Selling Investment Property How Much Does It Cost to Sell a House? by John Goreham September 11, 2019September 11, 2019 by John Goreham September 11, 2019September 11, 2019 Savvy real estate investors know that you haven’t made any profits until a particular property has sold. We all enjoy comparing the purchase price to the sale price and the good feeling that comes from the large difference between the two. However, if you are a pragmatist and want to know the true costs of selling a house, read on. We will detail the expected costs of selling a home from top-down. The larger costs one might expect will come first. Are you considering selling your home? Mashvisor has a platform that allows anyone to list a house for sale. Learn more here. Here is Mashvisor’s list of the expected costs to sell your primary residence. Seller’s Real Estate Agent Costs Assuming the home’s systems are in good working order, the largest real estate transaction cost is broker commissions. It is also one of the best values. Professional real estate brokers (and the companies they own or work for) provide a valuable service to sellers. Expect a commission cost of about 5% to 6% of the home’s selling cost. So, on a $400,000 home, that cost is $20,000 to $24,000. You can sell your home without an agent if you wish. However, unless you are in the business, we strongly recommend that you don’t. Related: The Best Way to Find a Real Estate Agent Septic System Repair/Replacement Costs The single largest cost associated with selling a home is often overlooked in stories such as this one. Homes with septic systems make up the majority of residences in rural and suburban areas. Many states, Massachusetts for one, require that the seller have the home septic system inspected and brought up to standards prior to sale. In some states, it cannot be left to the buyer as a discount on the cost of the home. To close, the septic system must have state approval in these locations. Older homes, or those near bodies of water, may have difficulty meeting the current standards and a replacement system may be required. Septic repairs and replacement can run from under $1,000 to over $50,000. We suggest every seller start here to get an understanding of the costs they will incur. Even states that do not require septic system approval before the sale have standards that must be met. For this reason, Mashvisor always cautions rental property investors to avoid or carefully consider any property with a septic system. A septic replacement at sale time can negate any profits and turn a property from a profitable investment to a loss. Home Inspection and Pre-Sale Improvement Costs Prior to listing one’s home, a home inspection is a wise investment. A home inspection will alert a seller to things they may not have noticed. You can bet the buyer’s inspector will spot those, so it is better to know in advance. This will allow you as the seller to do the repairs on a longer timeline rather than in haste as sale time nears. Mashvisor’s research indicates that a home inspection typically costs from $300 to $500. It is usually financially smart to perform specific pre-sale home improvements. Shabby paint, an entry floor that is past its prime, and other things that may not bother you as the owner can turn off buyers who have stars in their eyes as they first see the home. Aside from having buyers demand higher than market price adjustments to the sale price, potential buyers may also move on, and not make an offer. Your realtor can be a resource here. An experienced realtor knows what buyers spot and can give you a list of things that will cost you money upfront to remedy, but save you money at sale time. Related: 7 Things to Know Before You Sell Your Home. Cosmetic things like peeling exterior paint and a cracked entry floor won’t stop a sale, but a roof that is past its lifespan can. So too can a heating system that is not functioning properly. Here it is not the state that steps in, but lenders. A mortgage is often contingent upon a sound home. If you have major systems like a roof or heating system in need of repair or replacement, you need to do these things so a sale can go forward with a mortgage. Thus, it is wise to just do them before listing. A roof can run from single thousands to over $20K depending upon the type and size. Roofing contractors can help. Similarly, a heating system replacement is best quoted by the folks who will replace the system. Capital Gains Tax For much of the past century, capital gains costs on a primary residence were a real problem. Not only could they be a substantial percentage of the transaction price, but they were also patently unfair. We say unfair because every real estate professional knows that the changing value of the dollar (downward over time) alone would negate most gains. Couple that with the depreciation on the home and the high cost of repairs, and any true “capital gain” would be wiped out in almost every sale. The Taxpayer Relief Act of 1997 eliminated federal capital gains taxes on most primary residence sales. It includes an exemption of $250,000 for single homeowners and $500,000 for married homeowners on the sale of their residence. There are restrictions on this exemption. For example, homeowners can only use this exemption once every two years. Your tax attorney can help with the details. State Taxes Individual states and local municipalities can and do tax the sale of primary residences. One thing many homeowners already know is that you should not change the location of your primary residence to a new state prior to selling your residence in the state that you are leaving. One typical scenario could go as follows; You decide to retire and purchase a small home in a sunny area. You then change your residency to that new sunny state before you sell the big-ticket primary residence you own. Doing so can trigger scary tax implications. Inform your accountant or the person who prepares your taxes if you plan to sell your home before changing your state of residency. States also have other fees and taxes that can add up to thousands of dollars. Check with your real estate professional and your closing attorney to get an estimate on those. Closing Costs and Fees The U.S. housing market is not uniform. The term “closing costs” itself varies in its definition from state to state. In a simple real estate transaction, these include the costs of the legal transfer of the property. The legal work involving the deed, the title, and the paperwork has a cost. There is no single standard for what these costs include. Who pays closing costs when selling a home varies by location. Your real estate agent will have an organized list for you and can tell you what to expect to pay in closing costs in your municipality. You may find it interesting that we put these near the end of our list, but closing costs are tiny compared to the costs for a roof or new septic system, and a fraction of the real estate agent’s commission. Home Staging Costs One optional cost of selling a house is staging. Once reserved for high-end homes, staging a home for sale has become more mainstream. At a minimum, it involves removing much of your furniture and personal belongings. That work you can do yourself or with the help of movers. Actual staging involves bringing in new furnishings and paying a professional to set up your house for a showing that pops. Your home and your area will determine the costs here. Like cosmetic updates, staging can pay for itself and possibly bring in more offers. You want to present the home in the best way possible. Staging is the way to do that. Moving Costs Although not associated with the cost to sell your home, moving costs are real and they should be part of your budget. Take note that payment is often asked for in cash. Make a few phone calls to local movers with good ratings to get a budget number. How Much Does It Cost to Sell a House? It can depend entirely on how the house has been used. Here at Mashvisor, we serve the real estate investment community as well as private owners of homes. Please take note that the facts in this story relate to private residence sales. Investment property sales have an entirely different set of circumstances to consider. To learn about how Mashvisor can help you sell a home, start here. Start Your Investment Property Search! START FREE TRIAL AgentCostsHome InspectionOwner OccupantRenovations 0 FacebookTwitterGoogle +PinterestLinkedin John Goreham John is a Content Writer at Mashvisor. He is also the owner of a rental property company who has used Mashvisor’s tools in the past to help with his business. John's background includes automotive writing. When he is not writing about cars or investing in rental properties, John enjoys fishing with his family. Previous Post Arizona Housing Market Predictions for 2020 Next Post Mortgage Applications Rise Thanks to Low Rates Related Posts Tips for an Accurate Real Estate Comparative Market Analysis What types of property make for the best real estate investments? Should I Sell My House or Rent It Out to Fund Mortgage Payments? 3 Rules to Follow When Conducting Comparative Market Analysis It’s a Seller’s Market But You Can Still Invest in Real Estate How to Sell a House Fast in a Slow Market: 10 Tips How to Organize the Best Real Estate Open House for Your Investment Properties for Sale? 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