays on the market for a while.
- HOA document fees: If your house, condo or townhouse is part of a homeowners association, you may be charged a fee to provide required documentation to the buyer. This is separate from ongoing fees and is often due at closing.
- Final cleaning or junk removal: Once the sale is complete and it’s time to move out, things can move quickly. You may need to hire a professional cleaning service to leave the home in good condition or pay for junk removal if you’re short on time or can’t take everything with you.
- Bridge loan interest (if applicable): If you're using a bridge loan to buy your next home before selling your current one, don't forget to account for interest or fees tied to that financing.
How to Calculate Your Net Proceeds
Now that you have a sense of the costs involved in selling your home, let’s get to the part you’ve been waiting for: your net proceeds. This is the final amount after all costs have been deducted from your sale price–your bottom line and the number every seller wants to see. Here’s how it is calculated:
Ways to Minimize Your Selling Costs
Want to minimize your selling costs to maximize your profit? Consider these strategies:
Go DIY for Improvements
Focus on low-cost, high-impact updates, such as painting, updating light fixtures, or refreshing curb appeal. Many of these projects can be done yourself, helping you avoid contractor fees.
Clean and Declutter
While professional staging is a great service, you can save money by handling the basics yourself. Stagers focus on creating a clean, neutral, and inviting environment. Replicate that by tidying up, removing personal items, and arranging furniture to highlight your home’s best features and help buyers picture themselves living in the space.
Sell As-Is (When It Makes Sense)
If your home needs work and you're not up for repairs, consider listing it as-is. While the sale price may be lower, you'll avoid upfront costs and attract buyers looking for fixer-uppers. Weigh your options to determine which choice is more worth it for you.
Negotiate Agent Commissions
Agent fees are typically around 5%-6%, but some agents may be open to negotiation.
Time Your Sale Strategically
Selling in a seller’s market, when demand is high, can lead to quicker offers, fewer concessions, and less need for repairs or incentives.
Trust the Experts on Pricing
A well-priced home tends to sell faster, and that can save you money on ongoing costs like utilities, HOA dues and property taxes. Work with a trusted real estate agent who can provide market insights and comparable sales data to help you set a competitive, data-driven price from the start.
Know the Costs So You Can Close With Confidence
Understanding the true costs of selling your home helps you plan ahead, make smarter decisions, and avoid surprises at closing. If you're looking for personalized guidance on selling your current home or financing your next, connect with a Pennymac Loan Expert for expert support every step of the way. You can also enroll in Pennymac Home Connect, which will match you with a top real estate agent in your area to help with your home sale or purchase.
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