Your Net Proceeds From A Home Sale
The largest financial investment most people make in their lives is a home. So knowing how much you can profit from selling your home is crucial, especially if you plan to use the proceeds for a new house, send the children off to college, or generate income with other investments.
These calculations can be customized. For example, the closing table amount will depend on your equity, outstanding mortgage balance, and closing cost.
What Is The Net Profit From A House Sale?
After you have accounted for all costs associated with selling your house, the net proceeds are how much you will make. Your net proceeds, or home sale price, is the difference between your mortgage payment amount and your closing costs.
Selling Is Expensive
First, determine the selling expenses to figure out how much you will make.
Preparing Your Home
Sellers will often make repairs and upgrades to their homes to sell faster and more quickly. These investments can help you sell your home faster and for more money, so factor them into your net proceeds.
The Zillow/Thumbtack analysis shows that the average seller spends approximately $6,000 on home improvements before listing.
Factor into your calculation how much it will cost you to move from your home. This includes truck rentals, professional movers, and packing materials.
Local moves less than 100 miles require two movers and one vehicle. It usually costs between $80 and $100 an hour plus $25 to $50 for additional movers.
Long-distance moves over 100 miles cost between $2,000 to $5,000, with an average of $0.50 per pound.
The Sum Of The Mortgage Payoff
The amount you owe on your mortgage is the mortgage payoff amount. Include any home equity loans and lines of credit that you have taken out against the property. Your mortgage payment amount will be significantly lower if you have owned your property for a while or your home's value has increased substantially. This means that you will have more money in your pocket.
It is also true that the reverse is true. Your mortgage payment amount will be higher if you have less equity than your home's sale price. A mere 10% of homeowners in the United States are in negative equity, also known as being underwater. They owe more than the home is worth. This does not include homeowners who owe slightly less or the same amount but also those who may need to bring more money to the table because of other selling costs.
Transaction Fees And Closing Costs
Seller Closing costs are the largest expense when selling a house. Closing costs can cost anywhere from 8% to 10% of the sales price. For example, a home that sells for the median U.S. home price of $230,000.100 will cost between $17,000 to $22,000.
A majority of that, 10% to 8%, goes to agent commissions. These can amount to 6% of the sales price, with half going towards the listing agent and the other half going to buyer's agents. It's not unusual for sellers to pay the commission of the buyer's agent.
"Closing costs" refers to a broad range of fees, taxes, and charges required to complete the sale of a house.
These Are The Most Frequent Expenses:
Property taxes prorated
Discount points are also known as mortgage points.
How To Calculate The Profit When You Sell A House
Once you know the costs, you will be paying. Next, you can calculate your home sale proceeds.
Find Out The Home's Value And Possible Sale Price
The average American home is worth $226,300. However, your home's value will vary depending on many factors, such as the quality of the home and the local market conditions. Therefore, the first step in determining your home's fair market value is to determine its current market value. This can be done in a variety of ways:
Find A Real Estate Agent:
A comparative market analysis (CMA) is one of the first things that a listing agent will do to help you determine a suitable listing price.
Search for similar recent sales by yourself, looking for homes that sold in the past three to six months.
Get A Loan Payoff Quote
To determine the amount of your loan repayment, contact your lender. The loan payment amount does not include the monthly loan balance. Instead, it includes the daily interest and fees that you will have to pay at closing. Most payoff quotes are valid for a specific number of days and no longer than 30.
Ask your lender whether there is a prepayment penalty for your loan. A prepayment penalty is a fee that a lender charges to recover some interest charges when the property is sold, and the loan is closed.
Prepayment penalties are not always applicable to all loans. They usually apply only if the loan is repaid within the first year. Different lenders calculate the penalty. The penalty could be a flat fee, a percentage on your loan balance, or a remaining percentage interest that you owe.
Example: Suppose you purchased your home ten years back for $175,000, with a 6% fixed-rate mortgage over 30 years and a 20% downpayment of $35,000. Your current mortgage balance would amount to $139,000. Therefore, your current mortgage balance would be approximately $139,000.
Cost Estimation For Staging
48% of buyers believe some type of staging is necessary, according to the research. Home staging is as simple as cleaning, depersonalizing, and cleaning. Or it can be more complex, like a professional staging the entire home.
In the United States, staging is a part of $6,570 in pre-sale home preparation.
The West Coast has the highest home preparation costs at $7,840 in Sacramento and $7,755 in San Jose. San Francisco is $7,620.
The total home preparation costs are the lowest in St. Louis ($3,690), Phoenix (4,040), and Charlotte ($4,275).
Example: Using the $91,100 remaining after deducting the average home preparation costs and paying your loan, you can now make an $84,530 net profit.
Make Sure To Factor In Repairs That Are Needed
Sellers may pay repairs in one of these three ways
Pre-listing repairs should be taken care of.
At the buyer's request, take care of any repairs prior to closing
To cover the cost for repairs, provide a credit at closing
The cost of repairs to your home will determine how much you end up paying. However, it is often a good idea to take care of major items before listing. Your home can be more attractive to potential buyers by adding mechanical or electrical upgrades. This can increase the likelihood of getting more offers. You have complete control over who does what and how much, rather than letting buyers decide on a dollar amount that will pay for future repairs.
Example: Buyer concessions are a part of negotiation where buyers ask for credit or a discount on the sale. In our case, they cost 1%, or $2301. This brings your net profit to $82,229.
Add The Commissions Of Agents Or Marketing Costs To Your Total
The commissions you pay can be as high as 6%, depending on the method by which your home is sold. On the other hand, you might owe 4% to 5% less if you choose a discount broker, depending on the extent of their services.
Selling for sale by owner (FSBO) can help you save money on your agent commission, but you will still need to pay 3% to the buyer's agent. Most buyers work with an agent. Offering a commission increases the likelihood that they will show your home to their clients.
Remember that FSBO sellers are responsible for all aspects of selling, including photography, marketing, and advertising. To get your listing onto the local MLS, you might consider hiring an agent for a few hundred dollars.
Transaction Fees Are Important To Remember
All sellers must pay fees to sell their home regardless of how they sell it. These fees can be taken out of the sale proceeds or out-of-pocket. Transfer taxes (in certain cities and states), prorated property tax, prorated utilities, and escrow fees are all part of the seller closing costs. The buyer also needs a title insurance policy. Depending on your location and financial details, these closing costs may add up to 2%-4% to the sale price.
Example: If you assume that your transaction costs are higher at 4%, your potential profit will be between $4,602 and $9,204.
In conclusion, the total profit for the home in this example is $59,219.