You bought a great place and enjoyed it but now it’s time for the next step in your real estate journey (moving to the burbs, upgrading, downsizing, relocating, etc.). While we hope you are sitting on a big profit and lots of equity, you might be surprised at how much you will actually net after closings costs and taxes.
I hope you are sitting down… closing costs for sellers can total more than 8% of their sale price! If you have a mortgage this can mean a significantly larger percentage of your equity. In some instances, 8% in fees from closing costs could be 40% or more of the equity in your home if you only put 20% down when you got a mortgage.
While this isn’t technically an itemized closing cost, it is certainly something you should consider. If you are selling your primary residence, you have lived there for 2 years or more, and are married, you can typically exclude the first $500,000 in capital gains and take them tax free (Prevu does not give tax advice, so please consult your accountant as people's tax situations can vary). If you are single, it would be approximately half of that or $250,000.
When calculating your gain it is generally advisable to speak to your accountant so that he can properly determine your cost basis. Don’t forget all the closing costs you paid when you bought your home and also be sure to tell your accountant about all the work and improvements you made along the way.
Transfer taxes are unavoidable but commission costs are a different story. At 5-6% of the home price, commissions are the largest cost that you can actually control. For example, sellers with Prevu, a New York based tech-enabled brokerage, pay a fair 1% listing agent commission, allowing them to save up to 5% versus traditional brokers.
Prevu delivers the same experience as a traditional agent, handling pricing, marketing, private showings, open houses, and negotiation. Your home also gets showcased with professional photography and 3D virtual tours. If a buyer comes with a buyer’s agent, sellers typically offer an additional commission to the buyers’ agent to incentivize them to bring their buyers. If a buyer comes without a broker, sellers pays only the 1% listing agent commission, a big difference of Prevu versus traditional brokers.
Our advice to you regarding seller closings costs is to control what you can. If you have specific questions relating to your home feel free to reach out to an expert Prevu agent for advice.
Traditional brokers no longer hold the keys to the real estate castle. 98% of homebuyers search online when looking for a home and it is increasingly difficult for brokers to justify the high fees they are charging homeowners to sell their homes.
December 08, 2017